Hong Kong and South Korea sign tentative deal to fight tax cheats

Hong Kong and South Korea signed a tentative tax deal which allows Seoul to obtain information on suspected Korean tax evaders, South Korea’s finance ministry announced.

Hong Kong’s Financial Services and Treasury Bureau confirmed with the South China Morning Post today that it had completed negotiations for a comprehensive double taxation agreement (CDTA) with South Korea.

Under the deal, the South Korean government will have access to information held by Hong Kong’s financial agencies on Korean citizens suspected of tax evasion, Seoul’s Ministry of Strategy and Finance explained.

Seoul also will be able to ask Hong Kong banks to provide past tax information on suspected Korean tax cheats, including taxes on real estate transactions. 

In addition, Korea’s National Tax Service will impose a tax rate of 10 per cent on income from investments made by Hongkongers in Korea, the ministry added. To prevent double taxation, Hong Kong’s Inland Revenue Department will then deduct the amount of income tax the investors paid in South Korea.

The deal, signed provisionally in Hong Kong last Friday, comes after three rounds of negotiations between Hong Kong and South Korean tax officials.

The first round started in November 2010, ten months after Hong Kong revised its law on the exchange of tax information to comply with the minimum standard of the Organisation for Economic Co-operation and Development.