Indonesia, Hong Kong sign double taxation agreement

11:26, March 24, 2010      

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Indonesia and Hong Kong signed an agreement on double taxation agreement (DTA) here on Tuesday.

The agreement was signed by Indonesian Finance Minister Sri Mulyani Indrawati and Finance Secretary of Hong Kong Special Administrative Region John Tsang at the finance ministry.

The agreement will eliminate double taxation on the same source of income; lower the holding tax rate on passive income, including dividends, interests as well as royalties; and provide certainty and stability in terms of tax reliability for investors from both Indonesia and Hong Kong doing businesses in each other's economies.

The Indonesian finance minister said the signing of DTA was a very important step forward for creating a productive as well as constructive cooperation between the two sides.

She said that Indonesia was improving the economic facility to create a wealth improvement for most Indonesian people, and the DTA would strengthen the integrity of the country's tax system and help it create a better environment for investment.

"The DTA will give certainty and stability in tax treatment on flows of human resources, capital or technology between Indonesia and Hong Kong," said Mulyani.

She hoped economic relations between the two sides would increase with constraints being eradicated and reduced.

"Hong Kong is recognized here by many business communities as a very important commercial center that provides very important and positive influence for Indonesian economy," the minister said, adding that the DTA was a step forward for businesses both in Indonesia and Hong Kong.

Besides, Mulyani also said that the agreement would allow Indonesia and Hong Kong to share taxpayers' information, including bank information. "We recognized tax evasion is a very serious problem, not only for Indonesia, but also for all economies," she said.

"I do hope by having this agreement and information sharing and tax authority using international standard, this cooperation will reduce tax evasion and benefit both economy."

Meanwhile, Tsang said that the agreement would boost transparency and business certainty.

Tsang said that the signing of DTA served to elevate the bilateral relationship between the two sides to new heights.

"Indonesia and Hong Kong have long enjoyed investment and economic partnership," he said. "Our bilateral trade in annual rate is about nine percent between 2005 and 2009. Last year, trade between us amounted to nearly $4.5 billion dollars."

Tsang said that the agreement no doubt would encourage a great flow of investment of talents, technologies and expertise between Indonesia and Hong Kong. "It allows us to leverage each other's strength and strategic locations to markets in the region and also beyond," he added.

Tsang told Xinhua after the ceremony that the signing of DTA would also benefit Chinese mainland. According to him, China has the largest population in the world and is becoming the most important economic center in the world.

He said that during this process, the currency played a very important role. Hong Kong now is the only offshore RMB (Chinese currency) transaction center, and Indonesian and Chinese people could use RMB to do business in Hong Kong, Tsang added.

"Since Hong Kong was the most important, perhaps the only offshore center of RMB, the DTA will also help facilitate the trade between Chinese mainland and Indonesia," he said, adding that it would also help Hong Kong grow its significance as an International RMB center.

Source: Xinhua
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