Washington International Law Journal


Andrew Halkyard


It came as no small surprise when it was announced in February 1998 that the Chinese mainland ("the Mainland") and Hong Kong had agreed to enter into an arrangement for the avoidance of double taxation of income. Although concerns of double taxation between the Mainland and Hong Kong tended to be more academic than practical, this arrangement helps establish a firm foundation for future co-operation by the Mainland and Hong Kong on trade and other economic matters. From a Hong Kong taxation perspective, it is one of the most significant developments to have occurred for a very long time. From a broader perspective, the Mainland has adopted a flexible and innovative approach to taxation issues related to Hong Kong. A standard treaty template, based upon the OECD Model Double Taxation Convention, has been used to regulate jurisdiction to tax within different parts of the People's Republic of China. This augurs well for China's effort to effectively implement the autonomy promised to Hong Kong under the challenging rubric of "one country, two systems."

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