The New Zealand and Hong Kong double tax agreement was a positive step, Deloitte Dunedin tax partner Peter Truman said yesterday.
Although New Zealand had had a double tax agreement with China since 1985, the treaty did not extend to Hong Kong following the transfer back to China of sovereignty on July 1, 1997, he said.
Finance Minister Bill English and Hong Kong's Financial Secretary John Tsang signed the agreement in Auckland yesterday.
Mr English said it was an important step forward in strengthening New Zealand's economic relationship with Hong Kong.
"It is a significant addition to New Zealand's network of double tax agreements with key trading partners and is potentially valuable to businesses and investors from both here and Hong Kong," he said.
Revenue Minister Peter Dunne said Hong Kong was New Zealand's ninth-largest market for exports and an important source of investment.
Exports to Hong Kong were worth $850 million a year.
"This agreement will make New Zealand a more attractive investment destination for Hong Kong investors and will make it easier for New Zealand businesses to invest in Hong Kong," he said.
Mr Truman said the main advantage of double tax agreements for taxpayers was that they established which countries had the primary right to tax income.
Hong Kong taxed its nationals only on income earned in Hong Kong.
Income derived from New Zealand would be taxable only in New Zealand.
The agreement would reduce the amount of withholding tax that New Zealand deducted from a New Zealand dividend earned by a Hong Kong national, reducing their overall tax cost.
"The reduction in taxes - and certainty provided on taxing rights - should encourage investment and trade between the two countries," Mr Truman said.
