Corporate tax in the UAE
In January 2022, the Ministry of Finance (Ministry) of the United Arab Emirates (UAE) announced its intention to…
US President Donald Trump has signed on July 14, 2020 an order to end preferential economic treatment for Hong Kong, after China enacted a new Security Law there. Hong Kong would be treated “the same as mainland China”, Trump said, which means the abolition of privileges, special economic relations, and the export of technology of particular importance.
The United States’ decision to treat Hong Kong as mainland China is likely to also mean abandoning the tax deduction rules under the US- Hong Kong double taxation treaty and applying the rules in force for mainland China. This in turn may lead to retaliatory action by the Hong Kong authorities regarding tax deductions for outgoing payments in the United States. One should also consider the likelihood of similar actions on the part of other countries, primarily the UK, and further “domino effect”
Trump told that a “phase two” trade deal with China was in doubt because of its handling of coronavirus, which he called the “plague”.
The territory, a former British colony, enjoys unique freedoms. Hong Kong – a major global financial center – enjoys a special status with the US compared to mainland China. It is treated as a separate customs and travel territory and so is not, for example, subject to trade tariffs applied by the US on the mainland. But many people there see the looming National Security Law as bringing an end to Hong Kong’s special status.
During the summer of 2020, China introduced a new security law in Hong Kong, effectively abolishing freedom of speech and the independence of the courts in the autonomy. The US government has repeatedly threatened China with sanctions if the law is passed. Hong Kong has already suffered from lengthy anti-government protests that pushed the economy into recession. Then the coronavirus pandemic exacerbated the blow, just a few months before the introduction of the National Security Act. In the past week, tech companies began redefining their operations in Hong Kong, including Facebook, Twitter, Google, Microsoft and Zoom.
The ban on the export of defense products and high technology and the adoption of a law allowing sanctions against Chinese officials, including banks, involved in human rights violations in the autonomy were found to have undermined Hong Kong’s semiautonomous status. Washington’s goal is to prevent Hong Kong from maintaining economic and financial power if China continues to destroy democracy and freedom in autonomy. China’s foreign ministry condemned the latest US moves, saying they were a “gross interference” in its domestic affairs. In a strongly- worded statement, it said the country would also impose retaliatory sanctions against US individuals and entities to “safeguard China’s legitimate interests”.