Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

September 19, 2023

Hong Kong and Bangladesh sign comprehensive double taxation arrangement

  • Hong Kong signed a comprehensive double taxation arrangement (CDTA) with Bangladesh on 30 August 2023, largely based on the 2017 version of the Organisation for Economic Co-operation and Development Model Tax Convention.
  • The CDTA will become effective in Hong Kong for tax years beginning 1 April 2024.

Executive summary

On 30 August 2023, Hong Kong signed a CDTA with Bangladesh that will become effective in Hong Kong for tax years beginning 1 April 2024 if the ratification procedures can be completed in 2023.

This Alert summarizes the key provisions of the CDTA.

Detailed discussion

Resident (Article 4)

A company is a Hong Kong tax resident if it is incorporated in Hong Kong or if incorporated outside Hong Kong and normally managed or controlled in Hong Kong. The "tie-breaker" rule for dual-resident companies considers where the company's place of effective management is situated.

Permanent Establishment (Article 5)

In addition to a fixed-place permanent establishment (PE), the CDTA covers other forms of PE, such as Construction PE, Service PE and Agency PE. Certain activities are listed as exempt from creating a PE, such as: using facilities for storage; display or maintenance of stock of the enterprise's own goods; processing, purchasing goods or merchandise; or collecting information, and other preparatory or auxiliary activities.

Business Profits (Article 7)

Article 7 of the CDTA restricts deductibility of expenses payable by the PE to a head office in the form of royalties, fees or commissions, among others. The CDTA also contains the exclusion for purchasing activity.

Taxation of Dividends (Article 10), Interest (Article 11), Royalties (Article 12), Technical Services Fees (Article 13) and Capital Gains (Article 14)

Passive streams of income like dividends, interest, royalties, technical services fees and capital gains are generally taxable in the resident jurisdiction. Such income may also be taxed in the source jurisdiction at the reduced withholding rates summarized below:

Income streams




Capital gains on disposal of shares

Fees for technical services

Tax rate

Normal withholding rate in Hong Kong



Generally 4.95%



Normal withholding rate in Bangladesh






Reduced rate under the CDTA






The CDTA also provides tax relief for Hong Kong residents deriving profits from international shipping transport in Bangladesh. They will enjoy 50% tax reduction in Bangladesh in respect of the profits subject to tax there.

Elimination of Double Taxation (Article 24)

To eliminate double taxation on a person, both jurisdictions allow a foreign tax credit against for jurisdictional taxes paid in the other jurisdiction.4

Prevention of treaty abuse

The CDTA contains the following specific provisions against treaty abuse:

  • An introductory statement or preamble specifying that the CDTA is intended to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance
  • The principal-purpose test (PPT) provisions whereby the granting of tax benefits under the CDTA would be denied if it is reasonable to conclude, considering all relevant facts and circumstances, that obtaining the benefits was one of the principal purposes of an arrangement or transaction; however the PPT would not apply if it is established that granting the tax benefits would be in accordance with the object and purpose of the relevant provisions of the CDTA


For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong

Ernst & Young LLP (United States), Hong Kong Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor



1 A beneficial owner who is a resident of the other Contracting Party and holds directly at least 10% of the capital of the company paying the dividends would be subject to tax at 10% of the gross amount of the dividends. In all other cases, the person would be subject to tax at 15% of the gross amount of the dividends.

2 Exempt if the interest is paid to the HKSAR Government, Hong Kong Monetary Authority, the Exchange Fund or any entity wholly or mainly owned by the HKSAR Government as may be agreed from time to time between the competent authorities of the Contracting Parties. It is also exempt if the interest is paid to the Bangladesh Government, the Bangladesh Bank, the Investment Corporation of Bangladesh or any entity wholly owned by the Bangladesh Government as may be agreed from time to time between the competent authorities of the Contracting Parties.

3 Gains derived by a Hong Kong resident from the alienation of shares of a company in Bangladesh deriving more than 50% of its asset value directly or indirectly from immovable property situated in Bangladesh would be subject to tax in Bangladesh.

4 Under Hong Kong's domestic law, the amount of a tax credit is limited to the Hong Kong profits tax payable in respect of the same income.


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more