Hong Kong and Rwanda have officially signed a Double Taxation Avoidance Agreement (DTAA). The deal was inked in Hong Kong on October 9, 2025, by Christopher Hui, Secretary for Financial Services and the Treasury, and Yusuf Murangwa, Rwanda’s Minister of Finance and Economic Planning.
The goal: To prevent the same income from being taxed twice, once in each country, while stopping loopholes that allow tax evasion. It is a big move for investors and businesses operating between the two economies, making cross-border taxation clearer and fairer.
Who and What the Agreement Covers
- The DTAA applies to: People and companies that are residents of either Hong Kong or Rwanda.
- In Hong Kong, it covers: Profits tax, salaries tax, and property tax.
- In Rwanda, it includes: Personal income tax, corporate income tax, withholding tax, capital gains tax, and rent tax.
-
Residency is defined simply:
– In Hong Kong, you are a resident if you live there, spend over 180 days in a year or 300 days across two years, or if your company is incorporated or managed there.
– In Rwanda, you are a resident if you are taxed because of where you live or manage your business, not just because you earn income from Rwanda.
Doing Business Across Borders
If your company operates in both places, understanding permanent establishment (PE) rules is key:
- A PE is: A fixed place of business, like an office, factory, or branch, that lasts for more than 183 days in a 12-month period. Once you have a PE in the other country, only the profits linked to that PE can be taxed there.
- Support activities such as storage or information collection: Do not count as a PE, unless they are part of a bigger business operation.
Lower Withholding Taxes
The treaty reduces withholding taxes on cross-border payments: This is a big plus for investors.
- Dividends are generally taxed up to: 7.5 percent
- Interest up to: 8 percent
- Royalties up to: 9 percent
- Technical service fees up to: 10 percent
- Government entities such as central banks and public funds: Often get full exemptions from tax on dividends and interest.
- If a related company charges more than an arm’s length amount: Only the fair market portion qualifies for the reduced rates. Any excess can still be taxed normally.
How Different Incomes Are Taxed
- Shipping and Air Transport: Only taxed in the company’s home country.
- Property Income: Taxed where the property is located.
- Capital Gains: Usually taxed where you live, unless linked to property or a PE in the other country.
- Employment Income: Taxed where you work, unless you stay less than 183 days and your employer is not local. In that case, only your home country taxes it.
When It Takes Effect
- The treaty does not start immediately: Each side must complete its domestic approval process and notify the other.
- Once both notifications are done: The agreement takes effect on the later date.
- In Hong Kong, it applies from: The tax year starting April 1 of the next calendar year.
- In Rwanda, it applies from: January 1 of the next year for withholding taxes, and for all other income from that same date.
Why It Matters
This treaty makes life easier for anyone doing business between Hong Kong and Rwanda:
- It removes double taxation, reduces cross-border tax costs, and builds investor confidence.
- It also shows both governments are committed to promoting fair, transparent, and sustainable international tax cooperation.