Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each.
Hong Kong adopts the territoriality basis of taxation, whereby only income / profit sourced in Hong Kong is subject to tax. However, many countries which tax their residents on a worldwide basis also provide their residents operating businesses in Hong Kong with unilateral tax credit relief for any Hong Kong tax paid on income / profit derived from Hong Kong.
Hong Kong allows a deduction for foreign tax paid on turnover basis in respect of an income which is also subject to tax in Hong Kong. Businesses operating in Hong Kong therefore do not generally have problems with double taxation of income.
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