Russia’s overall trade with the Chinese territory of Hong Kong rose by 53 percent in 2017, with Hong Kong’s total exports to Russia soaring by 43 percent to US$2.1 billion in the first ten months of 2017, while imports from Russia surged by 63 percent to US$870 million. Russia signed a Comprehensive Double Tax Agreement with Hong Kong in 2016, which entered into force on January 1, 2017. In addition to this, Russia and Hong Kong are also in the process of negotiating an Investment Promotion and Protection Agreement (IPPA).
The DTA has allowed for a cutback of 17 percent from the non-treaty tax rate. A detailed comparison of Russia’s withholding tax rates on Hong Kong residents before and after the agreement is shown below:
Russia’s imports from Hong Kong include silver and platinum (47 percent of the total), pearls, precious and semi-precious stones (18 percent), coal, not agglomerated (14 percent), iron and steel bars, rods, angles, shapes and sections (4 percent), prepared or preserved meat and edible meat offal (4 percent), telecommunications equipment and parts (3 percent), and crude animal materials (2 percent).
Hong Kong’s imports from Russia include telecommunications equipment and parts (shared 46 percent of the total), computers (21 percent), semi-conductors, electronic valves and tubes (5 percent), parts and accessories of office machines or computers (3 percent), electrical apparatus for electrical circuits (3 percent), jewelry (3 percent), pearls, precious, and semi-precious stones (3 percent), and electric power machinery and parts (2 percent).
Chris Devonshire-Ellis of Dezan Shira & Associates comments: “We have seen an influx of Russian businesses and finance coming into Hong Kong, driven both by the favorable tax conditions, as well as by the need for Russian businesses to diversify into Asian markets. Russian clients are also starting to become familiar with the concept of using Hong Kong as a strategic base for the mainland China market. It is interesting to note the bilateral trade in precious metals and gems, a logical result of the newly opened Eurasian Diamond Centre in nearby Vladivostok attracting Hong Kong’s long standing jewelry business.”
China’s bilateral trade with Russia also rose by 30 percent in 2017 and at €70 billion is now outstripping the China trade with several major European nations. China is also shortly about to sign a Free Trade Agreement with the Eurasian Economic Union. The agreement will see tariffs on Chinese goods either be significantly reduced or lowered to zero on thousands of items entering the EAEU, a trade bloc that includes Russia, Belarus, Armenia, Kazakhstan and Kyrgyzstan, as well as reductions for goods entering China. Much of this trade can be administered via Hong Kong with the HK dollar being more easily convertible into rubles than the RMB yuan.
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