Hong Kong and Mexico have signed and ratified a Double Taxation Agreement (DTA). The DTA covers profits tax, salaries tax and property tax in Hong Kong for assessments from April 1, 2014, and federal income tax and business flat-rate tax in Mexico from January 1, 2014.
Under the terms of the DTA, the current policy of double-taxing Mexican individuals who are resident in Hong Kong will end and any tax paid in Mexico will be considered a tax credit against the tax payable to Hong Kong. The DTA also incorporates the Organization for Economic Cooperation and Development's requirements for the exchange of tax information.
Specifically, the DTA lowers rates of withholding taxes in the contracting state in which the income is derived, in respect of dividends, interest and royalties. While dividend income is only taxable in the country of the recipient, interest income can be taxed in both territories. But in the territory where the interest income arises, withholding tax will be capped at 4.9% if the beneficial owner is a bank, and at 10% when the recipient is the beneficial owner of the asset from which interest income is derived. If the recipient is the beneficial owner of royalties income, the withholding tax rate will be capped at 10%.