Hong Kong has signed a double taxation agreement with Jersey, a milestone which will help grow business between Hong Kong and the British crown dependancy.  

Jersey’s chief minister senator Ian Gorst and Hong Kong’s secretary for financial services and the treasury Professor K C Chan, signed the deal yesterday. The new partnership will cut away much of the admin for commercial firms and private individuals doing business in the two financial centres, particularly in the capital markets space.

The agreement is aimed at helping resolve issues relating to potential double taxation of both corporate and personal incomes, such as business profits, dividends, interest, royalties, income from employment and pensions.

As well as strengthening the ability to exchange requested tax information with Hong Kong, the agreement is expected to bring commercial benefits to intermediaries and investors in both Jersey and Hong Kong, said Geoff Cook, chief executive of Jersey Finance.

“That China’s GDP is expected to continue to grow at around 8 per cent reaffirms that there are clear opportunities for Jersey to grow its private wealth management business through its specialist trust and foundation structures and popular expat banking services. Jersey’s flexible company structures also continue to be attractive as capital market activity in Hong Kong accelerates. In all these areas, this DTA will add significantly to the reasons for investors and institutions to have confidence in and choose Jersey as their preferred European financial centre to invest in Western markets,” added Cook.

“The signing of the agreement comes at a time when a number of Jersey legal and financial services firms are opening offices in Hong Kong. Demonstrating a commitment like this to doing business is absolutely vital in the Hong Kong market, so this agreement is really important not just in a technical sense but also because it underpins Jersey’s commercial relationship with Hong Kong too,” said Zhaoan Li, Jersey Finance’s head of business development in Greater China.

Investment from Hong Kong and China in Jersey is substantial, with nearly £7 billion ($11 billion) of banking deposits from the region. The first Chinese owned company was registered in Jersey in 1994, and more recently a number of large deals have come to market using Jersey companies following the approval in 2009 of Jersey holding companies to list on the Hong Kong Stock Exchange.

These include asset manager Glencore, which in 2011 was the biggest flotation on the London Stock Exchange with a secondary listing in Hong Kong, and commodities giant Rusal, the major commodities company which chose Hong Kong for its primary listing. A quarter of the Chinese companies that have listed in London, have done so through Jersey.