Hong Kong, Bahrain enact tax treaty to avoid double taxation

Enterprises and residents in Hong Kong and Bahrain will no longer need to pay double taxation on the same income following the implementation of their Comprehensive Avoidance of Double Taxation Agreement (CDTA), which took effect on March 4, 2025 after completing ratification procedures. 

The agreement, signed in March 2024, will apply to Hong Kong tax assessments beginning on or after April 1, 2026, providing financial relief and clearer tax obligations for businesses and individuals engaged in cross-border activities between both jurisdictions.

“The CDTA will allow companies and residents of Hong Kong and Bahrain to have certainty on tax liabilities and save tax when they engage in cross-border business activities, thus helping to promote bilateral trade and investment,” the government said in a statement on Monday.

The CDTA with Bahrain marks Hong Kong's 51st such agreement with global tax jurisdictions. The tax pact's implementation comes as Hong Kong officials encourage businesses to diversify markets amid ongoing global trade tensions.

At a Legislative Council Panel on Constitutional Affairs meeting, Undersecretary for Commerce and Economic Development Bernard Chan Pak-li described current challenges as presenting "both risks and opportunities," pledging enhanced support for local firms accessing mainland China's markets.

In response to lawmakers' concerns about tariff impacts, Chan outlined multiple assistance programs, including the BUD Fund for small- and medium-sized enterprises’ expansion, the Hong Kong Shopping Festival promotion, and E-Commerce Express initiatives.

"We're closely monitoring mainland policy developments, including new tax arrangements from the Ministry of Commerce and e-commerce platform support schemes," Chan noted, emphasizing proactive coordination with industry stakeholders.

(Ayra Wong)