India and Hong Kong have recently signed a long awaited tax treaty which will significantly impact MNCs, funds and entrepreneurs with respect to investments and transactions between the two countries. The treaty will come into force in the tax year following notification by both parties.
So far, a majority of investors have invested into India from Singapore, Mauritius, Netherlands and Cyprus largely because of beneficial tax treaties between India and these countries. Although there have been strong economic connections between Hong Kong and India for decades, the absence of a tax treaty has always been a risk factor for investors.