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Monday, 30 May 2022

International Tax Update : Tax treaties with China and Hong Kong to be covered by the MLI

Rik Smet

Rik Smet

Senior Associate

On 25 May 2022, China has deposited its instrument of ratification for the MLI with the OECD. This means that this treaty will enter into force as of 1 September 2022 for China. ‘Covered Agreements’ will therefore be altered by the MLI, which will apply to withholding taxes paid as of 1 January 2023 and to income taxes for taxable periods that start on or after 1 March 2023.

As China is also the depository for, and its instrument of ratification also covers, Hong Kong, the same applies for tax treaties with Hong Kong. However, not all notifications have yet been made with the OECD to determine the exact date the MLI will enter into force for – e.g. – the Belgian – Hong Kong tax treaty.

The main point of attention is the entry into force of the ‘principle purpose test’, according to which the tax treaty benefits should be disallowed if it reasonable to conclude that obtaining that benefit was one of the main purposes of any arrangement or transaction that resulted (in)directly in that benefit. The entry into force of the MLI will also introduce a limited amount of other, technical, changes.

Regarding Hong Kong, the entry into effect of the Covered Agreements (including with Belgium) depends on the date of notification to the OECD that the internal proceedings for the entry into effect of the MLI in Hong Kong, have been completed. Depending on the speed of such proceedings and notification thereof, it is possible that the MLI – including in particular the principle purpose test – would apply to taxable periods as of 1 January 2023. If these internal proceedings linger, or their finalization is not or only belatedly communicated to the OECD Secretariat, the MLI will not yet enter into effect regarding Hong Kong.

This development is relevant for Belgian based MNE’s with group entities and economic activities in Hong Kong as well as China.

Rik Smet – Senior Associate (

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Tiberghien’s international tax team will continue to monitor these and other tax developments relevant for Belgium / Luxembourg based multinational enterprises. Our editorial board consists of: 

Koen Morbée (International and EU corporate tax,;

Michiel Boeren (International and EU corporate tax,;

Ahmed El Jilali (International and EU corporate tax,;

Katrien Bollen (HR tax and global mobility,;

Ben Plessers (Transfer Pricing and Valuations,;

Gert Vranckx (VAT, customs, excises and other indirect taxes,;

Rik Smet (International and EU corporate tax,

In case you have further questions on this publication or want to discuss a tax query, please do not hesitate to contact the author(s) or one of the members of the editorial board. 

This newsflash is for information purposes only and cannot be relied upon as legal advice.

Rik Smet

Rik Smet

Senior Associate
Tiberghien Brussels

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