The process of mutual unification takes place in two phases: the Hong Kong tax authorities have made significant efforts under way to eliminate double taxation where possible, as evidenced by the countless laws to facilitate double taxation. These measures include national provisions providing for unilateral relief, comprehensive double taxation agreements, bilateral air services agreements, shipping revenue agreements and extensive pricing agreements. Hong Kong is based on the territorial tax base, which provides that only Hong Kong`s income is subject to any type of tax (profits or payroll tax). This principle generally ensures that most people in Hong Kong do not suffer from double taxation. In addition, under the DBA, Hong Kong airlines flying to Brunei are taxed at the Hong Kong corporate tax rate (which is lower than Brunei`s). Profits from international shipping made by Hong Kong residents but made in Brunei, which are currently taxable in Brunei, will be tax-exempt under the agreement. The agreement was also the first Hong Kong DBA to be signed using the Organisation for Economic Co-operation and Development standard for the exchange of tax information. China There are tax information exchange agreements to promote international tax cooperation and combat tax evasion. Many Hong Kong double taxation conventions contain information provisions. Hong Kong has also signed a series of stand-alone agreements on the exchange of tax information. They generally contain the following provisions: airlines (such as passenger airlines, air cargo, etc.) may be more vulnerable to double taxation because of the international nature of their airlines. Bilateral air services agreements have been concluded because they can be negotiated and concluded much more quickly than double taxation agreements. Hong Kong has bilateral air services agreements with Bangladesh, Belgium, Canada, Croatia, Denmark, Estonia, Ethiopia, Fiji, Finland, Germany, Iceland, Israel, Jordan, Kenya, Kuwait, Laos, Macao SAR, mainland China, Maldives, Mauritius, Mexico, the Netherlands, New Zealand, Norway, the Federation of Russia Sweden, Switzerland and the United Kingdom.
In August 2006, the Chinese and Hong Kong authorities signed an agreement to avoid double taxation, which aims to guarantee tax debt and tax savings to investors and taxpayers in both localities. Despite the low risk of double taxation in Hong Kong, the government has signed a vast network of double taxation agreements, as investors reduce the security and risk they offer. Under the agreement, Hong Kong residents who receive dividends from New Zealand that are not attributable to an institution in New Zealand are subject to a reduced withholding rate of 15%. The withholding rate is further lowered to 5% or 0% for eligible beneficiaries. Hong Kongers who receive royalties from New Zealand pay a withholding tax capped at 5%. Comprehensive double taxation agreements have been concluded between Hong Kong and the following countries (with effective dates): the agreement signed in 1998 to avoid double taxation of income and the prevention of tax evasion broadens the scope of the original agreement on corporate profits and income from human services.