WT/TPR/S/241/Rev.1 Trade Policy Review 
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) OVERVIEW  
1. While maintaining its commitment to the primacy  of the multilateral trading system, in recent 
years Hong Kong, China has more actively pursued free-trade agreements (FTAs) with its trading 
partners.  Hong Kong, China's economic relationship with China has been d eepened through further 
progressive liberalization within the framework of  the Closer Economic Partnership Arrangement 
(CEPA), in particular in the area of services.  Inward  foreign direct investment is strongly encouraged 
in the HKSAR and all sectors of the economy are ope n to foreign investment.  The time needed to 
incorporate and register a company for tax purposes is  expected to be reduced from four days to one 
in early 2011.  
(2) GENERAL INSTITUTIONAL , LEGAL AND POLICY FRAMEWORK  
2. Hong Kong, China became a Special Administ rative Region of the People's Republic of 
China (HKSAR) on 1 July 1997.  Under its "mini- constitution", the Basic Law, the HKSAR enjoys a 
high degree of autonomy in economic, trade, and monetary matters in accordance with the principle of "one country, two systems".
1  This includes the free movement of  goods and capital, a free port, and  
separate customs territory.  Under the Basic Law,  Hong Kong, China has autonomy to conclude and 
implement RTAs with foreign states (both WTO and non-WTO Members).2  Multilateral agreements  
entered into by the Central People's Governme nt of China can be applied to the HKSAR.3  A t  
end-June 2010, appr oximately 240 multilateral agreements we re applicable to the HKSAR, covering a 
broad range of matters, including customs, civil avia tion, shipping, health, and intellectual property.   
3. Hong Kong, China's constitutional framework was described in its previous TPR and remains 
unchanged.4  Meanwhile, the HKSAR Government has la unched a process to amend the electoral 
systems in order to introduce universal suffrage  for the Chief Executive (CE) in 2017, and the 
Legislative Council (LegCo) in 2020.5   
4. The structure of trade policy formulation, as set out in the HKSAR's last TPR, has not 
changed, apart from the re-organization and str eamlining of the executive branch, i.e. the policy 
bureaus, with effect from 1 July 2007.  The Trade and Industry Department remains responsible for 
Hong Kong, China's external commercial relations  within the Commerce and Economic Development 
Bureau (formerly Commerce, Industry and Technology  Bureau).  The expanded responsibilities of the 
Commerce and Economic Development Bureau encomp ass tourism, creative industries, consumer 
protection, and competition policy.   
                                                      
1 Preamble and Article 12 of the Basic Law.  View ed at:  http://www.basiclaw.gov.hk/en/basiclawtext/ 
index.html. 
2 Article 151 of the Basic Law. 
3 Article 153 of the Basic Law. 
4 WTO (2007). 
5 The CE is the head of Government of the HKSAR, and is appointed by the Central People's 
Government of China for a period of five years, following selection by an Election Committee.  The LegCo is the HKSAR's legislature.  It currently has 30 members returned by functional constituencies, which represent 
economic, social, and professional groups in the HKSAR;  and 30 members returned by geographical 
constituencies through direct elections.  The term of the current HKSAR Government, as well as the legislature, ends in 2012. Hong Kong, China WT/TPR/S/241/Rev.1 
 Page 15 
 
 
5. Hong Kong, China's public sector enjoys a good re putation in terms of integrity.  It is ranked 
amongst the best-performing in the world, and numbe r two in Asia (Corruption Perceptions Index).6  
Transparency International notes in particular the intensified efforts by the HKSAR Government and 
the Independent Commission Against Corruption in  fighting corruption in the financial sector.  
(3) PARTICIPATION IN THE WTO 
6. As a small and open economy, Hong Kong, Ch ina is a firm supporter of the multilateral 
trading system.  It continues to participate in the WTO as a separate customs territory;  it is also party 
to the plurilateral Agreement on G overnment Procurement (Chapter III(2 )(ix)) and a participant in the 
Information Technology Agreement.  Hong Kong, Ch ina's participation in the WTO is guided by 
two overarching objectives.  Firstly, to sustain the momentum of trade liberalization, especially in 
areas of interest to Hong Kong, China, such as tariffs and services.  Secondly, to strengthen and 
modernize the multilateral rules-based trading system  so that it remains an effective framework to 
promote trade expansion and liberalization, as we ll as to protect Hong Kong, China against any 
arbitrary and discriminatory actions  taken by its trading partners. 
7. At the Seventh WTO Ministerial Conference, in Geneva in 2009, Hong Kong, China 
reaffirmed its commitment to free and open trade.  The successful conclusion of the Doha Round in 
2010 remains Hong Kong, China's top priority.7  It has also expressed support for a proposal 
spearheaded by India, to start a process of systemic reforms of the WTO to improve the organization's 
functioning, efficiency, and transparency.8 
8. Hong Kong, China has an excellent record of providing notifications to the WTO.  At end 
2009, it had no regular notification obligation outsta nding.  In the period under review, Hong Kong, 
China has participated as third party in four WT O dispute settlement procedures, three of which 
concern anti-dumping measures, an area wher e Hong Kong, China has systemic interests.9 
(4) PREFERENTIAL TRADE AGREEMENTS AND ARRANGEMENTS  
(i) Regional trade agreements 
(a) Overview 
9. Hong Kong, China has been a strong advocate of the primacy of multilateralism, while 
pursuing closer regional economic cooperation in the Asia and Pacific region through the Asia-Pacific 
Economic Cooperation forum (APEC) and FTAs.  As noted in previous TPRs, in 2000 the 
Government reviewed its policy stance and concl uded that, in order to safeguard the HKSAR's 
economic and trade interests, it should adopt a more  open-minded approach in pursuing FTAs with its 
trading partners, while upholding its commitment to  the primacy of the multilateral trading system.  
The authorities believe that FTAs that are WTO-cons istent and of high standard could also help 
                                                      
6 Transparency International online information.  Viewed at:  http://www.transparency.org/ 
policy_research/surveys_indices/cpi/2009/what_s_new_in_cpi_2009. 
7 Statement by Hong Kong, China, WT/MIN(09)/ST/6, 1 December 2009. 
8 WTO document WT/MIN(09)/W/1, 16 October 2009. 
9 United States - Laws, Regulations and Methodology for Calculating Dumping Margins (Zeroing) 
(WT/DS294);  United States - Measures Relating to Zeroing and Sunset Reviews (WT/DS322);  European 
Communities - Anti-Dumping Measure on Farmed Sa lmon from Norway (WT/DS337);  and European 
Communities and its Member States - Tariff Treat ment of Certain Information Technology Products 
(WT/DS375-376-377). WT/TPR/S/241/Rev.1 Trade Policy Review 
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promote multilateral trade liberalization.  Th e 2003 Closer Economic Pa rtnership Arrangement 
(CEPA) with China constitutes Hong Kong, China's first FTA.  
10. In May 2001, FTA negotiations were launched w ith New Zealand, aimed at liberalizing trade 
in goods and services, and promoting investment .  The negotiations, suspended since 2002, were 
resumed in May 2009 and a Closer Economic Part nership Agreement was signed in March 2010.  The 
agreement is expected to enter into force in the last quarter of 2010.10  It covers all products, without 
exception.  While Hong Kong, China's applie d tariffs are already zero on an MFN basis, 
New Zealand's tariffs will be phased out within six ye ars after entry into force of the agreement, with 
over 90% of the tariff lines becoming duty free within  two years.  The agreement covers a range of 
issues of mutual interest, including goods, services, intellectual property and competition; 
negotiations on an investment protocol are to be c oncluded within two years from entry into force.  
Bilateral merchandise trade totalled HK$6.5 billio n in 2009, and services trade HK$3.7 billion in 
2008.11 
11. In January 2010, negotiations were initiated on establishing an FTA between the HKSAR and 
the European Free Trade Association (EFTA), with the aim of completing a comprehensive 
agreement in about a year.  Merchandise trade between Hong Kong, China and EFTA amounted to 
HK$59.9 billion in 2009.  Trade in services with EFTA amounted to HK$11 billion in 2008, with an 
average growth rate of 12.3% from 2004 to 2008.  The authorities consider that, in addition to 
opening up new business opportunities in the four  EFTA States, an FTA could provide a new 
economic platform for Hong Kong, China's trader s and service providers to further expand their 
business in the Nordic and western European mark ets.  Furthermore, the rules and disciplines 
developed under the FTA should improve the transpar ency of domestic regulations on both sides, and 
enhance certainty and minimize restrictions in  conducting business between the parties.   
(b) Closer Economic Partnership Arrangement (CEPA) between China and Hong Kong, China 
12. The CEPA comprises three major pillars of lib eralization and cooperation:  trade in goods, 
trade in services, and trade and investment facilita tion.  These are complemented by arrangements to 
enhance cooperation in financial services and tourism, as well as mutual recognition of professional 
qualifications.  The CEPA is based on a build ing block approach, involving supplementary 
progressive liberalization.  Since the CEPA (main te xt) was signed in June 2003, seven supplements 
have been concluded with additi onal liberalizing measures.  The latest, Supplement VII to the CEPA, 
was signed on 27 May 2010.  Its services liberalization measures will take effect on 1 January 2011.   
13. Government procurement and competition are not covered in the CEPA.  While 
anti-dumping, as well as subsidies and counterva iling measures, are covered, both sides have 
undertaken not to apply those measures to goods im ported and originating from the other side.  The 
trade facilitation agenda of CEPA covers ten ar eas, including strengthened cooperation on customs 
clearance, commodity inspection and quarantine, a nd food safety and quality and standardization.  
The CEPA allows both parties to apply safeguard  measures on imports, but so far the safeguard 
mechanism has not been invoked. 
14. The cooperation between the HKSAR and China on mutual recognition of professional 
qualifications has thus far been in the areas of securities and futures, accounting, and construction 
(including estate surveyors, architects, structural e ngineers, planners, quantity surveyors, and building 
surveyors). 
                                                      
10 Trade and Industry Department online informati on.  Viewed at:  http://www.tid.gov.hk/english/ 
trade_relations/hknzcep /files/HKNZCEP.pdf. 
11 Trade and Industry Department (2010). Hong Kong, China WT/TPR/S/241/Rev.1 
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15. Examination of the CEPA by the WTO Co mmittee on Regional Trade Agreements was 
completed in April 2006.12  Hong Kong, China has also notified the subsequent packages of 
liberalizing measures under CEPA Supplemen ts IV (2007), V (2008), and VI (2009).13 
16. Since 1 January 2006, the CEPA has provided for duty-free treatment on all imported goods 
from Hong Kong, China into the Mainland, with the exception of prohibited imports, and provided the 
eligible goods satisfy the CEPA's rules of origin .  The share of products manufactured in Hong Kong, 
China and for which rules of origin have been agr eed constitutes the effective product coverage of the 
CEPA:  this share was 63% of goods (by value) exported to China in 2009.14  For products that have 
no agreed CEPA rules of origin, Hong Kong, China' s manufacturers may apply and request to include 
them in subsequent phases of bilateral rules of orig in consultations, which are held twice a year.  At 
end 2009, CEPA rules of origin had been develope d for some 20% of the Mainland 2010 tariff lines. 
17. The CEPA's benefits to Hong Kong, China in respect of trade in goods are not nearly as 
significant as for trade in services.  This is not  only because of Hong Kong, China's diminishing 
manufacturing base but also because about half of its domestic exports already enter the Mainland 
market duty free (partly linked to outward pro cessing arrangements in the Mainland and partly 
because some products are enjoying MFN zero tariffs).  The utilization rate of CEPA preferences by 
exporters from Hong Kong, China has been relatively low, although it has increased consistently since 
2004 (see Table II.1).  Compliance with CEPA rules of origin has been one of the constraining factors in merchandise trade.
15  Up until 2009, most CEPA certificate of origin applications came from the 
food and beverages industries, followed by textiles and clothing, and plastics and plastic articles.  
However, in terms of export value, pharmaceutical  products accounted for the largest share, followed 
by plastics and plastics articles, and textiles and clothing.   
Table II.1 
CEPA preference utili zation rates, 2004-10 
 Export value of CEPA 
certificate of origin products 
(HK$ million) Export value of CEPA certificate 
of origin products as a %age of total domestic exports to China  CEPA preference utilization rate  
(export value of CEPA certificate of 
origin products as a %age of total 
domestic exports to China with agreed 
rules of origin) 
2004 1,150 3.0 4.7 
2005 2,366 5.3 8.1 
2006 3,254 8.1 11.5 
2007 4,434  10.9 16.1 
2008 4,819 13.9 20.7 
2009 5,447 20.4 32.5 
2010 (Jan-May) 2,501 20.3 31.5 
Source:  Information provided by the authorities. 
18. On trade in services, CEPA provides that Hong Kong, China will not impose any new 
discriminatory measures on China's services and serv ice suppliers in the service sectors covered, 
while China provides preferential treatment for H ong Kong, China services and service suppliers by 
removing or eliminating the restrictions in these service sectors.  While China's WTO commitments generally allow the establishment of joint ventur es for designated services, the CEPA allows 
                                                     
 
12 WTO document WT/REG162/M/3, 15 May 2006. 
13 WTO documents WT/REG162/N/1/Add.1, 21 December 2007;  WT/REG162/N/1/Add.2, 
8 December 2008;  and WT/REG162/ N/1/Add.3, 18 September 2009. 
14 Information provided by the Trade and Industry Department.  
15 Legislative Council Panel on Commerce and Industry (2007). WT/TPR/S/241/Rev.1 Trade Policy Review 
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Hong Kong, China service suppliers to set up wholly owned companies in China for specified 
services;  some of these services are additional to  those included in China's WTO commitments. 
19. Liberalization of trade in services is based  on a positive list approach;  there are no a priori  
sectoral exclusions of services sectors in the CEPA, nor any exclusions of any mode of supply.  The 
sectoral coverage of preferential treatment to service suppliers of Hong Kong, China has been 
expanded successively, to 44 service sectors under CEPA Supplement VII.16  Moreover, in each 
supplement further liberalization measures were introduced in sectors already covered.  The 
liberalization measures cover the traditional pilla rs of Hong Kong, China's economy (financial 
services, tourism, trading and logistics, and professional services), as well as services in which the 
HKSAR Government considers its service provide rs have a competitive edge (the six "new" 
industries), and other services (Chapter I(1), Chapte r IV(5)(vi)).  Overall, the CEPA includes about 
280 liberalization measures for trade in services.  The HKSAR Trade and Industry Department maintains an information database for CEPA service sectors.
17  
20. A feature of the CEPA is the liberalizati on of services trade through pilot measures 
first introduced in China's Guangdong Province, with the aim, inter alia , of serving as role models for 
further liberalization and to stre ngthen integration of the service industries of Hong Kong, China and 
Guangdong.18 
21. Under the CEPA, service suppliers of other WTO Members that are juridical persons 
established under the laws of each party are entitled to  the same treatment granted to its own service 
supplier, provided they have enga ged in substantive business operati ons.  The criteria for "substantive 
business operations" of service suppliers of Hong Kong, Ch ina are:  three to five years of operation in 
Hong Kong, China, depending on the sector;  liability to  payment of profit tax in Hong Kong, China;  
rental or ownership of business premises19;  and employment of 50% of the staff locally (Annex 5 to 
CEPA).  Hong Kong, China service suppliers are re quired to apply to the HKSAR Trade and Industry 
Department for a Hong Kong Service Supplier (HK SS) certificate before they can apply to the 
Mainland authorities to provide services in the Main land with preferential treatment under the CEPA.  
At end-May 2010, 2,233 HKSS certificates had been issued, compared with around 1,780 three years 
earlier.  Services areas most in demand for HKSS certificates have been transport and logistics 
services, distribution services, advertising, and air transport services.  
22. The CEPA is "nationality-blind" as it allows  Hong Kong-based companies of any nationality 
to enjoy preferential access opportunities in the Mainland.20  Almost half of HKSS certificates were 
issued to companies with majority  foreign ownership (September 2009).21 
23. CEPA services liberalization h as delivered significant revenues for companies in Hong Kong, 
China and operations established by HKSS in Main land China.  During 2007-09, cumulative business 
                                                      
16 Sectoral coverage was expanded from 18 service sectors (CEPA Supplement I), to 27 (CEPA 
Supplement II), to 38 (CEPA Supplement IV);  to 40 (CEPA Supplement V);  to 42 (CEPA Supplement VI), 
and 44 (CEPA Supplement VII).  No new servi ce sectors were included in Supplement III. 
17 Trade and Industry Department online inform ation.  Viewed at:  http://www.tid.gov.hk/ 
english/cepa/index.html. 
18 This is in line with the policy direction of the Ou tline of the Plan for the Reform and Development of 
the Pearl River Delta (2008-2020), as well as the Framework Agreement on Hong Kong/Guangdong 
Co-operation. 
19 For maritime transport services, at least 50% of the ships owned by the Hong Kong Service Supplier 
(HKSS) should be registered in Hong Kong, China. 
20 WT/TPR/M/173, paragraph 34. 
21 Hong Kong Invest online information.  Viewed  at:  http://www.investhk.gov.hk/default_bodies/ 
resources/en_cepa.pdf. Hong Kong, China WT/TPR/S/241/Rev.1 
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receipts obtained by companies established in Ho ng Kong, China from Mainland-related business due 
to CEPA reached HK$52.5 billion.  During the same period, CEPA-induced business receipts 
obtained by HKSS operations established in Main land China amounted to HK$198.5 billion.  The 
four major contributing service areas were distributi on, transport and logistics, freight forwarding 
agency, and construction and real estate.22  The remarkable increase in the amount of business receipts 
since 2007 is likely due to the expanded coverage  of the CEPA from 27 service areas in 2006 to 
42 service areas in 2009, as well as the deepening of  liberalization measures over the years, which 
brought about more business opportunities for companies in Hong Kong, China.  
Table II.2 
Additional business receipts obtained by companies in Hong Kong, China due to CEPA, 2004-09 
(HK$ million) 
Business receipts due to CEPA 
Year 
Total Amount from Mainland-related business 
2004 .. 1,582 
2005 .. 3,323 
2006 .. 4,178 
2007 19,157 18,288 
2008 20,408 19,529 
2009 15,495 14,689 
Cumulative total (2007-09) 55,060 52,506 
Cumulative total (2004-09) .. 61,589 
.. Not available. 
Note: The second column refers to the tota l amount of business receipts obtained by co mpanies in Hong Kong, China that are gene rated 
from transactions with all parties (including local, Mainland, a nd overseas) due to the CEPA.  The third column shows that an 
overwhelming proportion of  business receipts were obtained from Mainland-related business. 
Source: Legislative Council Panel on Commerce and Industry (2010), The Mainland and Hong Kong Closer Economic 
Partnership Arrangement .  Viewed at:  http://www.le gco.gov.hk/yr09-10/english/p anels/ci/papers/cicb1-2065-
1-e.pdf . 
(ii) Other preferential trade agreements 
24. Hong Kong, China is a beneficiary of non-reciprocal tariff preference schemes operated by 
Canada and the Russian Federation.  Under Canada's General Preferential Tariff scheme, 
three quarters of eligible products enter Canada duty free;  the remainder enjoys tariffs lower than the 
MFN rates applicable to exports from most devel oped countries.  The scheme covers most products, 
with the exception of dairy products, poultry, eggs, refined sugar, and most textiles, apparel, and 
footwear.  The share of Hong Kong, China's domes tic exports to Canada covered by the scheme has 
been insignificant.  In 2009, only 0.18% of Hong Ko ng, China's domestic exports  to Canada benefited 
from the preferential treatment. 
25. The Generalized System of Preferences (GSP) operated by the Russian Federation covers 
most products except certain agricultural goods;  bevera ges, spirits, and vinegar;  articles of apparel 
and clothing accessories;  footwear;  precious or semi-precious metals;  electrical machinery and equipment;  vehicles;  and clocks and watches.  E ligible goods are subject to 75% of the basic import 
tariff rate charged by the Russian Federation.  These goods must fulfil the Hong Kong, China origin 
requirements and meet the delivery conditions of di rect shipment and direct purchase as required by 
the Russian Federation.  GSP certificates are issued to facilitate exporters' cl aims for preferential 
tariffs for exports of Hong Kong, China origin pro ducts.  Only a very limited amount of Hong Kong, 
                                                     
 
22 Legislative Council Panel on Commerce and Industry (2010). WT/TPR/S/241/Rev.1 Trade Policy Review 
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China origin products have benef ited from this preferential treatme nt (about 1% of Hong Kong, China 
origin exports in 2007 and 2008;  none in 2009 and up to April 2010). 
(5) FOREIGN INVESTMENT REGIME  
26. Hong Kong, China is committed to free and open  trade, and investment.  All service sectors 
are open to foreign investment, and foreign service  providers and foreign investors generally enjoy 
national treatment, except for (limited) regulatory re quirements concerning investment in the banking 
and broadcasting sectors where the requirements are a ligned with international standards. There is no 
minimum capital requirement for investments.   
27. The HKSAR has three industrial estates, which are operated by the Hong Kong Science and 
Technology Parks Corporation, a statutory body est ablished in 2001 with the Government as the sole 
shareholder (Table III.9).  The three industrial estates  provide a total of 217 hectares of land, at cost, 
to manufacturing and services companies with new or improved technology and processes, which cannot be accommodated in ordinary multi-storey i ndustrial or commercial buildings.  There is no 
restriction on ownership of companies operating in  industrial estates.  Apart from providing the land 
at cost, there are no special tax incentives fo r companies operating in industrial estates. 
28. Invest Hong Kong is the Government agen cy responsible for spearheading Hong Kong, 
China's efforts to attract and retain foreign direct investment from overseas, as well as from 
companies in China and Chinese Taipei.  It offers  facilitation services and sector-specific advice to 
support companies throughout the investment pro cess, and provides aftercare support services to 
companies already established in Hong Kong, China.  Trade and investment facilitation is covered by 
the CEPA.  Specifically, both sides have undertaken  to notify and publicize their respective policies 
and regulations on external trade and foreign inv estment promotion;  exchange views, and conduct 
consultations to solve common problems relating to trade and investment;  and strengthen cooperation 
in organizing exhibitions and a rranging delegations to participate in overseas exhibitions (Annex 6 to 
the CEPA main text). 
29. Incorporation or registration of a company in  Hong Kong, China is quick and simple.  The 
Companies Registry administers the Companies Ordi nance (Cap. 32) and is responsible for providing 
services for the incorporation of local limited co mpanies, as well as registration of companies 
incorporated outside the HKSAR, which have established a place of business in the HKSAR.  Currently, it takes four working days to inco rporate or register a local limited company.
23  However, 
this will be reduced to less than one day follow ing the introduction of the electronic incorporation 
services, expected in early 2011.  Licences are requi red for specific activities, including restaurants, 
travel agencies, employment agencies, banks, fund managers, insurance brokers, and lawyers. 
30. Within one month of incorporation/registration with the Companies Registry, all enterprises 
are required to register with the Business Regi stration Office of the Inland Revenue Department 
(Business Registration Ordinance, Cap. 310).  To further streamline the process, a one-stop company 
incorporation and business registration service is exp ected to be provided by the Companies Registry 
in early 2011.  This will allow company incorpor ation and business registration to be processed 
                                                      
23 Company Registry online information.  Viewed at:  http://www.cr.gov.hk/sc/publications/ 
information.htm [07/05/10]. Hong Kong, China WT/TPR/S/241/Rev.1 
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together and completed in less than a day.  To pr ovide relief during the global financial crisis, the 
Business Registration Fee was waived for ar ound 880,000 businesses in 2008/09 and 2009/10.24  
31. Hong Kong, China has a territorial taxation system, whereby only income or profits sourced 
in Hong Kong, China are taxed.  Enterprises operati ng in Hong Kong, China generally are not subject 
to double taxation.  Hong Kong, China will not char ge profits tax on airlines, regardless of their 
resident status, in respect of income genera ted from international traffic not commencing from 
Hong Kong, China.  The HKSAR Government has nonetheless negotiated a network of double 
taxation agreements (DTAs), to minimize exposure of its residents and the residents of the DTA 
partners to double taxation.  It is Hong Kong , China's policy to negotiate double taxation relief 
arrangements for airline income with its aviation part ners, either by including an article on avoidance 
of double taxation in the bilateral air services ag reements or by concluding standalone DTAs.  
32. There are also double taxation relief arrangements that cover shipping income.25   
33. Hong Kong, China has bilateral investment promotion and protection agreements with 
17 countries, all WTO Members.26 
 
                                                      
24 The Business Registration Fee will also be waived in 2010/11.  The cost of the waiver in terms of 
revenue forgone was about HK$1.6 billion in 2008/09 and HK$1.7 billion in 2009/10, and will be about 
HK$1.8 billion in 2010/11. 
25 Hong Kong, China has adopted the following general principles for assessing profits tax on 
shipowners.  It will charge profits tax on income from a shipowner carrying business in Hong Kong, China if:  
the shipowner is a company in corporated in Hong Kong, China;  the bu siness of the ship owner is normally 
controlled or managed in Hong Kong, China;  or any ship owned by the shipowner calls at any location within the waters of Hong Kong, China.  The worldwide profits of a shipowner, regardless of its resident status, are 
apportioned into "Hong Kong, China portion" and "non-Hong Kong, China portion" such that only the 
"Hong Kong, China portion" is chargeable to Hong Kong  tax in line with its territorial source principle of 
taxation.  In general, the "Hong Kong, China portion" is  income derived from carriage of passengers and goods 
undertaken by a ship within the waters of Hong Kong, China or commencing from Hong Kong waters.  For a ship registered in Hong Kong, China, income derived from "international uplifts" (i.e. carriage shipped aboard a 
ship within the waters of Hong Kong, China and proceed ing to sea from within Hong  Kong waters) will not be 
included in the "Hong Kong, China portion".  The above exclusion is to assist shipowners registered in Hong Kong, China to compete on more level terms in the in ternational shipping arena as they could face double 
taxation on their international shipping activities. 
26 Department of Justice online information.  View ed at:  http://www.legislation.gov.hk/table2ti.htm.  
The bilateral agreements with Finland and Kuwait, signed  in July 2009, have not yet entered into force.