Overview of the New CDTA
On September 4, 2026, Hong Kong and Slovenia signed a Comprehensive Avoidance of Double Taxation Agreement (CDTA)—Hong Kong’s 60th CDTA. (ird.gov.hk) This agreement replaces or introduces new withholding tax rates and allocates taxing rights to help reduce double taxation risks between the two jurisdictions. (ird.gov.hk)
Key Changes Under the Agreement
- Dividends: Slovenia’s withholding tax rate for Hong Kong residents is reduced to a maximum of 10% (from up to 25%) (ird.gov.hk)
- Interest and royalties: Reduced to maximum 5% withholding tax under the CDTA, from prior rates of up to 25% in Slovenia for those categories. (ird.gov.hk)
- Tax credit: Hong Kong residents will now be allowed to credit any tax paid in Slovenia against Hong Kong tax due on the same income, under the IRO rules. This enhances tax efficiency for cross-border investors. (ird.gov.hk)
Effective Date & Ratification Process
- The CDTA will take effect once both jurisdictions complete ratification procedures. In Hong Kong, this means the Chief Executive in Council issues an order under the Inland Revenue Ordinance, followed by negative vetting by the Legislative Council. (ird.gov.hk)
- Investors should monitor official notices to confirm when the CDTA is in force.
Implications for Tax Planning
- Cross-border investment structuring: Companies investing in Slovenia (or receiving income from Slovenia) may see lower withholding costs on dividends, royalties and interest.
- Holding companies in Hong Kong: Reduced leakage via withholding taxes makes Hong Kong a more efficient location for holding entities in Europe.
- Financial flows: Income streams from Slovenia to Hong Kong entities/employees can be restructured to take advantage of the lower rates and tax credit mechanism.
Example
A Hong Kong company holds shares in a Slovenian company and receives dividends that were previously withheld at 25%. Under the new CDTA, only up to 10% can be withheld. If Slovenia withholds 10%, the Hong Kong company can claim credit for that 10% against Hong Kong profits tax, reducing overall tax burden.
Action Checklist
- Check if your Slovenia-source payments (dividends, interest, royalties) qualify under the new CDTA once effective
- Update tax withholding procedures in both jurisdictions
- Retain documentation of foreign tax paid for Hong Kong tax credit claims
- Monitor whether the CDTA has been ratified and gazetted in both jurisdictions before applying the new rates
Conclusion
The Hong Kong-Slovenia CDTA strengthens cross-border tax cooperation, enhances certainty for investors, and unlocks savings via reduced withholding rates and tax credits. Planning ahead and staying informed on ratification will ensure you benefit from the new regime.