In August 1989, the U.S. and Hong Kong concluded an agreement to exempt from income tax, on a reciprocal basis, income from the international operation of ships (the “shipping agreement”). The shipping agreement was effective for tax years beginning on or after January 1, 1987. (Notice 97-40, 1997-2 CB 287)
On July 14, 2020, the President issued an Executive Order (EO) on Hong Kong Normalization, which, among other things, directed the Commerce Department to give Hong Kong notice of intent to terminate the shipping agreement. (E.O. 13936)
IRS has announced that he termination of the shipping agreement is effective for tax years beginning on or after January 1, 2021.
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