• Service: Tax, International Tax
  • Type: Event
  • Date: 5/10/2013

Treaty developments in China 

Abe Zhao:

Recently China has been really negotiating treaties with the UK, with France and with Germany. The UK treaty was renegotiated in the middle of 2011. After that the procedure was to ratify the treaty within the respective countries. There is a hiccup within the dividend article. The dividend article insists that if the Chinese shares are owned by a UK company and the ownership percentage is at least 25 percent then any dividend coming from China to the UK should be taxed at a 5 percent rate. But in the 2011 version they actually used the term direct and indirect in counting that 25 percent. So that’s actually a very generous provision and when the Chinese tax authorities submitted that the treaty version to the state council, that version got rejected and therefore they had to renegotiate that treaty. I believe that the new version’s negotiation has just been complete and so if everything goes normal then the newer version should be ratified in the next three to four months, so that’s for the UK treaty.

For the France and the Germany treaties, I believe that their terms should be consistent with the terms in the UK treaty because China really wants to trade with the three major countries in Europe in the same manner. Previously the China/France treaty has a tax spearing article. We believe that in this renegotiated version that article is going to be removed because China is really waving the flag that we’re not a developing country anymore so we really don’t need the benefits of those tax spearing articles. So that’s the current treaty negotiation efforts right now.

Abe Zhao, National Leader China’s International Tax Practice, KPMG in China, gives an overview of the current status of treaties in China.

 Global Insights

 Regional & national insights


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