• Service: Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 10/22/2013

China - Income tax treaty with Switzerland 

October 22: Representatives of China and Switzerland have signed a new income tax treaty that, once ratified and enters into force, would replace a 1991 income tax treaty.

This new treaty follows a general trend in recent agreements between China and other European countries.

Reduced withholding tax rates

The new China-Switzerland income tax treaty generally would provide for the following withholding tax rates:

  • Dividends – the withholding tax rate would be reduced from 10% to 5%, if the company receiving the dividends holds an ownership stake of at least 25% in the company distributing the dividend
  • Interest – the withholding tax rate would remain at 10%
  • Royalties – the withholding tax rate would be reduced from 10% to 9%

Permanent establishments

The thresholds for permanent establishments would be adjusted to:

  • 12 months (from 6 months) for building and construction sites and installation projects
  • 183 days in a 12-month period for provision of services

Other provisions

Two provisions particularly relevant for Swiss companies are:

  • China could not levy any business tax or value added tax (VAT) on international transport services provided by Swiss shipping companies and airlines.
  • Capital gains taxation deriving from disposal of shares would be subject to tax in the country where the company of which the shares are being sold is a resident, provided there is a minimum participation of 25% during the last 12 months preceding the disposal.

KPMG observation

Along with the new free trade agreement between China and Switzerland, the new income tax treaty may be viewed as further enhancing mutual trade and direct investments between the two countries and may allow Switzerland to become a hub for Chinese companies doing business in Europe.

The treaty must be ratified by both countries and is subject to an optional referendum in Switzerland. While ratification is pending, the exact date when the treaty will enter into force is unknown. However, it is anticipated that this could be accomplished sometime by the middle of 2014.

Read an October 2013 report prepared by the KPMG member firm in China: The new China-Switzerland Double Taxtion Agreement

Read also a September 2013 blog posting by the KPMG member firm in Switzerland: New Double Tax Agreement between Switzerland and China

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now