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Double Tax Treaties in China

Double Tax Treaties in China

China has signed a large number of double tax treaties with countries from all over the world. The purpose of the double tax treaties is to avoid the double taxation of natural persons and legal entities who are residents of a contracting state with activities in the other contracting state. The agreements signed between China and other states refer to the taxes on income which are applied to individuals and companies. Foreign investors interested in the business environment in China should know that the income taxes applicable on the Chinese market may vary from the ones in the country of origin. The agreements can provide tax reliefs or tax deductions/exemptions, which are applicable to the citizens and companies of the contracting states. 

Our Chinese lawyers can provide legal assistance to businessmen who want to invest here or who are interested to open a company in China; the lawyers are familiar with specific regulations related to the avoidance of double taxation

Double taxation treaties between China and other countries

At the moment, China has signed 102 agreementsfor the avoidance of double taxation. The list of countries that have signed double tax treaties with China includes the following states: Albania, Algeria, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Brunei, Bulgaria, Botswana, Canada, Croatia, Cuba, Cyprus, the Czech Republic, Chile,  Cambodgia, Denmark, Egypt, Estonia, Ethiopia, Ecuador, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Korea, Kuwait, Laos, Latvia, Lithuania, Luxembourg, Macao, Macedonia, Malaysia, Malta, Mauritius, Mexico, Moldova, Mongolia, Montenegro, Morocco, Nepal, the Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Trinidad and Tobago, Ukraine, UAE, UK, USA, Uzbekistan, Vietnam, Venezuela, Zimbabwe, Zambia, . 

We remind that our attorneys in China can offer you in-depth information about each of these agreements.

What are the advantages offered by the double tax treaties?

Double tax treaties are useful for encouraging foreign investments in China and, in some cases, for investments dedicated to specific economic sectors. China provides atax-friendly systemfor economic sectors such as IT or software and communication, as these sectors are very appealing for business investors with operations on the Chinese territory.

Double tax treaties are not only useful for companies that have their headquarters based both in China and in another contracting state that has signed a double tax treaty; they are also necessary for trading companies which, although not based in China, can charge services to a Chinese company. As a general rule, a double tax treaty typically offers advantages for the taxation of the following taxes: corporate income tax, individual income tax, withholding taxes and dividend taxes. 

What is a permanent establishment in China?

 A permanent establishment refers to the place of business of a certain company through which it can run its operations. Such a place can refer to an office, a workshop, a factory, a mine or a construction site operated by the foreign company in China. At the same time, a double taxation agreement stipulates when a company with operations in Chinacan become a permanent establishment (PE). Foreign investors interested in setting up a business in China should know that the provisions of the agreements may vary, in accordance with the stipulations on which the contracting states have agreed upon. 

The main policies of DTTs signed by China

The double taxation treaties signed by China with the above-mentioned countries are extremely important for business with foreigners in this country. These significant treaties have the following purposes:

  • • the double taxation can be avoided (not paying the taxes twice);
  • • the fiscal evasion is prevented through the double tax treaties;
  • • the cross-border trading activities are encouraged by the provisions of DTTs signed by China;
  • • the bilateral investments and the related activities are protected by the double tax treaties.

If you would like to know more about the provisions of double tax treaties signed by China with your country of residence, please feel free to address your inquiries to our team of lawyers in China.

The withholding tax and the DTTs in China

According to the double taxation treaties signed by China, the withholding rates vary between 5% and 15% for royalties, dividends, and interests. We remind that if you would like to benefit from the provisions of the double taxation agreements signed by the People’s Republic of China, our advisors can help you submit the relevant documents with the authorities in charge.

Our law firm in China can offer you more details on how you can apply the provisions stipulated by various double tax treaties in China, in accordance with the country of origin of the company; persons interested in finding out more details on a specific treaty for the avoidance of double taxation in China can contact our Chinese lawyers for legal assistance.