Withholding Tax and Double Tax Treaty in China

Withholding Tax in ChinaUpdated Regulations

Relationship between Withholding Tax and Double Tax Treaty

Withholding tax & double tax treaty

Purpose of double tax treaty:

• Avoid double taxation in home and foreign countries;

• Prevent income tax evasion.

Withholding tax & double tax treaty

Double Tax Treaty - Tax Rates

CountryTax Rate

Dividend Interest Royalty

Sweden 5%* 10% 10%**

Denmark 10% 10% 10%**

Hong Kong 5%* 7% 7% **

Singapore 5%* 7% 10%**

*The parent company needs to control more than 25% shares of the subsidiary.

** There some special requirement on Royalty

Withholding tax & double tax treaty

• Double tax treaty will prevail over Chinese tax regulations.

• Must make application to receive tax treatment under double tax treaty.

Withholding tax & double tax treaty

• The six-month rule.

• Income tax will be exempted if the loan is provided by government bodies.

• Double tax treaty applies only to income taxes.

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