On 28 March 2014, China and Germany entered into a new double taxation agreement (DTA) and protocol (together referred to as 'the new DTA'). The new DTA results in an extensive revision of the currently applicable treaty signed in 1985 (1985 DTA). The key changes include extending the time threshold of construction permanent establishment (PE) from six months to 12 months, reducing the withholding tax rate on dividends to 5%, as well as revamping taxing rights on capital gains. The new DTA is also designed to prevent granting of benefits in treaty abuse cases. If diplomatic procedures are completed by both sides within 2014, the new DTA could apply to income derived on or after 1 January 2015 at earliest.
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