Greenlight granted on the long-awaited China-UK Tax Treaty
On 13 December 2013, the long-awaited new China-UK Double Taxation Agreement (DTA) and its protocol (together referred to as 'the new DTA') concluded in 2011 and 2013 respectively, has entered into force. The new DTA will apply to income and capital gains derived on or after 1 January 2014 in China. The existing China-UK DTA which has been in effect since 1985 will be repealed at the same time.
The new DTA has many breakthroughs. It generally follows the trend of other new tax treaties concluded or re-negotiated in recent years, demonstrating the State Administration of Taxation's intention to equalise the treaty treatments for more foreign jurisdictions. While the new DTA will facilitate cross-border services and two-way direct investments from an income tax perspective, it will also bring about a number of challenges such as the newly added anti-treaty shopping provisions. Investors and relevant stakeholders need to revisit their business arrangements and investment structure to leverage the treaty benefits.
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