China Tax/Business News Flash

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Jan 2014, Issue 2

New tax treaty between China and France brings benefits and challenges

On 26 November 2013, China and France signed a new double taxation agreement (new DTA) and an accompanying protocol in Beijing. The new DTA replaces the current treaty of 1984. It has a number of new features, including clarification on treaty application to partnership and other similar entities, a reduced withholding tax rate of 5% on dividends, extension of the construction permanent establishment (PE) threshold to 12 months, as well as new guidance aimed at combating treaty shopping. Upon entry into force, the new DTA will provide new treaty benefits as well as bring about a number of challenges. If it is timely to complete proper diplomatic procedures on both sides within 2014, the new DTA could apply to income derived on or after 1 January 2015.

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