New Tax Treaty between Germany and China
On 28 March 2014, a new agreement between Germany and the People’s Republic of China (hereinafter referred to as the “PRC”) for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as the “new DTA”) and its protocol were signed. The New DTA and its protocol will enter into force on the 30th day following the day on which both countries notify each other of completion of their respective ratification procedures.
As compared to the existing DTA and its protocol that were signed on 10 June 1985, major amendments under the new DTA are laid out in the below table:
Provisions |
New DTA |
Existing DTA |
---|---|---|
Permanent establishment (“PE”) |
Construction PE: |
Construction PE: |
|
Service PE: |
Service PE: |
Withholding tax |
Dividends: |
Dividends: |
|
Royalties: |
Royalties: |
Capital gain |
Provides a relief from capital gains tax in the following three types of share dispositions:
|
No such relief provided |
Independent personal services |
If a resident of a Contracting State stays in the other Contracting State for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned; the resident’s income derived from his activities performed in that other State may be taxed in that other State |
If a resident of a Contracting State stays in the other Contracting State for a period or periods, in the aggregate, more than 183 days in the calendar year concerned, the resident’s income derived from the activities in that other State may be taxed in that other State. |
Income from employment |
Remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
|
Remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
|
Anti-abuse rules |
Provides anti-abuse rules and allows both contracting states to apply domestic laws concerning the prevention of tax evasion and avoidance. |
Not such rules provided. |