Representatives of the People’s Republic of China (PRC) and Taiwan on 25 August 2015 concluded six years of negotiations and signed, for the first time, an income tax treaty. Assuming the remaining approval and ratification procedures are completed by both countries during 2015, the new China-Taiwan income tax treaty and the accompanying “appendix” could be effective beginning as early as 1 January 2016—thereby applying to 2016 and subsequent tax years.
The income tax treaty between China and Taiwan provides for reduced levels of dividend, interest, royalties, and capital gains withholding tax (relative to domestic rates) and are competitive rates when compared to the withholding tax rates in other treaties in China’s network of income tax treaties.
Taken together with its double tax mitigation features, the China-Taiwan income tax treaty is expected to enhance “cross-straits” trade and investment in the form of mutual direct investment. It is anticipated the agreement will lead to the use of simpler investment holding and operating structures, and the door may also be opened to potential tax efficiency gains through restructuring.
Read an August 2015 report (PDF 276 KB) prepared by the KPMG member firm in China: New PRC-Taiwan double tax arrangement expected to encourage cross-straits trade and investment
Read a September 2015 report (PDF 276 KB) prepared by the KPMG member firm in Taiwan: Tax Treaty with PRC Signed
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