China: Applying treaty-related withholding tax rates, other treaty benefits

China: Treaty-related withholding tax rates

The State Administration of Taxation introduced a new administrative system for granting tax benefits to non-residents under China’s network of income tax treaties, tax arrangements for the avoidance of double taxation, and international transport treaties. In conjunction, there are new forms to be used in filing for application of treaty benefits. These measures will be effective 1 November 2015.

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The new guidance is Gonggao [2015] No. 60, and is known in English as “Announcement 60.”

KPMG observation

The new tax treaty-relief system is viewed as representing an improvement over the existing system that relies on “pre-approvals” from the tax authorities in order to obtain income tax treaty relief. Under the new system, no tax authority pre-approval will be required for withholding tax agents to apply reduced treaty-related withholding tax rates for payments of dividends, interest, royalties, or capital gains or for taxpayers seeking to secure other tax treaty-related protection—such as permanent establishment (PE) protection. With the new guidance under Announcement 60, withholding tax agents may, on confirmation that the taxpayer satisfies the basic treaty criteria, directly apply the reduced rates of withholding tax under the application treaty. Also, taxpayers may simply file a completed form and supporting information to self-apply other tax treaty protections.

 

Read a September 2015 report prepared by the KPMG member firm in China: New China administrative guidance improves access to tax treaties

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