China: “Beneficial ownership” for tax treaty purposes | KPMG | GLOBAL

China: Guidance clarifying “beneficial ownership” for tax treaty purposes

China: “Beneficial ownership” for tax treaty purposes

China’s State Administration of Taxation issued guidance (Announcement 9) to clarify the “beneficial ownership” requirement with respect to dividends, interest, and royalty under certain articles of income tax treaties for the avoidance of double taxation. The guidance is effective from April 2018.


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Announcement 9 retains a commercial substance-focused approach to beneficial ownership, as originally set out in guidance issued in 2009, but also provides greater clarity on the substance requirements and offers detailed examples. Announcement 9 also expands a “safe harbour” and introduces a form of a “derivative benefits” test. 

Tax professionals anticipate that the changes may help multinational enterprises and investment funds. While the recognition that an investment management activity may constitute a substantial business activity is viewed as a positive development, there are challenges likely to remain.


Read a March 2018 report prepared by the KPMG member firm in China

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