On 27 June 2011, China and United Kingdom signed a new double tax
treaty (“New UK Treaty”), replacing the previous treaty that was concluded
in 1984. The New UK Treaty and its protocol signed on 27 February 2013
entered into force on 13 December 2013. The New UK Treaty and its
protocol both take effect from 1 January 2014 for PRC tax purposes, from
1 April 2014 for UK corporation tax, and from 6 April 2014 for UK income
and capital gains taxes.
On 7 October 2009, China and Belgium also signed a new double tax treaty
(“New Belgium Treaty”), replacing the previous treaty that was concluded
in 1985. The ratification procedures for the New Belgium Treaty have been
completed by both countries. The New Belgium Treaty entered into force
on 29 December 2013 and applies to income earned after 1 January 2014.
The terms of the two new treaties are among the most preferential to
be found in any of the treaties that China has concluded in recent years.
For example, both new treaties have reduced the applicable tax rate on
dividends to 5%, provided the recipient of the dividend is a corporate
shareholder who holds at least 25% of the shares in the distributing
company. Furthermore, the New Belgium Treaty has reduced the
applicable tax rate on royalties to 7%.
For a detailed discussion of the provisions of the New UK Treaty and its
protocol, please refer to the July 2011 issue of our Legal Alert and the
March & April 2013 issue of our China Tax Monthly.
We expect that the New UK Treaty and the New Belgium Treaty will make
the UK and Belgium more attractive jurisdictions for bringing global
investments into China and Chinese investments into Europe.