The China-Taiwan Double Tax Agreement

The-China-Taiwan-DTA.jpgMainland China and Taiwan have signed a double tax treaty. China and Taiwan didn’t sign this treaty before because of historical reasons. This has been a cause for a hindered economic development and trading activities between the two countries. However, foreign investors in China coming from Taiwan can benefit from this treaty. The experts at our law firm in China can help you with detailed information so that you can take advantage of all the features of this treaty.

Tax exemptions or reductions applicable according to the treaty

Several types of income are exempt from taxation in both countries and benefit from tax reductions. They include:
- business income: produced from Mainland China by a Taiwan corporation or derived from Taiwan by a Chinese company;
- shipping and air transport;
- capital gains;
- employment income: for example that produced by a Chinese resident in Taiwan;
- investment income.
The double taxation agreement (DTA) also sets forth the manner for dispute resolution in taxation cases. A Taiwan resident can present any dispute to the Taiwanese tax authorities. Tax disputes between Chinese and Taiwanese investors and individuals are settles through mutual negotiation. Our attorneys in China can offer you professional assistance in litigation cases.

Other benefits offered by the DTA

The double taxation agreement offers reduced withholding tax rates for dividends, interest and royalties received from Mainland China by companies in Taiwan. The applicable rates will be at least 5% for dividends (if the beneficiary is a company that holds at least 25% of the share capital of the company paying the dividends) and 10% in other cases. The withholding tax rate for interest and royalties will be 7%.
The double tax agreement has the purpose of reducing payable taxes for companies and individuals involved in cross-strait economic activities. Some economic activities may still be double taxed until the agreement is fully implemented in both countries. For more information and assistance in taxation matters in China, please contact the lawyers at our law firm in China.