Switzerland and China Sign New Income Tax Treaty

China

Switzerland and China have signed a new Income and Capital Tax Treaty that, once in force and effective, will replace the old treaty of 1990. The new treaty will come into force on January 1 of the year following the exchange ratification instruments by both countries. Under the new treaty, if a Chinese or Swiss beneficial owner directly holds at least 25% of the capital of a Swiss or Chinese company paying a dividends, the withholding tax on sais dividends is reduced from 10% to 5%. The withholding tax on royalties is reduced from 10% to 9% whereas withholding tax on interest remains unchanged. In accordance with the new treaty, the following withholding taxes will apply:

Dividends: 5% if the beneficial owner is a company (other than a partnership) which holds directly at least 25% of the capital of the company paying the dividends. In all other cases, it remains unchanged at 10%.

Interest: 10%.

Royalties: 9%.

As always, the payments of dividends, interest, and royalties between companies of the above two countries may still be subject to lower withholding taxes, although unlikely, in accordance with the local legislation of each country. You can read the tax treaty for yourself by clicking here.

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