China signed a new income tax treaty and protocol with Russia on 13 October 2014. The key changes made in the new treaty are:
- In Article 4, “place of effective management” has been included as a one of the criteria for determining residency status;
- In Article 5, the definition of a Permanent Establishment (PE) is modified; for a service PE to exist the current period of more than 18 months for presence of personnel providing services in the other contracting state is changed to a period of more than 183 days within a 12-month period;
- The current withholding tax rate for dividends has been reduced from 10% to 5% if a corporate beneficial owner holds at least 25% of the equity interest in the company paying the dividend and this holding amounts to at least €80,000 or its equivalent in any other currency;
- In Article 11, withholding tax on interest has been reduced to 5% from the previous 10%.
- In Article 12, the withholding tax rate on royalties has been reduced to 6% from 10%;
- In Article 13, capital gains derived from the alienation of shares are exempted except where more than 50% of the value of the shares of the disposed company is directly or indirectly attributable to immovable property.
The new tax treaty and Protocol will enter into force on the 30th day after receiving notification of completion of the relevant ratification process. The new treaty will become effective in the taxable years beginning on or after 1 January following the entry into force.
