Germany and China signed a new double tax agreement (DTA) and Protocol on March 28 2014. The agreement generally follows the provisions of the OECD Model but the definition of a permanent establishment includes the provision of services in the other contracting State by employees or other staff engaged for the purpose if the activities continue, on the same project or a connected project, for an aggregate of more than 183 days in any twelve month period. The maximum withholding tax rate on dividends is reduced to 5% where the recipient company owns 25% of the company paying the dividend, and is reduced to 15% where the dividend is paid from income and gains derived mainly from immovable property and is distributed by an investment vehicle that distributes most of its income annually and whose income and gains are exempt from tax. In all other cases the maximum withholding rate is 10%.

The maximum withholding tax rate on interest is 10%, with some exemptions. The maximum withholding rate on royalties related to copyright, patents and trademarks is 10%, and the rate for royalties in connection with the use of, or the right to use, scientific, commercial or industrial equipment is 10% of the adjusted amount. The adjusted amount is 60% of the gross amount of the royalties.

The agreement and protocol include detailed provisions in respect of the exchange of information. The agreement also provides for nondiscrimination and for a mutual agreement procedure.

The agreement will enter into force when the two countries notify each other that the relevant domestic legal procedures for ratification have been completed. Until the new agreement is in force the existing double taxation agreement signed in 1985 will continue to apply.