The People’s Republic of China and the Netherlands signed a new tax treaty on 31 March 2013, which is expected to replace the current tax treaty of 1987.
Under the new treaty, a building site, or construction, assembly or installation project or supervisory activities where activities continue for a period of at least 12 months (previously 6 months) can be considered as a permanent establishment (PE).
According to the new treaty, the Chinese withholding tax rate on royalty will be reduced to 6% from 10% for payments received for the right to use any industrial, commercial or scientific equipment.
