Switzerland China Double Tax Treaty

Switzerland-China Double Tax Treaty

Updated on Tuesday 26th January 2016

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Switzerland-China-double-tax-treatyThe double taxation convention between Switzerland and China

Switzerland has signed its first double taxation agreement with China in 1990. The treaty was amended in 2013 and enforced in 2014 by both countries. The new treaty was named the Agreement for Avoidance of Double Taxation with respect to Taxes on Income and Capital. The new Switzerland-China double tax treaty applies to incomes derived from January 1st, 2015 on.

Our Swiss lawyers can provide you with all information about the content of the new double taxation treaty with China.

Provisions of the new Switzerland-China double tax agreement

The most important provisions of the new double taxation treaty between Switzerland and China are the ones on the reduced rates of the withholding taxes levied in both countries: dividend and royalties payments. Under the agreement, Swiss companies investing in China will benefit from new reduced rates on dividend payments as it follows:

  • -          Swiss companies holding at least 25% of the shares in a Chinese company will benefit from a new rate of 5% on dividend payments, from the old 10% tax rate;
  • -          Swiss companies not qualifying for the 25% shareholding criteria will benefit from a 10% reduced rate;
  • -          royalties payments also benefit from a new reduced tax rate of 9%, from the old 10% rate;
  • -          royalties payments derived from the use of commercial, industrial or scientific equipment will be subject to a 6% tax rate.

Switzerland does not impose any tax on royalties and interest payments. Therefore, under the new treaty Swiss companies doing business in China will benefit from a 10% tax rate on interests.

Taxation of capital gains under the new treaty between Switzerland and China

One of the most important provisions of the double tax treaty between Switzerland and China refers to the taxation of capital gains. Under the new treaty, capital gains derived from disposal of shares may be taxed in the country of residence of the disposing company. However, the recipient must have held at least 25% of the capital for at least 12 months before the disposal of the shares. The same taxation rules apply in case the recipient invests at least 50% of the capital in immovable property in the country of the paying company.

The new provisions favor the taxation of capital gains only in the country of residence of the alienating company, and thus providing for a more efficient avoidance of double taxation.

For a complete understanding of the taxation under the new double tax agreement with China, do not hesitate to contact our law firm in Switzerland.