China Enters Into New Tax Treaty With The Netherlands

The People's Republic of China and the Government of the Kingdom of the Netherlands signed a new double taxation treaty ("DTA") on 31 May 2013. The new treaty - which still has to be ratified by both countries - replaces the current treaty that entered into force in 1987 and is to a large extent modeled on the 2010 OECD Model Convention. The new treatywill further improve the economic ties between the Netherlands and Mainland China.

The DTA, together with the Netherlands participation exemption regime and extensive tax treaty network, makes the Netherlands a tax-efficient gateway into Europe and the rest of the world for companies and individuals from China. Likewise, the DTA provides a favorable basis for Dutch companies to enter or further expand their activities in China. Distinctive features of the new DTA are:

In accordance with the 2010 OECD model convention, the DTA provides that a building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months. Under the current double taxation agreement such site or project already constitutes a permanent establishment if it lasts more than 6 months. The DTA provides for a reduction of withholding tax to 5% on dividend payments arising in one state and paid to a beneficial owner of the income concerned resident in the other state, if the receiving entity holds...