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Dec 2013, Issue 29

Greenlight granted on the long-awaited China-UK Tax Treaty

On 13 December 2013, the long-awaited new China-UK Double Taxation Agreement (DTA) and its protocol (together referred to as 'the new DTA') concluded in 2011 and 2013 respectively, has entered into force. The new DTA will apply to income and capital gains derived on or after 1 January 2014 in China. The existing China-UK DTA which has been in effect since 1985 will be repealed at the same time.

The new DTA has many breakthroughs. It generally follows the trend of other new tax treaties concluded or re-negotiated in recent years, demonstrating the State Administration of Taxation's intention to equalise the treaty treatments for more foreign jurisdictions. While the new DTA will facilitate cross-border services and two-way direct investments from an income tax perspective, it will also bring about a number of challenges such as the newly added anti-treaty shopping provisions. Investors and relevant stakeholders need to revisit their business arrangements and investment structure to leverage the treaty benefits.

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Peter Ng
China and Hong Kong Tax Leader
Tel: +[86] (21) 2323 1828 Email
Edwin Wong
Tel: +[86] (10) 6533 2100 Email
Charles Lee
China South Tax Leader
Tel: +[86] (755) 8261 8899 Email