New PRC-Taiwan double tax arrangement expected to encourage cross-straits trade and investment

New PRC-Taiwan double tax arrangement expected to en...

China Tax Alert - Issue 21, August 2015 On 25 August 2015 the People’s Republic of China (PRC) and Taiwan concluded six years of negotiations to sign, for the first time, a Double Tax Agreement (‘the DTA’). Assuming the remaining approval procedures are completed by both parties in the remainder of 2015, the new DTA and its accompanying Appendix could take effect from as early as 1 January 2016, applying to 2016 and subsequent tax years. The DTA provides for reduced levels of dividend, interest, royalties and capital gains withholding tax (WHT) relative to domestic rates, competitive with the best of the PRC’s other DTAs. Taken together with its double tax mitigation features, the DTA is expected to enhance cross-straits trade and investment in the form of mutual direct investment. We expect this to lead to the use of simpler investment holding and operating structures and the door may also be opened to potential tax efficiency gains through restructuring.