Widescale Changes to China Tax Treaties
ISSUING AUTHORITY:
The People’s Republic of China and OECD
EFFECTIVE DATE:
September 1 2022
On the 1st September 2022 the vast majority of China’s bilateral tax treaties with other countries will be altered using the OECD’s Multilateral Instrument (MLI). China has selected which provisions within the MLI will take effect and how they will take effect and has produced an instrument of ratification which was lodged with the OECD on the 25th May 2022.
The effect of the instrument on Chinese tax treaties is extremely complex. First, if the other party to the bilateral tax treaty with China has not also submitted their instrument of ratification to the OECD then the MLI will, in general, not change the existing bilateral treaty (although some exceptions do exist to this). For example, China’s double tax treaty with Armenia will be unaffected as Armenia has yet to deposit its instrument of ratification with the OECD. Secondly, in cases where both China and the other party to the bilateral doiuble tax treaty have made the same choice in relation to any particular MLI provision that that provision will, in general, supercede or amend the existing treaty provision. If there is a mismatch in positions then the MLI provision will generally not take affect (again, exceptions exist to this also).
In general, most companies involved in cross-border capital flows will need to reassess their position uner the relevant China tax treaty prior to the 1st September 2022.
Reference:
China deposits an instrument for the approval of the Multilateral BEPS Convention
