The New China-Germany DTA

China and Germany have officially ratified a new Double Taxation Agreement (DTA). Since its last version in 1985, this expanded and updated treaty will be fully implemented as of 1 Jan 2017.

Here are the most notable changes for our clients and readers:



1. Permanent establishment threshold elevated to 12 months

If building sites, construction, assembly or installation projects, or any supervisory activities in connection with these last more than 12 months in China, they will be recognized as permanent establishments. Thus, no China corporate income tax will be collected if the project exists less than 12 months. Previously, the threshold was 6 months. Fiducia is experienced in advising clients on their permanent establishment matters.


2. Dividends withholding tax rate reduced to 5%

If the beneficial owner holds more than a 25% share of the company paying the dividends, the withholding corporation income tax will be only 5% (previously 10%). If the share is less than 25%, the tax rate will still be 10%.


3. Withholding tax rate for royalties reduced to 6%

Corporate income withholding tax for royalty fees associated with the use of industrial, commercial or scientific equipment is reduced to 6% from 10%.

We can advise you on your unique cross-border taxation and compliance situations. Email us today at to find out more.