China and Macau Amend Double Tax Treaty

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Nov. 16 – China recently amended its double tax agreement with the territory of Macau, standardizing tax rates and clarifying capital gains exemptions among other changes.

The State Administration of Taxation released Announcement No. 15 on October 8 announcing that the protocol for the “Arrangement between the Macau Special Administrative Region and Mainland of China for the Avoidance of Double Taxation (DTA) and the Prevention of Fiscal Evasion with Respect to Taxes on Income” would become effective on September 15, 2010.

The protocol, which amends the DTA arrangement established in 2004, was signed in Macau on July 15, 2009.

Based on the current DTA arrangement between China and Macau, the protocol sets the same standard of tax collection derived from the income of both Chinese and foreign enterprises in the mainland and clarifies the definition of tax resident; the duration change in determining valid permanent establishment; tax rates for dividends, interest and royalties; and the look-back period for capital gain tax exemptions.

According to the announcement, the protocol applies to the income derived from January 1, 2011.

Related Reading
The China Tax Guide (Fourth Edition)

Including information on China’s double tax treaties. (US$40)