Switzerland – China Double Taxation Treaty
The first double tax treaty that Switzerland signed with China was implemented in 1990. Since then, there has been an entirely redrafted treaty which was implemented in 2013 and adds a number of new tax exemptions and other preventative measures regarding tax evasion.
The new treaty provides improved tax rates with the main focus on reducing dividend taxes as well as royalties and interest taxes. Investors from China should follow the regulations outlined in this treaty as its role in the Swiss-China business relationship is far-reaching and will dictate what a business from China can and can not do.
The taxes covered by the Switzerland – China DTA
China’s Swiss double taxation agreement covers a number of different taxation types, from income tax capital which is levied by both China and Switzerland. With regards to Switzerland, the taxation types which are listed in the treaty are the federal, cantonal and communal taxes, which are:
- on income: total income, income from capital, commercial profits, capital gains and others;
- on capital: movable and immovable property, business assets and other items of capital.
A focus on the Chinese part of the treaty shows that the agreement covers the following taxation types:
- the personal income tax;
- the corporate income tax.
To establish a business in Switzerland it is vital to understand the treaties and how they work for businesses and international investors. We recommend speaking to one of our consultants for more information on the treaties and Switzerland’s various taxation types.
Preferential tax rates under China – Switzerland DTA
The revised and improved 2013 Swiss-China taxation treaty provides businesses with a far improved withholding tax rate as well as reduced taxes on interest and royalties in certain circumstances. Dividends in some cases are only subject to a 5% tax rate in the event the business who is the beneficiary of them is the owner of at least 25% of the company who is providing them with the dividends.
The treaty also allows for a 10% withholding tax on interest and also features some exemptions for companies which are connected to government. Royalty withholding tax is down to 9% as of the revised 2013 treaty.
There are also additional provisions implemented into the treaty which cover the exchange of information between businesses across national borders. Swiss businesses who conduct transportation services which include shipping and airline transport are also able to benefit from additional tax exemptions.
You can find more information on our website about Swiss taxation, as well as company formation. Contact one of our consultants for further assistance.