China–Europe Tax Treaties: Selected Tax Treaties and International Taxation

480 Pages·2022·5.4 MB·English

by  Lorenzo Riccardi, Giorgio Riccardi

Lorenzo Riccardi
Giorgio Riccardi
China–Europe
Tax Treaties
Selected Tax Treaties and International
Taxation
China–Europe Tax Treaties
·
Lorenzo Riccardi Giorgio Riccardi
China–Europe Tax Treaties
Selected Tax Treaties and International
Taxation
LorenzoRiccardi GiorgioRiccardi
ShanghaiUniversity RsAAsia
Shanghai,China Shanghai,China
ISBN 978-981-19-3562-6 ISBN 978-981-19-3563-3 (eBook)
https://doi.org/10.1007/978-981-19-3563-3
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AlessandroCieri,DiyangHe,Marco
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FrieriandYuZhang.
Contents
HistoricalBackgroundtoInternationalTreaties ...................... 1
TheProcessofNegotiatingTaxTreaties ............................. 5
TheUnitedNationsModelandOECDModelTaxConventions ........ 7
ObjectivesofTaxTreaties .......................................... 9
ContentsofaTypicalTaxTreaty .................................... 11
IntroductiontoChineseTaxation ................................... 13
LegislativeBackgroundandTaxReform ............................... 13
SourcesofChineseTaxLaw ......................................... 13
TaxClassification .................................................. 14
IndividualIncomeTax ............................................ 14
CompanyIncomeTax ............................................ 15
ValueAddedTax ................................................ 15
ConsumptionTax ................................................ 16
OtherTaxes ..................................................... 16
CustomsDuties .................................................. 17
IndividualIncomeTax .............................................. 17
TaxResidence ................................................... 18
TaxLiability .................................................... 18
WorldwideTaxationandSix-YearRule ............................. 19
IncomeClassification ............................................. 19
CalculationofTaxableIncome ..................................... 19
IndividualIncomeTaxRates ...................................... 20
SocialContributions .............................................. 21
SpecialAdditionalDeductions ..................................... 22
TaxAllowancesforExpats ........................................ 22
CompanyIncomeTax ............................................... 23
CompanyIncomeTaxRate ........................................ 23
TaxableEntities ................................................. 23
vii
viii Contents
CategoriesofTaxableIncome ..................................... 24
TheSourceoftheIncome ......................................... 24
TaxLiabilityandComputation ..................................... 25
WithholdingTax ................................................. 25
WithholdingAgent ............................................... 25
TaxComputationandDeadlines ................................... 26
Anti-avoidanceRules ............................................. 26
TransferPricing .................................................... 26
GeneralFramework .............................................. 26
Related-PartyDefinition .......................................... 27
MasterFile ..................................................... 27
LocalFile ....................................................... 28
SpecialIssueFile ................................................ 28
Country-By-CountryReporting .................................... 28
ChinaataGlance ................................................... 28
Appendix:TaxRevenue ............................................. 30
AnOverviewofChinaEuropeTradeandEconomies ................. 33
EuropeanEconomies ................................................ 33
EuropeanEconomies:OpennesstoBusiness ............................ 35
EuropeanEconomies:Trade ......................................... 36
EuropeanEconomiesandChina:Import,Export,andTradeBalance ....... 38
European Economies and China: Two Main Import Categories
fromChina ........................................................ 40
EuropeanEconomiesandChina:TwoMainExportCategoriestoChina .... 43
EuropeanEconomiesandChina:BilateralDoubleTaxAgreement ......... 46
China—EuropeanDoubleTaxTreaties .............................. 49
Austria ........................................................... 51
Belgium .......................................................... 71
CzechRepublic ................................................... 93
Denmark ......................................................... 113
Finland ........................................................... 135
France ........................................................... 155
Germany ......................................................... 181
Greece ............................................................ 207
Ireland ........................................................... 225
Italy .............................................................. 245
Netherlands ....................................................... 269
Norway ........................................................... 293
Contents ix
Poland ............................................................ 315
Portugal .......................................................... 335
Romania .......................................................... 355
Russia ............................................................ 375
Spain ............................................................. 397
Sweden ........................................................... 419
Switzerland ....................................................... 439
UnitedKingdom ................................................... 463
Historical Background to International
Treaties
International tax treaties are the foundation and thus a crucial component of the
taxrulesandtreatmentofinternationalpaymentsandincomes.Oftheinternational
taxtreaties,thevastmajorityfolloweithertheUnitedNationsModelDoubleTaxa-
tionConventionbetweenDevelopedandDevelopingCountries(UNModel)orthe
OrganisationforEconomicCo-operationandDevelopmentModelTaxConvention
onIncomeandonCapital(OECDModel).
However,thehistoryofinternationaltaxagreementsdatestopriortothefounda-
tionoftheUNattheendofWorldWarII.Theseinitialagreementswereprimarily
basedwithinEurope andbetween contiguous stateswherethetreatieswerepredi-
cateduponthesimilarityofbothnationstaxsystems,thereforetheseearlytaxtreaties
werelimitedintheirinternationalnature.Nevertheless,theseearlytreatiesdidestab-
lishthefoundationswhichunderpinthemoderninternationaltaxationsystem,partic-
ularlywithrespecttoconceptssuchasreciprocityandtheminimisingoftheburden
ofdoubletaxation.ThisprincipleofreciprocityisattheheartoftheOECDModel
uponwhichmostmoderntaxagreementsarebased.
Reciprocityinearlyinternationalrelationswasseenasthegrantingbyonenation
ofcertaincommercialprivilegestoanother,wherebythecitizensofbothareplaced
upon an equal basis in certain branches of commerce. It may be understood that
reciprocity is theoretically attributed to every legal norm of international law, it
shouldnotbeautomaticallyassumedthatreciprocityisthebasisofallinternational
treaties,asmostinternationaltreatiesnowfollowmultilateralmost-favoured-nation
treatmentintheirrelations.
In 1823, the United Kingdom introduced a law based upon reciprocity which
enabled any country to export goods to the United Kingdom as long as the open
accesstothatcountry’smarketswasfreelyavailabletoBritishships.
This early preference for reciprocal trade continued until the signatory of the
1860Cobden–ChevalierTreatytradeagreementbetweentheUnitedKingdomand
France, which brought about the status of most-favoured-nation. This agreement
introducedtheinterpretationofthemost-favoured-nationclause,whichresultedin
theharmonisationoftradeconcessionsinallparticipatingstates.Thisshifttohowever
©TheAuthor(s),underexclusivelicensetoSpringerNatureSingaporePteLtd.2022 1
L.RiccardiandG.Riccardi,China–EuropeTaxTreaties,
https://doi.org/10.1007/978-981-19-3563-3_1
2 HistoricalBackgroundtoInternationalTreaties
wasnotseenininternationaltaxtreaties,theimportanceofreciprocityremained,the
mostnotableexamplebeingintheAustria-HungaryandPrussiaforthePrevention
ofDoubleTaxationsignedon21stofJune1899,whichintroducedregulationsfor
theavoidanceofdoubletaxationonthebasisofreciprocity.Thetreatygavetothe
Ministerof Finance the authority to introduce regulations on such occasion where
thetreatydifferedfromnationallawtopreventtheissueofdoubletaxationarising.
In the twentieth century a number of other methods for providing relief from
doubletaxationhavebeenidentified.Doubletaxationcanberelievedbyonejuris-
diction unilaterally not imposing tax on income earned in another jurisdiction, by
onejurisdictionreducingtheamountoftaxpayableinthatjurisdictionforanytax
paid in another jurisdiction on the same income or by allocating taxing rights for
differenttypesofincomebetweenjurisdictions.Interestingly,theearlytaxtreaties
chosetheallocationmethodofreliefthatcontinuestoprevailinmoderntaxtreaties.
Further,theearlytaxtreatiesadoptedthefundamentalprinciplesofallocatingtaxing
rights based on the source of income or the residence of the taxpayer. Modern tax
treatiescontinuetoallocatetaxingrightsbasedonthesesameprinciples.
Theearlytaxtreatiesalsoestablishedcentralconceptssuchas‘permanentestab-
lishment’, which determines where a business pays tax. These mutual agreement
procedures for dispute resolution back to the 1899 treaty, which provided for a
non-binding,negotiation-basedprocessbetweenthepartiesonspecificissues.
The introduction of the 1899 treated was initiated due to an introduction of
personalincometax,andanacquisitiontaxintheAustro-Hungarianempirein1898,
whereas Prussia already had similar taxes in force, thus for citizens living in the
borderregions,doubletaxationbecameafrequentissueduetotheporousnatureof
bordersatthetime.The1899treatyintroducedtaxationrightstothecountryofdomi-
cileandtothecountryofsourceinrelationtoacquisitiontaxes.Article1provided
thattaxpayerswouldonlybeliablefordirectstatetaxesinthecountrywherethey
hadtheirdomicileorinthecountryofresidenceiftherewasnodomicile.Utilizing
aconceptnowcommonplaceinalltaxtreaties,Article2ofthetreatyallocatedthe
righttotaxbusinessprofitstothecountrywherethepermanentestablishmentwas
located.
The next recorded double tax treaty was signed between the Austro-Hungarian
EmpireandLiechtensteinandfollowedonfromtheprecedentsetbythe1899stip-
ulating the right to tax business profits to the country where the land, buildings or
businessestablishmentsweresituatedandtherighttotaxtheincomeofindividuals
tothecountryofdomicile.
The next decade prior to the first world war saw a multitude of double tax
treatiessignedbetweentheGermanicstates,whichshowsthecommonstillevident
tothisday,ofthesigningoftreatiesbetweennationswithsignificantculturaltiesor
economicties.
Legalnatureoftaxtreaties
Treatiesarecontractsbetweensovereignnations,thisisclarifiedinArticle2ofthe
ViennaConventionontheLawofTreaties,whichappliestoalltreaties,provides: