November 3, 2014

Signed in May 2013 new tax treaty between China and the Netherlands was ratified by the governments of both countries and entered into force on 31 August 2014. The treaty is applicable to income received on or after 1 January 2015 for both countries. The most significant highlights are as follows:

- a reduced 6% effective rate for royalty payments for the use of, or the right to use, any industrial, commercial or scientific equipment;
- 0% capital gains tax on shares of the disposed company representing directly or indirectly less than 50% of their value attributable to immovable properties and the transferor holds directly or indirectly less than 25% of equity interest in the disposed company for the 12-month period preceding to the share transfer;
- relief from tax, if shares are quoted on a recognized stock exchange and the total of the shares disposed by the transferor during the fiscal year in which the disposal takes place does not exceed 3% of the quoted shares, or shares are held by government or any of its wholly owned resident institutions or entities.