China and Russia on October 13 signed an agreement for the avoidance of double taxation. The agreement would replace a tax treaty signed by the countries in May 1994.
Under the new agreement, dividends are subject to a reduced 5 percent withholding tax if the company receiving the dividend holds a stake of at least 25 percent of the capital of the distributing company and this holding amounts to at least 80,000 Euros. For other cases, the withholding tax rate for dividends is 10 percent. The 1994 treaty provides for a maximum withholding tax rate of 10 percent for all dividends.
The new treaty provides that interest is subject to 5 percent withholding tax (zero in the case of a governmental institution), and royalties are subject to a 6 percent rate. Under the 1994 treaty, withholding tax on interest and royalties is capped at 10 percent.
The treaty includes a limitation-on-benefits clause and “principal purpose” clauses to counter treaty abuse.
See, Treaty
