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Belgium, China sign new income tax treaty |
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Executive summary
On 7 October 2009, Belgium and China signed a new income tax treaty. Once it enters into force, it will replace the current treaty which dates back to 1985 (1985 treaty).
This new treaty is basically on par with income tax treaties of other preferred trading partners of China (such as Hong Kong and Singapore) and can be viewed as a confirmation of Belgium’s favorable position in the Asia Pacific region. Belgium was the first country to sign a tax treaty with Hong Kong (in force since 2004) and has somewhat recently concluded a new treaty with Singapore (in force since 2008). In addition, an income tax treaty with Macao was signed in 2006. In the Asia Pacific region, Belgium now holds 17 signed and 16 in-force income tax treaties.
The new treaty generally follows the OECD Model Convention.
The most relevant differences from the current 1985 treaty are summarized and briefly discussed below:
Broadened scope of the permanent establishment (PE) exceptions for building sites and the furnishing of servicesWithholding tax rate reduction on dividends from 10% to 5%Withholding tax rate reduction on royalties from 10% to 7%Capital gains tax exemption on disposition of shares listed on stock exchangesExpansion of the Belgian participation exemption to low-taxed or untaxed Chinese subsidiaries engaged in an active trade or businessRestriction of the Belgian exemption on profits from Chinese permanent establishments engaged solely in passive activities. |
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3-11-2009 |
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Colophon |
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