11 August 2017
According to a recent update to the treaty status table of Romania's National Agency for Fiscal Administration, the new income tax treaty between China and Romania entered into force on 17 June 2017. The treaty, signed 4 July 2016, replaces the 1991 income tax treaty between the two countries.
The treaty covers Chinese individual income tax and enterprise income tax, and covers Romanian tax on income and tax on profit.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 22 (Other Income) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims or other rights in respect of which the income is paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.
Both countries apply the credit method for the elimination of double taxation. In respect of Romania-source dividends received by a Chinese resident company that owns at least 20% of the shares of the paying company, China will also provide a credit for the Romanian tax paid on the profits out of which the dividends are paid.
The treaty applies from 1 January 2018. The 1991 tax treaty between the two countries ceases to apply from that date.
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