22 August 2016
The new income tax treaty between China and Romania was signed on 4 July 2016. Once in force and effective, the new treaty will replace the 1991 income tax treaty between the two countries, which is currently in force.
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 dividends, interest, royalties or other income are 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.
The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. The 1991 tax treaty between the two countries will cease to have effect from the date the new treaty is effective.
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