China–Europe Tax Treaties: Selected Tax Treaties and International Taxation PDF
Preview China–Europe Tax Treaties: Selected Tax Treaties and International Taxation
Lorenzo Riccardi Giorgio Riccardi China–Europe Tax Treaties Selected Tax Treaties and International Taxation China–Europe Tax Treaties · Lorenzo Riccardi Giorgio Riccardi China–Europe Tax Treaties Selected Tax Treaties and International Taxation LorenzoRiccardi GiorgioRiccardi ShanghaiUniversity RsAAsia Shanghai,China Shanghai,China ISBN 978-981-19-3562-6 ISBN 978-981-19-3563-3 (eBook) https://doi.org/10.1007/978-981-19-3563-3 ©TheEditor(s)(ifapplicable)andTheAuthor(s),underexclusivelicensetoSpringerNature SingaporePteLtd.2022 Thisworkissubjecttocopyright.AllrightsaresolelyandexclusivelylicensedbythePublisher,whether thewholeorpartofthematerialisconcerned,specificallytherightsoftranslation,reprinting,reuse ofillustrations,recitation,broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,and transmissionorinformationstorageandretrieval,electronicadaptation,computersoftware,orbysimilar ordissimilarmethodologynowknownorhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthors,andtheeditorsaresafetoassumethattheadviceandinformationinthisbook arebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor theeditorsgiveawarranty,expressedorimplied,withrespecttothematerialcontainedhereinorforany errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional claimsinpublishedmapsandinstitutionalaffiliations. ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSingaporePteLtd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore DedicatedtoourEurasianfriends,partners andcolleagues,withaspecialthankyouto EdwardSheehan,LuigiWang,Nicola AlessandroCieri,DiyangHe,Marco Rumhein,SimoneRestaino,MauroDong, MauroDellisanti, LucaZheng,Pasquale FrieriandYuZhang. Contents HistoricalBackgroundtoInternationalTreaties ...................... 1 TheProcessofNegotiatingTaxTreaties ............................. 5 TheUnitedNationsModelandOECDModelTaxConventions ........ 7 ObjectivesofTaxTreaties .......................................... 9 ContentsofaTypicalTaxTreaty .................................... 11 IntroductiontoChineseTaxation ................................... 13 LegislativeBackgroundandTaxReform ............................... 13 SourcesofChineseTaxLaw ......................................... 13 TaxClassification .................................................. 14 IndividualIncomeTax ............................................ 14 CompanyIncomeTax ............................................ 15 ValueAddedTax ................................................ 15 ConsumptionTax ................................................ 16 OtherTaxes ..................................................... 16 CustomsDuties .................................................. 17 IndividualIncomeTax .............................................. 17 TaxResidence ................................................... 18 TaxLiability .................................................... 18 WorldwideTaxationandSix-YearRule ............................. 19 IncomeClassification ............................................. 19 CalculationofTaxableIncome ..................................... 19 IndividualIncomeTaxRates ...................................... 20 SocialContributions .............................................. 21 SpecialAdditionalDeductions ..................................... 22 TaxAllowancesforExpats ........................................ 22 CompanyIncomeTax ............................................... 23 CompanyIncomeTaxRate ........................................ 23 TaxableEntities ................................................. 23 vii viii Contents CategoriesofTaxableIncome ..................................... 24 TheSourceoftheIncome ......................................... 24 TaxLiabilityandComputation ..................................... 25 WithholdingTax ................................................. 25 WithholdingAgent ............................................... 25 TaxComputationandDeadlines ................................... 26 Anti-avoidanceRules ............................................. 26 TransferPricing .................................................... 26 GeneralFramework .............................................. 26 Related-PartyDefinition .......................................... 27 MasterFile ..................................................... 27 LocalFile ....................................................... 28 SpecialIssueFile ................................................ 28 Country-By-CountryReporting .................................... 28 ChinaataGlance ................................................... 28 Appendix:TaxRevenue ............................................. 30 AnOverviewofChinaEuropeTradeandEconomies ................. 33 EuropeanEconomies ................................................ 33 EuropeanEconomies:OpennesstoBusiness ............................ 35 EuropeanEconomies:Trade ......................................... 36 EuropeanEconomiesandChina:Import,Export,andTradeBalance ....... 38 European Economies and China: Two Main Import Categories fromChina ........................................................ 40 EuropeanEconomiesandChina:TwoMainExportCategoriestoChina .... 43 EuropeanEconomiesandChina:BilateralDoubleTaxAgreement ......... 46 China—EuropeanDoubleTaxTreaties .............................. 49 Austria ........................................................... 51 Belgium .......................................................... 71 CzechRepublic ................................................... 93 Denmark ......................................................... 113 Finland ........................................................... 135 France ........................................................... 155 Germany ......................................................... 181 Greece ............................................................ 207 Ireland ........................................................... 225 Italy .............................................................. 245 Netherlands ....................................................... 269 Norway ........................................................... 293 Contents ix Poland ............................................................ 315 Portugal .......................................................... 335 Romania .......................................................... 355 Russia ............................................................ 375 Spain ............................................................. 397 Sweden ........................................................... 419 Switzerland ....................................................... 439 UnitedKingdom ................................................... 463 Historical Background to International Treaties International tax treaties are the foundation and thus a crucial component of the taxrulesandtreatmentofinternationalpaymentsandincomes.Oftheinternational taxtreaties,thevastmajorityfolloweithertheUnitedNationsModelDoubleTaxa- tionConventionbetweenDevelopedandDevelopingCountries(UNModel)orthe OrganisationforEconomicCo-operationandDevelopmentModelTaxConvention onIncomeandonCapital(OECDModel). However,thehistoryofinternationaltaxagreementsdatestopriortothefounda- tionoftheUNattheendofWorldWarII.Theseinitialagreementswereprimarily basedwithinEurope andbetween contiguous stateswherethetreatieswerepredi- cateduponthesimilarityofbothnationstaxsystems,thereforetheseearlytaxtreaties werelimitedintheirinternationalnature.Nevertheless,theseearlytreatiesdidestab- lishthefoundationswhichunderpinthemoderninternationaltaxationsystem,partic- ularlywithrespecttoconceptssuchasreciprocityandtheminimisingoftheburden ofdoubletaxation.ThisprincipleofreciprocityisattheheartoftheOECDModel uponwhichmostmoderntaxagreementsarebased. Reciprocityinearlyinternationalrelationswasseenasthegrantingbyonenation ofcertaincommercialprivilegestoanother,wherebythecitizensofbothareplaced upon an equal basis in certain branches of commerce. It may be understood that reciprocity is theoretically attributed to every legal norm of international law, it shouldnotbeautomaticallyassumedthatreciprocityisthebasisofallinternational treaties,asmostinternationaltreatiesnowfollowmultilateralmost-favoured-nation treatmentintheirrelations. In 1823, the United Kingdom introduced a law based upon reciprocity which enabled any country to export goods to the United Kingdom as long as the open accesstothatcountry’smarketswasfreelyavailabletoBritishships. This early preference for reciprocal trade continued until the signatory of the 1860Cobden–ChevalierTreatytradeagreementbetweentheUnitedKingdomand France, which brought about the status of most-favoured-nation. This agreement introducedtheinterpretationofthemost-favoured-nationclause,whichresultedin theharmonisationoftradeconcessionsinallparticipatingstates.Thisshifttohowever ©TheAuthor(s),underexclusivelicensetoSpringerNatureSingaporePteLtd.2022 1 L.RiccardiandG.Riccardi,China–EuropeTaxTreaties, https://doi.org/10.1007/978-981-19-3563-3_1 2 HistoricalBackgroundtoInternationalTreaties wasnotseenininternationaltaxtreaties,theimportanceofreciprocityremained,the mostnotableexamplebeingintheAustria-HungaryandPrussiaforthePrevention ofDoubleTaxationsignedon21stofJune1899,whichintroducedregulationsfor theavoidanceofdoubletaxationonthebasisofreciprocity.Thetreatygavetothe Ministerof Finance the authority to introduce regulations on such occasion where thetreatydifferedfromnationallawtopreventtheissueofdoubletaxationarising. In the twentieth century a number of other methods for providing relief from doubletaxationhavebeenidentified.Doubletaxationcanberelievedbyonejuris- diction unilaterally not imposing tax on income earned in another jurisdiction, by onejurisdictionreducingtheamountoftaxpayableinthatjurisdictionforanytax paid in another jurisdiction on the same income or by allocating taxing rights for differenttypesofincomebetweenjurisdictions.Interestingly,theearlytaxtreaties chosetheallocationmethodofreliefthatcontinuestoprevailinmoderntaxtreaties. Further,theearlytaxtreatiesadoptedthefundamentalprinciplesofallocatingtaxing rights based on the source of income or the residence of the taxpayer. Modern tax treatiescontinuetoallocatetaxingrightsbasedonthesesameprinciples. Theearlytaxtreatiesalsoestablishedcentralconceptssuchas‘permanentestab- lishment’, which determines where a business pays tax. These mutual agreement procedures for dispute resolution back to the 1899 treaty, which provided for a non-binding,negotiation-basedprocessbetweenthepartiesonspecificissues. The introduction of the 1899 treated was initiated due to an introduction of personalincometax,andanacquisitiontaxintheAustro-Hungarianempirein1898, whereas Prussia already had similar taxes in force, thus for citizens living in the borderregions,doubletaxationbecameafrequentissueduetotheporousnatureof bordersatthetime.The1899treatyintroducedtaxationrightstothecountryofdomi- cileandtothecountryofsourceinrelationtoacquisitiontaxes.Article1provided thattaxpayerswouldonlybeliablefordirectstatetaxesinthecountrywherethey hadtheirdomicileorinthecountryofresidenceiftherewasnodomicile.Utilizing aconceptnowcommonplaceinalltaxtreaties,Article2ofthetreatyallocatedthe righttotaxbusinessprofitstothecountrywherethepermanentestablishmentwas located. The next recorded double tax treaty was signed between the Austro-Hungarian EmpireandLiechtensteinandfollowedonfromtheprecedentsetbythe1899stip- ulating the right to tax business profits to the country where the land, buildings or businessestablishmentsweresituatedandtherighttotaxtheincomeofindividuals tothecountryofdomicile. The next decade prior to the first world war saw a multitude of double tax treatiessignedbetweentheGermanicstates,whichshowsthecommonstillevident tothisday,ofthesigningoftreatiesbetweennationswithsignificantculturaltiesor economicties. Legalnatureoftaxtreaties Treatiesarecontractsbetweensovereignnations,thisisclarifiedinArticle2ofthe ViennaConventionontheLawofTreaties,whichappliestoalltreaties,provides:
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