UAE Tax Treaties with China

Email: dxb4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak German English, and Chinese.
skype: burlinna

CN-Q-10: 

China Parent Company, can apply for zero tax rate without PE under DTA in UAE?

CN-A-10:

There are currently no withholding taxes applicable in the UAE, hence claiming relief under double tax treaties may not be relevant.

CN-Q-20:

When China Parent Company as an Investor, setup a UAE subsidiary, and provide services from China to UAE Subsidiary, can apply for zero tax rate without PE under DTA in UAE?

CN-A-20:

According to DTA Article 5 item 7, a UAE subsidiary will not be treated as PE of China’s Parent company as an investor because it is a separate legal entity.

That means if a UAE Subsidiary pay service fee to the China Parent Company through a service contract signed between subsidiary and China Parent company
as an investor, China Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgment by UAE Tax Bureau.

CN-Q-30:           

What is the procedure for UAE to apply for zero tax rate under DTA without PE?

CN-A-30:

There are currently no withholding taxes applicable in the UAE, hence claiming relief under double tax treaties may not be relevant.

CN-Q-40:           

When China Resident company having UAE domestic sourced income, what are the withholding tax rates for various incomes in UAE?

CN-A-40:

China has DTA with UAE, and if you are with PE (Permanent Establishment) in UAE, your income will be considered as UAE domestic sourced income.
As for levying Tax Rate, please be aware:
if UAE Tax rate > DTA Rate, adopt DTA Rate; if UAE Tax rate < DTA Rate, adopt UAE Rate.

If DTA applied, the DTA rates between China and UAE are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.

CN-Q-50

When China Tax Resident having UAE domestic sourced income, what is UAE’s application procedure based on the DTA preferential tax rate?

CN-A-50:

There are currently no withholding taxes applicable in the UAE, hence claiming relief under double tax treaties may not be relevant.

Summary of TAX TREATY between UAE and CHINA

The Government of the United Arab Emirates and the Government of the People’s Republic of China concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 1 July 1993 and takes effects from 1 January 1995.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:

*A place of management

*A branch

*An office

*A factory

*A workshop

*A building site, a construction, assembly or installation project, or supervisory activities for a period of more than 24 months.

*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 24 months.

Withholding Tax

*Article 7 of DTA between UAE and China explained, UAE may not tax payments on general business services rendered by China corporation unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, states that dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State shall be taxable only in that other Contracting State if the beneficial owner of the dividend is a company which is a resident of that other Contracting State whose shares are at least 20% owned directly or indirectly by the Government of that other Contracting State.

*Article 11 states that interest is taxed in the Contracting State in which it arises, beneficial owner of the interest shall be charged 7% of the gross amount of the interest.

*Article 12 explained royalties means payment for (a) the use of, or the right to use, any copyright of literary, artistic, or scientific work including cinematograph films and films and recordings for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula, or process; or (b) information concerning industrial, commercial, or scientific experience.

*Technical services are covered by the business profits in Article 7. UAE corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE. Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.

*A professional service or other activities provided by individuals of an independent character was explained in Article 14. UAE corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in UAE for 183 days or more. An independent activity includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory. It shall be credited against the tax levied in the first-mentioned territory on that resident. However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.

Exchange of Information

Article 26 states that the competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) relevant to the provision of this Agreement.

Please be aware of below Warning:
The above contents are digested by Evershine R&D and Education Center in December 2022.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Dubai Evershine BPO Service Limited Corp.
Email: dxb4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak German, English and Chinese.
skype: burlinna

or
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System, please send an email to HQ4dxb@evershinecpa.com
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LinkedIn address: Dale Chen

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(version: 2024/07)

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