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Danish / Chinese Tax Treaty Established

During the June visit of the Chinese President Hu Jintao to Denmark, a number of agreements were concluded between Danish and Chinese parties, including a new tax treaty, replacing the treaty concluded in 1986.

The new treaty is intended to facilitate investments to and from China while making Denmark a hub for Euro-Chinese trading relations. Taxand Denmark summarises the key highlights for multinationals.

Dividend distributions
The new tax treaty reduces the applicable tax rate to 5%, provided the recipient is a corporate shareholder holding at least 25% of the shares in the distributing company. For all other shareholders, the applicable tax rate continues at 10%. No Danish withholding tax will be levied on qualifying distributions to China.

Permanent establishments
Under the 1986 treaty a building site only constitutes a permanent establishment if activities continue for more than 6 months. The new tax treaty entail that unless either activity extend beyond a 12 month period, no permanent establishment is created.

The new treaty will be implented in Denmark in January 2013.


Taxand's Take

The new tax treaty between Denmark and China grants favourable possibilities for Chinese investors in Europe as well as for European investors in China. Investors may benefit from the extensive Danish tax treaty network, often allowing for dividends to be streamed through Danish entities with no Danish withholding tax. Denmark may therefore prove an attractive base for investments to and from China.

Your Taxand contact for further queries is:
Anders Oreby Hansen
T. +45 72 27 36 02

Taxand's Take Author