New China – Italy double tax treaty

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New China – Italy double tax treaty

On 19 June 2019, the Italian Council of Ministers approved the China – Italy Double Tax Treaty (“New DTT”), signed in Rome on 23 March 2019. The New DTT will enter into force 30 days after the exchange of the ratification instruments replacing the China – Italy Double Tax Treaty signed on 31 October 1986 (“Old DTT”).

The New DTT is generally in line with the 2017 OECD Model Tax Convention and the OECD Multilateral Convention, which both China and Italy signed in Paris in 2017. Provisions related to dividends, interest, royalties and capital gains introduce relevant changes compared to the Old DTT.

Hereinafter some brief comments to the New DTT:

Preamble: in line with the 2017 OECD Model Tax Convention, it is clarified that the aim of the New DTT is the elimination of double taxation with respect to taxes on income without creating opportunities for non-taxation or reduced taxation by means of tax evasion or avoidance.
Dual residence of persons other than individuals (article 4, paragraph 3): in line with the 2017 OECD Model Tax Convention, the mutual agreement procedure replaces the test of the place of effective management. Indeed, under the New DTT, where a person other than an individual is a resident of both China and Italy, the competent authorities of both Countries shall endeavour to determine by mutual agreement in which State it is resident for the purposes of the treaty.

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