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New provisions under the revised Italy – China DTA

China and Italy have signed in March a new Double Tax Agreement (DTA) during the visit of the Chinese President Xi Jinping in Rome for the Memorandum of Understanding on Belt and Road Initiative.

The new DTA will replace, after its ratification, the previous agreement signed by the two countries in 1986 and introduces several more favorable amendments, especially regarding interests, dividends, and royalties paid by a company resident in one side to a company resident in the other side.

In particular, the new DTA will:

  • decrease, from 10% to 5%, the withholding tax on dividends paid to beneficial owner holding directly at least 25% of the capital of the company that is paying dividends throughout a 365-day period before the payment;

  • reduce, from 10% to 8%, the withholding tax on interests paid to financial institution on a loan with a term of at least 3 years for the financing of investment projects;

  • exempt from Italian taxation the interest deriving from securities issued by Bank of Italy, Cassa Depositi e Prestiti, SACE and Simest and paid to beneficial owners resident in China;

  • decrease, from 7% to 5%, the withholding tax on royalties for the use of, or the right to use, industrial, commercial, or scientific equipment;

  • exempt from taxation the capital gain deriving from certain equity transfers since only capital gains deriving from the transfer of participation of at least 25% at any time over the 12 months prior to the sale will be considered taxable.

The text of the revised DTA betwenen Italy and China is available here.

In the table below we have listed the major differences between the two versions of the DTA。

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