The New Double Taxation Agreement between China and Germany signed on 28.03.2014 has been enforced since 01.01.2017. German investors operating in China either with a wholly owned Chinese company or with shareholding in a joint venture may benefit from this Agreement. Accordingly the withholding incoming tax rate on dividends is reduced from initially 10% to 5%, if the German beneficial owner of the dividends is a company which directly holds at least 25% of the shares. Such rule makes Hong Kong or Singapore based holding companies less attractive with regard to taxation issues on dividends. Then, for the investor who is just planning its China business should take account of its overseas company structure (directly in China mainland or through a third location) and the minimum shareholding percentage 25% for the tax preferential treatment.
To enjoy the advantage of this new Agreement, a company must inform the local tax office in China expressly in writing. Such request must be submitted together with copies of the company´s articles of association and the business license. The application of this Agreement doesn´t take place automatically ex officio.
For more details of this Agreement please refer to the following link: http://www.chinatax.gov.cn/n810341/n810770/c1153094/part/1153095.pdf