China’s Trade and Investment Agreement Framework

China has been extremely active in putting into place a variety of trade agreements. This includes bilateral investment treaties (BITs), free trade agreements (FTAs), and double taxation agreements (DTAs), etc.

Free Trade Agreements

China has developed a strategic position when it comes to entering into free trade agreements – the policy of allowing dutiable and tax reduction on certain products and services being one of the main cornerstones that has projected the nation to be the world’s manufacturing hub over more recent years.

Without doubt, the signing of the China-ASEAN FTA, followed by the recent RCEP agreement in particular, will continue to have a huge impact on China and Asia’s development in global sourcing and the foreign investment related to this.

China also has a Free Trade Agreement with Switzerland, which as a result has become one of the few European nations not to have a China trade surplus.

In total, China has signed off 23 FTAs impacting 26 countries or regions countries (including the 10 ASEAN nations), has another 10 under negotiation, and a further eight under consideration.

Countries/Regions Having FTAs with China
FTA	Countries	Status
RCEP	ASEAN (10), China, Japan, South Korea, Australia, New Zealand	Signed and effective
China-Cambodia FTA	Cambodia	Signed and effective
China-Mauritius FTA	Mauritius	Signed and effective
China-Maldives FTA	Maldives	Signed
China-Georgia FTA	Georgia	Signed and effective
China-Australia FTA	Australia	Signed and effective
China-Korea FTA	South Korea	Signed and effective
China-Switzerland FTA	Switzerland	Signed and effective
China-Iceland FTA	Iceland	Signed and effective
China-Costa Rica FTA	Costa Rica	Signed and effective
China-Peru FTA	Peru	Signed and effective
China-Singapore FTA (including upgrade)	Singapore	Signed and effective
China-New Zealand FTA	New Zealand	Signed and effective
China-Chile FTA (including upgrade)	Chile	Signed and effective
China-Pakistan FTA (including upgrade)	Pakistan	Signed and effective
China-ASEAN FTA (including upgrade)	Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanrnar, Philippines, Singapore, Thailand, Vietnam	Signed and effective
Mainland and Hong Kong Closer Economic and Partnership Arrangement	Hong Kong	Signed and effective
Mainland and Macao Closer Economic and Partnership Arrangement	Macao	Signed and effective
China Taiwan ECFA	Taiwan	Signed and originally expired in September 2020

Bilateral investment agreements (BITs)

China has been entering into bilateral investment treaties (BITs) with other countries since the early 1980s, when the nation began its path to reforms under then-state leader Deng Xiaoping. Although many have now been superseded by more complicated and sophisticated trade agreements and other bilateral mechanisms, BITs remain important, especially for investors from emerging nations with relatively immature tax laws and regulatory environments. Such treaties also help to underpin the bilateral investment conditions between China and other developed nations.

[tips title="Did You Know"]Among others, BITs are a useful starting point to clarify legal and tax treatments under bilaterally agreed conditions and should be understood as a bilateral document of first resort when understanding the investment environment, and protection mechanisms that China offers its many trading partners.[/tips]

China has China has in total 107 BITs in force, with another 17 under negotiation.

Countries/Regions Having BITs with China (as of March 2022)
Algeria	Mali	Argentina	Guyana
Cameroon	Mauritius	Barbados	Jamaica
Cape Verde	Morocco	Bolivia	Mexico
Democratic Republic of Congo	Mozambique	Canada	Peru
Egypt	Nigeria	Chile	Trinidad and Tobago
Ethiopia	South Africa	Colombia	Uruguay
Equatorial Guinea	Sudan	Cuba	Papua New Guinea
Gabon	Tanzania	Australia	Lithuania
Ghana	Tunisia	New Zealand	Macedonia
Madagascar	Zimbabwe	Albania	Malta
Armenia	North Korea	Austria	Moldova
Azerbaijan	Oman	Belarus	Netherlands
Bahrain	Pakistan	Belgium/Luxembourg	Norway
Bangladesh	Philippines	Bosnia and Herzegovina	Poland
Cambodia	Qatar	Bulgaria	Portugal
Georgia	Saudi Arabia	Croatia	Romania
Iran	South Korea	Cyprus	Russia
Israel	Sri Lanka	Czech Republic	Serbia
Japan	Syria	Denmark	Slovakia
Kazakhstan	Tajikistan	Estonia	Slovenia
Kuwait	Thailand	Finland	Spain
Kyrgyzstan	Turkey	Germany	Sweden
Laos	Turkmenistan	Greece	Switzerland
Lebanon	United Arab Emirates	Hungary	United Kingdom
Malaysia	Uzbekistan	Iceland	Ukraine
Mongolia	Vietnam	Italy
Myanmar	Yemen	Latvia

Double tax avoidance agreements (DTAs)

DTAs are mostly of a bilateral nature and, while DTA-signing countries are not all members of the Organization for Economic Cooperation and Development (OECD), DTAs are generally based on model conventions developed by the OECD or (less commonly) the United Nations. And while about 75 percent of the actual words of any given DTA are identical with the words of any other DTA, the applicability and specific provisions of each treaty can vary substantially.

[video file='https://cdn.jwplayer.com/videos/ylNxk39x-sZcHHUE7.mp4' image='https://resource.dezshira.com/resize/900x506/Misc/banners/web_1.jpg' title='Maximize Profits in Your Dividend Repatriation by Leveraging the PRC-HK DTA']

From an investor’s perspective, confusion about international taxation can arise when investors are subject to two different and potentially conflicting tax systems. For example, Hong Kong and Singapore adopt a “territorial source” principle of taxation, which means that only profits sourced locally are taxable. Meanwhile, other countries, such as China and the United States, are on the worldwide tax system, and resident enterprises can be required to pay tax on income sourced both inside and outside of the country.

DTAs not only provide certainty to investors regarding their potential tax liabilities but also act as a tool to create tax-efficient international investments.

So far, China has signed DTAs with 110 countries or regions.

Countries (Regions) with Signed DTAs with China (as of April 2021)
A-B	C-J	K-N	P-S	T-Z
Argentina*	Denmark	Katar	Oman	Tajikistan
Angola*	Ecuador	Kazakhstan	Pakistan	Taiwan*
Albania	Egypt	Kenya*	Papua New Guinea	Thailand
Algeria	Estonia	Korea (ROK.)	Philippines	Trinidad & Tobago
Armenia	Ethiopia	Kuwait	Poland	Tunisia
Australia	Finland	Kyrgyzstan	Portugal	Turkey
Austria	France	Laos	Romania	Turkmenistan
Azerbaijan	Gabon*	Latvia	Russia	Ukraine
Bahrain	Georgia	Lithuania	Saudi Arabia	United Arab Emirates
Bangladesh	Germany	Luxembourg	Serbia & Montenegro	United Kingdom
Barbados	Greece	Macao	Seychelles	United States
Belarus	Hong Kong	Macedonia	Singapore	Uzbekistan
Belgium	Hungary	Malaysia	Slovakia	Uganda*
Bosnia-Herzegovina	Iceland	Malta	Slovenia	Venezuela
Botswana	India	Mauritius	South Africa	Vietnam
Brazil	Indonesia	Mexico	Spain	Zambia
Brunei	Iran	Moldova	Sri Lanka	Zimbabwe
Bulgaria	Ireland	Mongolia	Sudan
Cambodia	Israel	Morocco	Sweden
Canada	Italy	Nepal	Switzerland
Chile	Jamaica	Netherlands	Syria
Congo*	Japan	New Zealand
Croatia		Nigeria
Cuba		Norway
Cyprus
Czech Republic
* Signed, but not in effect at time of writing.

[faq title="FAQ: China’s Tariff Exclusion Process for US Imports" ui="accordion"]

What are China’s tariff exclusion process for US products?

• So far, several sets of US goods have been successfully excluded from China’s additional tariffs, as a result of several rounds of the exclusion process.
• Please refer to our article – China’s Tariff Exclusion Lists for US imports: A Timeline to stay abreast of the latest exemptions released by China’s Tariff Commission of the State Council.

On May 13, 2019, China’s Tariff Commission of the State Council announced the Trail Measures on the Exclusion Work for US Products Subject to Additional Tariffs (Tariff Commission Announcement [2019] No.2), triggering the exclusion process for US imports affected by additional tariffs imposed during the trade war.

China has so far carried out two rounds of applications where businesses sought to avail exemptions from additional tariffs, which ended July 5 and October 18, 2019, respectively.

Businesses are advised to pay attention to government announcements on when to apply for the next round of tariff exclusion; those seeking third-party support should also note the internal application deadline of their respective industrial association.

Who can apply for exclusion from Chinese tariffs?

Firms in China that import, produce, or use the relevant products or the industrial associations of such firms are eligible to apply for tariff exemption.

Respective industrial associations are encouraged to collectively submit the application on behalf of their members.

However, repeated applications for tariff exemption on the same product by a firm and an industrial association must be avoided.

Which Chinese imports are eligible and what are key application dates?

The products that China has announced retaliatory tariffs on and those products that continue to be tariffed since the beginning of the US-China trade war can claim for exemption from the tariffs.

The previous timeline for submitting the application was:

June 3, 2019 to July 5, 2019 – for the first batch of imports that were subject to additional tariffs, which include:

• 545 items subject to the US$34 billion list (The Annex 1 in Tariff Commission Announcement [2018] No.5); and
• 333 items subject to the US$16 billion list (The Annex 2 in Tariff Commission Announcement [2018] No.7).

You can also download a combined list of the first batch of imports at the bottom of the MOF website: https://gszx.mof.gov.cn/ (click “下载填报说明”).

September 2, 2019 to October 18, 2019 – for the second batch of imports subject to additional tariffs, which include:

• Items subject to the US$60 billion list (The Annex 1, 2, 3, 4 in Tariff Commission Announcement [2018] No.6).

To be noted, some of the products in the above-mentioned lists, such as automobiles and auto parts of US origin are not eligible for the application – if the government rolled-back the tariff or suspended proposed retaliatory tariffs.

The time frame for the next round of applications is not confirmed yet.

Pending / to be announced – for the third batch of imports subject to additional tariffs, which probably will include:

• Items subject to the US$75 billion list (Tariff Commission Announcement [2019] No.4).

How does China decide if a product is worthy of tariff exemption?

The Chinese government will consider three reasons when assessing the request for tariff exemption:

• The difficulties in seeking substitutes from countries outside of the US;
• The severe economic damage caused by the imposition of additional tariffs to the applicant; and
• The serious negative structural effects on the relevant industry caused by the imposition of additional tariffs (including industry development, technology advancement, employment, environmental protection, etc.) or serious consequences to Chinese society.

Enterprises need to pay particular attention to the above issues or seek professional assistance to increase the likelihood of successfully obtaining a tariff exemption.

What are the documents required?

The exclusion request shall be made for products classified within one 8-digit HS subheading through the online declaration system of MOF (see the link: https://gszx.mof.gov.cn/).

Applicants may register and log in first and then fill in the application, according to the official instruction (click “下载填报说明”) shown at the bottom of the MOF website.

Documents that will need to be prepared include:

• Business license (scanned copy);
• Import declaration of imports applying for an exclusion during the period between 2017 to 2019 (PDF file); and
• Description of the market share and sales ranking of the enterprise in the country or a certain region, etc.

Information that needs to be provided includes:

• Basic information of the enterprise;
• Information on the products; and
• Import data (quantity and amount of relevant goods imported during the period between 2017 to 2019, etc.).

To be noted, the applicant who applies for the exclusion of multiple products with different 8-digit HS codes shall fill out a form for each product separately.

What is the validity period of an approved exemption?

The period of exclusion will be valid for one year after the date of approval, which can be understood as the date when the Customs Tariff Commission of the State Council releases the exemption list.

Businesses should keep track of this and verify the status of their application against this list as the government has not yet confirmed a date of release.

Applicants who had already been hit with the additional tariffs and are eligible for tariff exemption can apply for a refund of the retaliatory tariffs within six months after the release of the exemption list.

Note: The official links in this article are in Chinese. Businesses are advised to seek professional assistance to understand the government requirements clearly. See here for our article explaining the US tariff exemption process. 

[/faq]