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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:

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:

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:

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]

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