Dividends
With regard to dividends, a reduction in the conventional withholding tax rate is envisaged with respect to the 1986 Agreement, from 10% to 5%, in the case of direct participations of at least 25% of the capital of the company that pays dividends, held for at least 365 days. This reduction in the rate may therefore benefit Italian companies that receive Chinese source dividends. Furthermore, the reduction in the rate on qualified investments will encourage the capitalisation of Chinese companies in Italy, through equity investments. For other dividends, the rate of 10% applies.
Interests
The amount of withholding tax applicable in the source state cannot exceed a rate equal to 10% of the gross amount of interest; there is a reduced rate of 8% on interest paid to financial institutions, in relation to loans with a duration of at least three years aimed at financing investment projects.
Royalties
With regard to royalties, it is envisaged that the general rate applicable in the source State may not exceed 10% of the fees paid for the use, or the concession in use, of a copyright on literary, artistic or scientific works, including software, cinematographic films and films or recordings for television or radio broadcasts, as well as for patents, trademarks, designs or models, secret formulae or processes, or for information concerning industrial, commercial or scientific experiences.
Capital gains
With regard to capital gains, the treatment of capital gains deriving from the sale of qualifying holdings with a minimum level of 25% is confirmed. However, the new agreement provides for the taxation of these capital gains if held with a level of participation above this threshold at any time in the 12 months prior to the sale.
