On December 1, 2015, China signed a DTT with Zimbabwe, bringing the number of DTTs signed by China to 104. The DTT will enter into force upon completion of the ratification procedures by both sides. The important features of ChinaZimbabwe DTT include:
- Withholding tax (WHT) rates on dividends, interest, and royalties paid to qualified beneficial owners (BO) are 2.5% / 7.5% (2.5% for corporate BO which holds directly or indirectly at least 25% shares of the company paying the dividends and 7.5% for all other cases), 7.5% and 7.5% respectively.
- There is a ‘principle purpose test (PPT)’ provision in each article of dividends, interest, and royalties stipulating that if the main purpose or one of the purposes to put in place the arrangement is to take advantage of the treaty benefit, the treaty benefit shall not be granted.
- Capital gains arising from the transfer of property-rich shares and shares that represent a participation of at least 50% in a company in the source state may be taxed in the source state. In other cases of share transfers, the taxing right lies with the residence state.
- The profit derived by an enterprise from the operation or rental of ships, boats, aircraft, rail, or road transport vehicles in international traffic and the rental of containers and related equipment which is incidental to the operation of international traffic shall all be taxable only in the contracting state where the place of effective management of the enterprise is located.
