How to eliminate double taxation?
The 'tax credit' is the basic mechanism utilized by the treaties to eliminate double taxation. A foreign resident is allowed to apply the Chinese income tax as a credit against his resident country's income tax. In addition, according to the US-China tax treaty, if a company owns more than 10% of the voting rights of a Chinese company from which it receives dividends, it may apply as a credit against its US income tax the Chinese income tax paid by the Chinese company with respect to the profits out of which the dividends are paid.
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