AN improved and updated double taxation agreement (DTA) between Singapore and China will come into effect on Tuesday.

The revised agreement will continue to help investors avoid the burden of double taxation of income between Singapore and China.

It will further strengthen the economic links between the two countries by facilitating the cross-flow of trade, investment, financial activities and technical know-how and expertise between Singapore and China.

The latest terms include:

• Reducing withholding tax rate on dividends to 5 per cent from 7 per cent for corporate shareholders holding at least 25 per cent of the share capital, and to 10 per cent from 12 per cent for other shareholders.
• The withholding tax rate on lease payments for industrial, commercial or scientific equipment will be reduced to six per cent from 10 per cent.
• In addition, gains from the sales of shares in Chinese companies will be subject to tax in China only if the person making the sale has held at least 25 per cent of the share capital of the company in the past 12 months.

The provisions of the revised DTA shall apply to income derived on or after Jan 1 2008.