Singapore and China completed negotiations on a new tax treaty on 11 July. When ratified by both governments, the treaty will replace the existing treaty which has been in force since 12 December 1986.

Under the new treaty, withholding tax on dividends will be reduced from the current seven per cent, for corporate shareholders holding at least 25 per cent of the share capital, and 12 per cent for others, to five per cent and 10 per cent respectively.

Gains from the disposal of shares of Chinese companies will be taxed in China only if the vendor has held at least 25 per cent of the share capital of the company at any time during the preceding 12-months.

The treaty will help to restore parity with Hong Kong, which signed a new treaty with China last year.