Draft version of the slides used to open my lecure at the Cpital University of Business and Law, Beijing. I focused on the latest changes to the Italy - China DTC and the 2019 MoU signed in Rome.

1. “One Belt and One Road” Project
and the China-Italy Tax Treaty
Professor Marco Greggi
Beijing, October 30th 2019
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2. Programme of the Seminar
1. The Belt and Road Project, as seen from Europe;
2. The Treaty currently in force;
3. The March 2019 Memorandum of Understanding;
4. The proposed changes to the Treaty and their impact on bilateral
investments.
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3. The New Seidenstraßen, 2013
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4. The European Vison
1. Using Peter Frankopan’s approach to the development of the Silk
Roads;
1. Not a conflict of models, but a fluctuation of the development dynamics;
2. The European perspectives / impressions:
1. Fragmentation;
2. Fear / Uncertainty;
3. Opportunities in a multipolar world.
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5. The Road and the Tax(-es)
• The Belt and Road project in need of:
• Physical infrastructures;
• Legal infrastructures including tax-related ones:
• Permanent establishment notion;
• Taxation at source;
• Non discrimination;
• Prevention of multiple / double taxation;
• VAT / Custom clearance;
• Possible conflicting position of the states involved.
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6. The Road, summarised
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Priorities
• Equal opportunity
scenario (two way
roads);
• Consistency with
customs taxation
and VAT.
Priorities
• Allocation of
profits;
• Assessment of
permanent
establishments.
Priorities
• No taxation at
source;
• Neutrality of the
business
environment (toll
free road).

7. The Road, and the Bottlenecks
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European Union Law
Most favoured
Nation Clause
Customs
Regulations
Bilateral
Arrangements

8. The Treaty currently in Force
1. Signed in Beijing on October 31st 1986, on of the first treaties signed
by China in Europe;
2. Consistent with the (then) OECD Model convention of the time;
3. No update to the definition of Permanent establishment, and 6
months period for real-estate sector;
1. Italian domestic law allow cherry picking and arbitrage between Treaty and
domestic provisions;
4. In the additional protocol no references to ADRs or conflict
solutions.
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9. The 2019 Memorandum
1. Memorandum of Understanding have no binding value under the
law (paragraph VI of the 2019 MoU);
2. Can they be of some relevance in the Interpretation of existing
treaties according to the Vienna convention of the Interpretation of
the Law of Treaties (Articles 31 and sub) (Paragraph IV of the MoU)?
3. The possible relevance of the 2019 MoU:
1. Provisions on taxation within the Memorandum;
2. Subsequent proposed changes to the Double Taxation Convention.
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10. The MoU Structure:
Areas of Intervention
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Transport,
Logistics,
Infrastructure
Unimpeded
Trade and
Investments
Policy
Dialogue
Financial
Cooperation
People-to-
people
Connectivity
Green
Development
Cooperation

11. Financial Cooperation
Paragraph II of the MoU:
1. Bilateral communications and coordination of fiscal, financial and
structural reform policies in order to create a favourable
environment for economic and financial cooperation;
2. Establishment of the Italy – China Finance Dialogue by the
respective ministries;
3. Extension of the partnership towards third countries under the
framework of the Belt and road initiative.
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12. The MoU Structure:
Methodology of Cooperation
Pillar 1
•Exchange visits. Development of Pilot Programmes;
•Enhancement of transparency and Information sharing from all sectors of society.
Pillar 2
•Market principles oriented development of the OBOR project;
•Public- private sustainable projects.
Pillar 3
•Extension to third countries within the OBOR of the joint projects
•Enhancement of the (…) fiscal sustainability of the selected project
Pillar 4
•Further context of collaboration are also possible …
•… according to the common interest of the parties.
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13. Possible Impact on Taxation ?
1. Multilateralism in action, within the “OBOR Project” microcosm ?
• Most of the provisions of the MoU are intended to be applicable to third
countries as well;
2. OECD inspired BEPS and OBOR Project as “Divergent convergences”
?
• OBOR application to Intentional Taxation law demands for a subset of tax
rules, provisions and interpretive guidelines to be applied consistently with
the Interest of China and Italy in the smaller theatre of the OBOR;
• Centrality of the seamless of the business within / along the roads.
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14. Amendments to the Treaty
Italy - China
• In a nutshell:
• Most of the changes affecting the passive income taxation:
• Dividends;
• Interests;
• Royalties;
• …
• All of them are intended to reduce the withholding tax system as to
facilitate cross border investments;
• Tax treatment of Chinese investors now is quite similar to the
treatment of other European investors in Italy.
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15. Dividends
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10% Withholding tax, but only 5% if the participation is 25% or more and held for one year or more

16. Interests
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10% withholding tax, but 8% if loan for a long term investments (3 years), exemption for state organizations

17. Royalties
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10% standard rate, 5% industrial, commercial, scientific equipment

18. Capital Gains
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Taxation in the source state (where the participated company is, if qualified participation exists (25% or more)

19. One Road, no Shortcuts
• Cases in reference: C-115/16, C-118/16, C-119/16, C-299/16 as
decided by the CJEU on February 26th 2019 (the so called “Danish
cases”);
• Possibility to grant the application of the “Royalties directive” in
situations where the claimant company could be regarded as a
(potential) conduit;
• Issues under discussion:
• The concept of beneficial owner;
• The abuse of right doctrine and the conditions to prove it;
• The Free movement of capital as fundamental right.
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20. Going Off-road …
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A
B
C
Passive Income
See also Italian Supreme Court 25490 October 10° 2019

21. Thanks you for your Attention
marco.greggi@unife.it
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https://www.education-in-taxation.li/
The author wishes to express his gratitude to Professor Wuyao Weng for his support in the development of this project.