In a recent decision by the tax authorities in Qinghai, China, an application for treaty benefits regarding a dividend distribution was denied on the basis that the non-resident recipient of the dividends failed China's beneficial ownership test.
The case involved a mining company in Qinghai that was 90% owned by an offshore holding company which was wholly owned by a parent company resident in Canada. Although the holding company had five directors and five employees locally, the tax autho…