| Circular of the State Administration of Taxation of the People's Republic of China,on Issues of Relevant Articles Explanations and Implementation of the Arrangement between the Mainland and the Hong Kong SAR for the Avoidance of Double Taxation and Tax Evasion on Income |
| Tuesday,July 10,2007 Posted: 14:28 BJT(0628 GMT) CAITEC |
The bureaus of state taxation and local taxation of all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning: The Arrangement for Prevention of Double Taxation on Income and Prevention of Tax Avoidance between Mainland of China and Hong Kong Special Administration Region (the “Arrangement”) , signed on August 21, 2006, has been effective since Jan 1, 2007. For the purpose of furthering enhancing the implementation of the Arrangement, the State Administration of Taxation now provides detailed interpretations to some articles of the Arrangement. This Circular clarifies that the "fixed business locations" as provided in the definition of "permanent establishments" in Article 5 of the Arrangement not only refer to a fixed place of business, such as offices or branches established or registered by an enterprise of a contracting party in the place of the other contracting party for business operation, but also to the offices or other facilities used to provide enterprises of the other contracting party with long-term service. With regard to proceeds from the equity transfer as stipulated in Article 13.5, SAT states that for a Hong Kong resident who owns at least 25% equity of a mainland company, the proceeds from the equity transfer in whole or in part are taxable in mainland China. This Circular also provides detailed interpretations of the definition of Resident as stipulated in Article 4 of the Arrangement, the definition and calculation method of Dependent Personal Services as stipulated in Article 14 of the Arrangement, and clarifications on Article 9 Affiliated Enterprises, Article 11 Interests, Article 21 Elimination of Double Taxation, and implementation issues regarding Article 23 Consultation Procedure and Article 24 Information Exchange. State Administration of Taxation April 4, 2007 (All information published in this website is authentic in Chinese. English is provided for reference only. ) |
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