The Government of the People’s Republic of China and the Government of the
United States of America;
Desiring to conclude an Agreement for the avoidance of double taxation and the
prevention of tax evasion with respect to taxes on income;
Have agreed as follows:
ARTICLE 1
PERSONAL SCOPE
This Agreement shall apply to persons who are residents of one or both of the
Contracting States.
ARTICLE 2
TAXES COVERED
1. The taxes to which this Agreement applies are
(a) in the People’s Republic of China:
(i) the individual income tax;
(ii) the income tax concerning joint ventures with Chinese and foreign
investment;
(iii) the income tax concerning foreign enterprises;
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(iv) the local income tax.
(hereinafter referred to as “Chinese tax” ) .
(b) in the United States of America: the Federal income taxes imposed by the
Internal Revenue Code.
(hereinafter referred to as “United States tax” )
2. The Agreement shall apply also to any identical or substantially similar taxes
which are imposed after the date of signature of the Agreement in addition to, or in
place of, those referred to in paragraph 1. Within an appropriate time period, the
competent authorities of the Contracting States shall notify each other of any
substantial changes which have been made in their respective taxation laws.
ARTICLE 3
GENERAL DEFINITIONS
1. In this Agreement unless the context otherwise requires,
(a) the term “the People’s Republic of China” , when used in a geographical
sense, means all the territory of the People’s Republic of China, including
its territorial sea, in which the laws relating to Chinese tax are in force, and
all the area beyond its territorial sea, including the seabed and subsoil
thereof, over which the People’s Republic of China has jurisdiction in
accordance with international law and in which the laws relating to
Chinese tax are in force;
(b) the term “United States of America” , when used in a geographical sense,
means all the territory of the United States of America, including its
territorial sea, in which the laws relating to United States tax are in force,
and all the area beyond its territorial sea, including the seabed and subsoil
thereof, over which the United States of America has jurisdiction in
accordance with international law and in which the laws relating to United
States tax are in force;
(c) the terms “a Contracting State” and “the other Contracting State” mean the
People’s Republic of China or the United States of America, as the context
requires;
(d) the term “tax” means Chinese tax or United States tax, as the context
requires;
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(e) the term “person” includes an individual, a company, a partnership and
any other body of persons;
(f) the term “company” means any body corporate or any entity which is
treated as a body corporate for tax purposes;
(g) the terms “enterprise of a Contracting State” and “enterprise of the other
Contracting State” mean respectively an enterprise carried on by a resident
of a Contracting State and an enterprise carried on by a resident of the
other Contracting State;
(h) the term “nationals” means all individuals having the nationality of a
Contracting State and all legal persons, partnerships and other bodies of
persons deriving their status as such from the law in force in a Contracting
State;
(i) the term “competent authority” means
(i) in the People’s Republic of China, the Ministry of Finance or its
authorized representative; and
(ii) in the United States of America, the Secretary of the Treasury or his
authorized representative.
2. As regards the application of the Agreement by a Contracting State any term not
defined therein shall, unless the context otherwise requires, have the meaning which it
has under the laws of that Contracting State concerning the taxes to which the
Agreement applies.
ARTICLE 4
RESIDENT
1. For the purposes of this Agreement, the term “resident of a Contracting State”
means any person who, under the laws of that Contracting State, is liable to tax
therein by reason of his domicile, residence, place of head office, place of
incorporation or any other criterion of a similar nature.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of
both Contracting States, then the competent authorities of the Contracting States shall
determine through consultations the Contracting State of which that individual shall
be deemed to be a resident for the purposes of this Agreement.
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3. Where by reason of the provisions of paragraph 1 a company is a resident of both
Contracting States, then the competent authorities of the Contracting States shall
determine through consultations the Contracting State of which the company shall be
deemed to be a resident for the purposes of this Agreement, and, if they are unable to
so determine, the company shall not be considered to be a resident of either
Contracting State for purposes of enjoying benefits under this Agreement.
4. Where by reason of the provisions of paragraph 1 a company is a resident of the
United States of America, and, under a tax agreement between the People’s Republic
of China and a third country is also a resident of that third country, the company shall
not be considered to be a resident of the United States of America for purposes of
enjoying benefits under this Agreement.
ARTICLE 5
PERMANENT ESTABLISHMENT
1. For the purposes of this Agreement, the term “permanent establishment” means a
fixed place of business through which the business of an enterprise is wholly or partly
carried on.
2. The term “permanent establishment” includes especially:
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop; and
(f) a mine, an oil or gas well, a quarry, or any other place of extraction of
natural resources.
3. The term “permanent establishment” also includes:
(a) a building site, a construction, assembly or installation project, or
supervisory activities in connection therewith, but only where such site,
project or activities continue for a period of more than six months;
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(b) an installation, drilling rig or ship used for the exploration or exploitation
of natural resources, but only if so used for a period of more than three
months; and
(c) the furnishing of services, including consultancy services, by an
enterprise through employees or other personnel engaged by the
enterprise for such purpose, but only where such activities continue (for
the same or a connected project) within the country for a period or
periods aggregating more than six months within any twelve month
period.
4. Notwithstanding the provisions of paragraphs 1 through 3, the term “permanent
establishment” shall be deemed not to include:
(a) the use of facilities solely for the purpose of storage, display or delivery of
goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or of collecting information, for the
enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of
carrying on, for the enterprise, any other activity of a preparatory or
auxiliary character;
(f) the maintenance of a fixed place of business solely for any combination of
the activities mentioned in sub-paragraphs (a) through (e), provided that
the overall activity of the fixed place of business resulting from this
combination is of a preparatory or auxiliary character.
5. Notwithstanding the provisions of paragraphs 1 and 2, where a person, other than
an agent of an independent status to whom paragraph 6 applies, is acting on behalf of
an enterprise and has and habitually exercises in a Contracting State an authority to
conclude contracts in the name of the enterprise, that enterprise shall be deemed to
have a permanent establishment in that Contracting State in respect of any activities
which that person undertakes for the enterprise, unless the activities of such person
are limited to those mentioned in paragraph 4 which, if exercised through a fixed
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place of business, would not make this fixed place of business a permanent
establishment under the provisions of that paragraph.
6. An enterprise of a Contracting State shall not be deemed to have a permanent
establishment in the other Contracting State merely because it carries on business in
that other Contracting State through a broker, general commission agent or any other
agent of an independent status, provided that such persons are acting in the ordinary
course of their business. However, when the activities of such an agent are devoted
wholly or almost wholly on behalf of that enterprise, he will not be considered an
agent of an independent status within the meaning of this paragraph if it is shown that
the transactions between the agent and the enterprise were not made under
arm’s-length conditions.
7. The fact that a company which is a resident of a Contracting State controls or
is controlled by a company which is a resident of the other Contracting State, or
which carries on business in that other Contracting State (whether through a
permanent establishment or otherwise), shall not of itself constitute either
company a permanent establishment of the other.
ARTICLE 6
INCOME FROM IMMOVABLE PROPERTY
1. Income derived by a resident of a Contracting State from real property situated in
the other Contracting State may be taxed in that other Contracting State.
2. The term “real property” shall have the meaning which it has under the laws of
the Contracting State in which the property in question is situated. The term shall in
any case include property accessory to real property, livestock and equipment used in
agriculture and forestry, rights to which the provisions of general law respecting
landed property apply, usufruct of real property and rights to variable or fixed
payments as consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources; ships and aircraft shall not be regarded as real
property.
3. The provisions of paragraph 1 shall apply to income derived from the direct use,
letting or use in any other form of real property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from real
property of an enterprise and to income from real property used for the performance
of independent personal services.
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ARTICLE 7
BUSINESS PROFITS
1. The profits of an enterprise of a Contracting State shall be taxable only in that
Contracting State unless the enterprise carries on business in the other Contracting
State through a permanent establishment situated therein. If the enterprise carries on
business as aforesaid, the profits of the enterprise may be taxed in the other
Contracting State but only so much of them as is attributable to that permanent
establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting
State carries on business in the other Contracting State through a permanent
establishment situated therein, there shall in each Contracting State be attributed to
that permanent establishment the profits which it might be expected to make if it were
a distinct and separate enterprise engaged in the same or similar activities under the
same or similar conditions and dealing wholly independently with the enterprise of
which it is a permanent establishment.
3. In the determination of the profits of a permanent establishment, there shall be
allowed as deductions expenses which are incurred for the purposes of the permanent
establishment, including executive and general administrative expenses so incurred,
whether in the State in which the permanent establishment is situated or elsewhere.
However, no such deduction shall be allowed in respect of amounts, if any, paid
(otherwise than towards reimbursement of actual expenses) by the permanent
establishment to the head office of the enterprise or any of its other offices, by way of
royalties or other similar payments or by way of interest on money lent to the
permanent establishment. Likewise, no account shall be taken, in the determination of
the profits of a permanent establishment, for amounts charged (otherwise than
towards reimbursement of actual expenses) by the permanent establishment to the
head office of the enterprise or any of its other offices, by way of royalties or other
similar payments or by way of interest on money lent to the head office of the
enterprise or any of its other offices.
4. Insofar as the tax law of a Contracting State provides with respect to a specific
industry that the profits to be attributed to a permanent establishment are to be
determined on the basis of a deemed profit, nothing in paragraph 2 shall preclude that
Contracting State from applying those provisions of its law, provided that the result is
in accordance with the principles contained in this Article.
5. No profits shall be attributed to a permanent establishment by reason of the mere
purchase by that permanent establishment of goods or merchandise for the enterprise.
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6. For the purposes of paragraphs 1 through 5, the profits to be attributed to the
permanent establishment shall be determined by the same method year by year unless
there is good and sufficient reason to the contrary.
7. Where profits include items of income which are dealt with separately in other
Articles of this Agreement, then the provisions of those Articles shall not be affected
by the provisions of this Article.
ARTICLE 8
ASSOCIATED ENTERPRISES
1. Where
(a) an enterprise of a Contracting State participates directly or indirectly in the
management, control or capital of an enterprise of the other Contracting
State; or
(b) the same persons participate direcrly or indirectly in the management,
control or capital of an enterprise of a Contracting State and an enterprise
of the other Contracting State,
and in either case the relationship between the two enterprises in their
commercial or financial relations differs from that which would exist between
independent enterprises, then any profits which, but for those conditions would have
accrued to one of the enterprises, but by reason of those conditions have not so
accrued, may be included in the profits of that enterprise and taxed accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that
Contracting State-and taxes accordingly-profits on which an enterprise of the other
Contracting State has been charged to tax in that other Contracting State, and the
profits so included are profits which would have accrued to the enterprise of the
first-mentioned State if the conditions made between the two enterprises had been
those which would have been made between independent enterprises, then that other
Contracting State shall make an appropriate adjustment to the amount of the tax
charged therein on those profits. In determining such adjustment, due regard shall be
paid to the other provisions of this Agreement and the competent authorities of the
Contracting States shall if necessary consult each other.
ARTICLE 9
DIVIDENDS
1. Dividends paid by a company which is a resident of a Contracting State to a
resident of the other Contracting State may be taxed in that other Contracting State.
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2. However, such dividends may also be taxed in the Contracting State of which the
company paying the dividends is a resident, and according to the laws of that
Contracting State, but if the recipient is the beneficial owner of the dividends the tax
so charged shall not exceed 10 percent of the gross amount of the dividends.
This paragraph shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid.
3. The term “dividends” as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from other
corporate rights which is subjected to the same taxation treatment as income from
shares by the taxation laws of the Contracting State of which the company making the
distribution is a resident.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
dividends, being a resident of a Contracting State, carries on business in the other
Contracting State, of which the company paying the dividends is a resident, through a
permanent establishment situated therein, or performs in that other Contracting State
independent personal services from a fixed base situated therein, and the holding or
other corporate rights in respect of which the dividends are paid is effectively
connected with such permanent establishment or fixed base. In such case the
provisions of Article 7 or 13, as the case may be, shall apply.
5. Where a company which is a resident of a Contracting State derives profits or
income from the other Contracting State, that other Contracting State may not impose
any tax on the dividends paid by the company, except insofar as such dividends are
paid to a resident of that other Contracting State or insofar as the holding or other
corporate rights in respect of which the dividends are paid is effectively connected
with a permanent establishment or a fixed base situated in that other Contracting State,
nor subject the company’s undistributed profits to a tax on the company’s
undistributed profits, even if the dividends paid or the undistributed profits consist
wholly or partly of profits or income arising in that other Contracting State.
ARTICLE 10
INTEREST
1. Interest arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other Contracting State.
2. However, such interest may also be taxed in the Contracting State in which it
arises and according to the laws of that Contracting State, but if the recipient is the
beneficial owner of the interest, the tax so charged shall not exceed 10 percent of
the gross amount of the interest.
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3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting
State and derived by the government of the other Contracting State, a political
subdivision or local authority thereof, the Central Bank of that other Contracting State
or any financial institution wholly owned by that government, or by any resident of
the other Contracting State with respect to debt-claims indirectly financed by the
government of that other Contracting State, a political subdivision or local authority
thereof, the Central Bank of that other Contracting State or any financial institution
wholly owned by that government, shall be exempt from tax in the first-mentioned
Contracting State.
4. The term “interest” as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage, and whether or not carrying a right
to participate in the debtor’s profits, and in particular, income from government
securities, and income from bonds or debentures, including premiums or prizes
attaching to such securities, bonds, or debentures.
5. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of
the interest, being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent establishment
situated therein, or performs in that other Contracting State independent personal
services from a fixed base situated therein, and the debt-claim in respect of which the
interest is paid is effectively connected with such permanent establishment or fixed
base. In such case the provisions of Article 7 or 13, as the case may be, shall apply.
6. Interest shall be deemed to arise in a Contracting State when the payer is the
government of that Contracting State itself, a political subdivision, a local authority or
a resident of that Contracting State. Where, however, the person paying the interest,
whether he is a resident of a Contracting State or not, has in a Contracting State a
permanent establishment or a fixed base in connection with which the indebtedness on
which the interest is paid was incurred, and such interest is borne by such permanent
establishment or fixed base, then such interest shall be deemed to arise in the
Contracting State in which the permanent establishment or fixed base is situated.
7. Where, by reason of a special relationship between the payer and the beneficial
owner or between both of them and some other person, the amount of the interest,
having regard to the debt-claim for which it is paid, exceeds the amount which would
have been agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In such case the excess part of the payments shall remain taxable according
to the laws of each Contracting State, due regard being had to the other provisions of
this Agreement.
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ARTICLE 11
ROYALTIES
1. Royalties arising in a Contracting State and paid to a resident of the other
Contracting State may be taxed in that other Contracting State.
2. However, such royalties may also be taxed in the Contracting State in which they
arise and according to the laws of that Contracting State, but if the recipient is the
beneficial owner of the royalties, the tax so charged shall not exceed 10 percent of the
gross amount of the royalties.
3. The term “royalties” as used in this Article means payments of any kind received
as a consideration for the use of, or the right to use, any copyright of literary, artistic
or scientific work, including cinematographic films or films or tapes used for radio or
television broadcasting, any patent, technical know-how, trademark, design or model,
plan, secret formula or process, or for the use of, or the right to use, industrial
commercial or scientific equipment, or for information concerning industrial,
commercial or scientific experience.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the
royalties, being a resident of a Contracting State, carries on business in the other
Contracting State in which the royalties arise, through a permanent establishment
situated therein, or performs in that other Contracting State independent personal
services from a fixed base situated therein, and the right or property in respect of
which the royalties are paid is effectively connected with such permanent
establishment or fixed base. In such case the provisions of Article 7 or 13, as the case
may be, shall apply.
5. (a) Royalties will be deemed to arise in a Contracting State when the payer is
the government of that Contracting State itself, a political subdivision, a
local authority or a resident of that Contracting State. Where, however, the
person paying the royalties, whether he is a resident of a Contracting State
or not, has in a Contracting State a permanent establishment or a fixed base
in connection with which the liability to pay the royalties was incurred, and
such royalties are borne by such permanent establishment or fixed base, then
such royalties shall be deemed to arise in the Contracting State in which the
permanent establishment or fixed base is situated.
(b) Where under sub-paragraph (a) royalties do not arise in one of the
Contracting States, and the royalties relate to the use of, or the right to use,
the right or property in one of the Contracting States, the royalties shall be
deemed to arise in that Contracting State.
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6. Where, by reason of a special relationship between the payer and the beneficial
owner or between both of them and some other person, the amount of the royalties,
having regard to the use, right, or information for which they are paid, exceeds the
amount which would have been agreed upon by the payer and the beneficial owner in
the absence of such relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case the excess part of the payments shall remain
taxable according to the laws of each Contracting State, due regard being had to the
other provisions of this Agreement.
ARTICLE 12
CAPITAL GAINS
1. Gains derived by a resident of a Contracting State from the alienation of real
property referred to in Article 6 and situated in the other Contracting State may be
taxed in that other Contracting State.
2. Gains from the alienation of movable (personal) property forming part of the
business assets of a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State, or of movable (personal) property pertaining
to a fixed base available to a resident of a Contracting State in the other Contracting
State for the purpose of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or together with
the whole enterprise) or such a fixed base, may be taxed in that other Contracting
State.
3. Gains derived by a resident of a Contracting State from the alienation of ships or
aircraft operated in international traffic and of movable (personal) property pertaining
to the operation of such ships or aircraft shall be taxable only in that Contracting
State.
4. Gains from the alienation of shares of the capital stock of a company the property
of which consists directly or indirectly principally of real property situated in a
Contracting State may be taxed in that Contracting State.
5. Gains from the alienation of shares other than those mentioned in paragraph 4
representing a participation of 25 percent in a company which is a resident of a
Contracting State may be taxed in that Contracting State.
6. Gains derived by a resident of a Contracting State from the alienation of any
property other than that referred to in paragraphs 1 through 5 and arising in the other
Contracting State may be taxed in that other Contracting State.
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ARTICLE 13
INDEPENDENT PERSONAL SERVICES
1. Income derived by an individual who is a resident of a Contracting State in
respect of professional services or other activities of an independent character shall be
taxable only in that Contracting State, unless he has a fixed base regularly available to
him in the other Contracting State for the purpose of performing his activities or he is
present in that other Contracting State for a period or periods exceeding in the
aggregate 183 days in the calendar year concerned. If he has such a fixed base or
remains in that other Contracting State for the aforesaid period or periods, the income
may be taxed in that other Contracting State, but only so much of it as is attributable
to that fixed base or is derived in that other Contracting State during the aforesaid
period or periods.
2. The term “professional services” includes, especially, independent scientific,
literary, artistic, educational or teaching activities as well as the independent activities
of physicians, lawyers, engineers, architects, dentists and accountants.
ARTICLE 14
DEPENDENT PERSONAL SERVICES
1. Subject to the provisions of Articles 15, 17, 18, 19 and 20, salaries, wages and
other similar remuneration derived by a resident of a Contracting State in respect of
an employment shall be taxable only in that Contracting State unless the employment
is exercised in the other Contracting State. If the employment is so exercised, such
remuneration as is derived therefrom may be taxed in that other Contracting State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the other
Contracting State shall be taxable only in the first-mentioned State if:
(a) the recipient is present in the other Contracting State for a period or
periods not exceeding in the aggregate 183 days in the calendar year
concerned; and
(b) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the other Contracting State; and
(c) the remuneration is not borne by a permanent establishment or a fixed base
which the employer has in the other Contracting State.
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ARTICLE 15
DIRECTORS' FEES
Directors’ fees and other similar payments derived by a resident of a Contracting
State in his capacity as a member of the board of directors of a company which is a
resident of the other Contracting State may be taxed in that other Contracting State.
ARTICLE 16
ARTISTES AND ATHLETES
1. Notwithstanding the provisions of Articles 13 and 14, income derived by a
resident of a Contracting State as an entertainer, such as a theatre, motion picture,
radio, or television artiste, or a musician, or as an athlete, from his personal activities
as such exercised in the other Contracting State, may be taxed in that other
Contracting State.
However, income derived by a resident of a Contracting State as an entertainer or
athlete from activities exercised in accordance with a special program for cultural
exchange agreed upon by the governments of both Contracting States shall be exempt
from tax by the other Contracting State.
2. Where income in respect of personal activities exercised by an entertainer or an
athlete in his capacity as such accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the provisions of Articles 7, 13 and
14, be taxed in the Contracting State in which the activities of the entertainer or
athlete are exercised.
However, if those activities are exercised in accordance with a special program
for cultural exchange agreed upon by the governments of both Contracting States, the
income so derived shall be exempt from tax by the other Contracting State.
ARTICLE 17
PENSIONS
1. Subject to the provisions of paragraph 2 of Article 18, pensions and other similar
remuneration paid to a resident of a Contracting State in consideration of past
employment shall be taxable only in that Contracting State.
2. Notwithstanding the provisions of paragraph 1, pensions and other payments
made by the government, a political subdivision or a local authority of a Contracting
State under its social security system or public welfare plan shall be taxable only in
that Contracting State.
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ARTICLE 18
GOVERNMENT SERVICE
1. (a) Remuneration, other than a pension, paid by the government or a
political subdivision or a local authority of a Contracting State to an
individual in respect of services rendered to that government or
subdivision or authority shall be taxable only in that Contracting State.
(b) However, such remuneration shall be taxable only in the other Contracting
State if the services are rendered in that other Contracting State and the
individual is a resident of that other Contracting State who:
(i) is a national of that other Contracting State; or
(ii) did not become a resident of that other Contracting State solely for the
purpose of rendering the services.
2. (a) Any pension paid by, or out of funds created by, the government or a
political subdivision or a local authority of a Contracting State to an
individual in respect of services rendered to that government or subdivision
or authority shall be taxable only in that Contracting State.
(b) However, such pension shall be taxable only in the other Contracting State
if the individual is a resident of, and a national of, that other Contracting
State.
3. The provisions of Articles 14, 15, 16 and 17 shall apply to remuneration and
pensions in respect of services rendered in connection with a business carried on by
the government or a political subdivision or a local authority of a Contracting State.
ARTICLE 19
TEACHERS AND RESEARCHERS
An individual who is, or immediately before visiting a Contracting State was, a
resident of the other Contracting State and is temporarily present in the
first-mentioned Contracting State for the primary purpose of teaching, giving lectures
or conducting research at a university, college, school or other accredited educational
institution or scientific research institution in the first-mentioned Contracting State
shall be exempt from tax in the first-mentioned Contracting State for a period not
exceeding three years in the aggregate in respect of remuneration for such teaching,
lectures or research.
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ARTICLE 20
STUDENTS AND TRAINEES
A student, business apprentice or trainee who is or was immediately before
visiting a Contracting State, a resident of the other Contracting State and who is
present in the first-mentioned Contracting State solely for the purpose of his education,
training or obtaining special technical experience shall be exempt from tax in that
Contracting State with respect to:
(a) payments received from abroad for the purpose of his maintenance,
education, study, research or training;
(b) grants or awards from a government, scientific, educational or other
tax-exempt organization; and
(c) income from personal services performed in that Contracting State in an
amount not in excess of 5, 000 United States dollars or its equivalent in
Chinese yuan for any taxable year.
The benefits provided under this Article shall extend only for such period of time
as is reasonably necessary to complete the education or training.
ARTICLE 21
OTHER INCOME
1. Items of income of a resident of a Contracting State, wherever arising, not dealt
with in the foregoing Articles of this Agreement shall be taxable only in that
Contracting State.
2. The provisions of paragraph 1 shall not apply to income other than that from
real property as defined in paragraph 2 of Article 6 if the recipient of such income,
being a resident of a Contracting State, carries on business in the other Contracting
State through a permanent establishment situated therein, or performs in that other
Contracting State independent personal services from a fixed base situated therein,
and the right or property in respect of which the income is paid is effectively
connected with such permanent establishment or fixed base. In such case the
provisions of Article 7 or 13, as the case may be, shall apply.
3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a
resident of a Contracting State not dealt with in the foregoing Articles of this
Agreement and arising in the other Contracting State may also be taxed in that other
Contracting State.
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ARTICLE 22
METHODS FOR ELIMINATION OF DOUBLE TAXATION
1. In the People’s Republic of China, double taxation shall be eliminated as follows:
(a) Where a resident of China derives income from the United States, the
amount of the United States income tax payable in respect of that income
in accordance with the provisions of this Agreement shall be allowed as a
credit against the Chinese tax imposed on that resident. The amount of
credit, however, shall not exceed the amount of the Chinese tax computed
with respect to that income in accordance with the taxation laws and
regulations of China.
(b) Where the income derived from the United States is a dividend paid by a
company which is a resident of the United States to a company which is a
resident of China and which owns not less than 10 percent of the shares of
the company paying the dividend, the credit shall take into account the
United States income tax payable by the company paying the dividend in
respect of the profits out of which the dividends are paid.
2. In the United States of America, in accordance with the provisions of the law of
the United States, the United States shall allow to a resident or citizen of the United
States as a credit against the United States tax on income:
(a) the income tax paid to China by or on behalf of such resident or citizen;
and
(b) in the case of a United States company owning at least 10 percent of the
voting rights in a company which is a resident of China and from which
the United States company receives dividends, the income tax paid to
China by or on behalf of the distributing company with respect to the
profits out of which the dividends are paid.
For the purposes of this paragraph of this Agreement, the taxes referred to in
paragraphs l (a) and 2 of Article 2 shall be considered income taxes.
3. Income derived by a resident of a Contracting State which may be taxed in the
other Contracting State in accordance with this Agreement shall be deemed to arise in
that other Contracting State.
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ARTICLE 23
NON-DISCRIMINATION
1. Nationals of a Contracting State shall not be subjected in the other Contracting
State to any taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which nationals of that
other Contracting State in the same circumstances are or may be subjected. This
provision shall, notwithstanding the provisions of Article 1, apply to persons who are
not residents of one or both of the Contracting States.
2. The taxation on a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall not be less favorably levied in that other
Contracting State than the taxation levied on enterprises of that other Contracting
State carrying on the same activities. This provision shall not be construed as obliging
a Contracting State to grant to residents of the other Contracting State any personal
allowances, reliefs and reductions for taxation purposes on account of civil status or
family responsibilities which it grants to its own residents.
3. Except where the provisions of Article 8, paragraph 7 of Article 10 or paragraph
6 of Article 11 apply, interest, royalties and other disbursements paid by a resident of
a Contracting State to a resident of the other Contracting State shall, for the purposes
of determining the taxable profits of the first-mentioned resident, be deductible under
the same conditions as if they had been paid to a resident of the first-mentioned
Contracting State.
4. Enterprises of a Contracting State, the capital of which is wholly or partly owned
or controlled, directly or indirectly, by one or more residents of the other Contracting
State, shall not be subjected in the first-mentioned Contracting State to any taxation or
any requirement connected therewith which is other or more burdensome than the
taxation and connected requirements to which other similar enterprises of the
first-mentioned Contracting State are or may be subjected.
ARTICLE 24
MUTUAL AGREEMENT PROCEDURE
1. Where a person considers that the actions of one or both of the Contracting States
result or will result for him in taxation not in accordance with the provisions of this
Agreement, he may, irrespective of the remedies provided by the domestic law of
those Contracting States, present his case to the competent authority of the
Contracting State of which he is a resident or, if his case comes under paragraph 1 of
Article 23, to that of the Contracting State of which he is a national. The case must be
presented within three years from the first notification of the action resulting in
taxation not in accordance with the provisions of this Agreement.
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2. The competent authority shall endeavor, if the objection appears to it to be
justified and if it is not itself able to arrive at a satisfactory solution, to resolve the
case through consultation with the competent authority of the other Contracting
State, with a view to the avoidance of taxation which is not in accordance with this
Agreement. Any agreement reached shall be implemented notwithstanding any time
limits in the domestic law of the Contracting States.
3. The competent authorities of the Contracting States shall endeavor to resolve by
mutual agreement any difficulties or doubts arising as to the interpretation or
application of this Agreement. They may also consult together for the elimination of
double taxation in cases not provided for in this Agreement.
4. The competent authorities of the Contracting States may communicate with each
other directly for the purpose of reaching an agreement in the sense of paragraphs 2
and 3. To facilitate reaching a mutual agreement, the competent authorities of both
Contracting States may meet for an oral exchange of opinions.
ARTICLE 25
EXCHANGE OF INFORMATION
1. The competent authorities of the Contracting States shall exchange such
information as is necessary for carrying out the provisions of this Agreement or of the
domestic laws of the Contracting States concerning taxes covered by this Agreement
insofar as the taxation thereunder is not contrary to this Agreement, in particular for
the prevention of fraud or evasion of such taxes. The exchange of information is not
restricted by Article 1. Any information received by a Contracting State shall be
treated as secret and shall be disclosed only to persons or authorities (including courts
and administrative bodies) involved in the assessment, collection, or administration of,
the enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes covered by this Agreement. Such persons or authorities shall use
the information only for such purposes. They may disclose the information in public
court proceedings or in judicial decisions.
2. In no case shall the provisions of paragraph 1 be construed so as to impose on a
Contracting State the obligation:
(a) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the laws or in the
normal course of the administration of that or of the other Contracting
State;
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(c) to supply information which would disclose any trade, business, industrial,
commercial or professional secret or trade process, or information the
disclosure of which would be contrary to public policy.
ARTICLE 26
DIPLOMATIC AGENTS AND CONSUNLAR OFFICERS
Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents
or consular officers under the general rules of international law or under the
provisions of special agreements.
ARTICLE 27
ENTRY INTO FORCE
Each of the Contracting States shall notify the other Contracting State in writing,
through diplomatic channels, upon the completion of their respective legal procedures
to bring this Agreement into force. The Agreement shall enter into force on the
thirtieth day after the date of the latter of such notifications and shall take effect as
respects income derived during taxable years beginning on or after the first day of
January next following the date on which this Agreement enters into force.
ARTICLE 28
TERMINATION
This Agreement shall remain in force indefinitely, but either Contracting State
may terminate the Agreement by giving notice to the other Contracting State in
writing through diplomatic channels on or before June 30 in any calendar year after
five years from the date on which this Agreement enters into force. In such event, the
Agreement shall cease to have effect with respect to income derived during taxable
years beginning on or after the first day of January of the year following that in which
the notice of termination is given.
DONE at Beijing on the 30th day of April, 1984, in duplicate, in the Chinese and
English languages, the two texts having equal authenticity.
For the Government For the Government
of the People’s Republic of China of the United States of America