Article 1Personal 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;
(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;
(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.
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;
(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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Article 22
Methods for the 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.
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.
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;
(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 Consular 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
of the United
Republic of China
States of America





PROTOCOL TO THE AGREEMENT BETWEEN THE GOVERNMENT OF THE
PEOPLE'S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE UNITED
STATES OF AMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE
PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
At the signing of the Agreement between the Government of
the People's Republic of China and the Government of the
United States of America for the Avoidance of Double Taxation
and the Prevention of Tax Evasion with Respect to Taxes on
Income (hereinafter referred to as "the Agreement"), both
sides have agreed upon the following provisions which form an
integral part of the Agreement:
1. This Agreement shall not restrict in any manner any tax
benefit which is or may hereafter be accorded in a Contracting
State by the laws of that Contracting State or by any
Agreement between the governments of the Contracting States.
2. Notwithstanding any provision of the Agreement, the
United States may tax its citizens. Except as provided in
paragraph 2 of Article 8, paragraph 2 of Article 17, and
Articles 18, 19, 20, 22, 23, 24 and 26 of this Agreement, the
United States may tax its residents (as determined under
Article 4) .
3. The United States may impose its social security tax, its
personal holding company tax and its accumulated earnings tax
notwithstanding any provision of this Agreement. However, a
Chinese company shall be exempt from the personal holding
company tax or the accumulated earnings tax in the United
States during a taxable year if during that taxable year the
company is wholly-owned, directly or indirectly, either by one
or more individuals who are residents of China (and who are
not citizens of the United States) or by the Government of
China or any wholly-owned agency thereof.
4. The term "person" as defined in Article 3 of the
Agreement shall include an estate or a trust.
5. In applying paragraph 2 of Article 4 of this Agreement,
the competent authorities of both Contracting States shall be
guided by the rules contained in paragraph 2 of Article 4 of
the United Nations Model Double Taxation Convention between
Developed and Developing Countries.
6. For purposes of paragraph 3 of Article 11 of this
Agreement, it is agreed by both sides that, in the case of
royalties paid for the rental of industrial, commercial or
scientific equipment, the tax shall be imposed on 70 percent
of the gross amount of such royalties.
7. It is agreed by both sides that the competent authorities
of the Contracting States may through consultation deny the
benefits of Articles 9, 10 and 11 to a company of a third
country if the company becomes a resident of a Contracting
State for the principal purpose of enjoying benefits under
this Agreement.
8. This Agreement shall not affect the application of the
agreement between the two governments with respect to mutual
exemption from taxation of transportation income of shipping
and air transport enterprises, signed at Beijing on March 5,
1982.
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
of the United
Republic of China
States of America





EXCHANGE OF NOTES
His Excellency
Zhao Ziyang,
Premier of the State Council of the People's Republic of
China.
Beijing, April 30, 1984
Excellency:
I have the honor to refer to the Agreement between the
Government of the United States of America and the Government
of the People's Republic of China for the Avoidance of Double
Taxation and the Prevention of Tax Evasion with Respect to
Taxes on Income which was signed today (hereinafter referred
to as "the Agreement" ) and to confirm, on behalf of the
Government of the United States of America, the following
understanding reached between the two Governments:
Both sides agree that a tax sparing credit shall not be
provided in Article 22 of this Agreement at this time.
However, the Agreement shall be promptly amended to
incorporate a tax sparing credit provision if the United
States hereafter amends its laws concerning the provision of
tax sparing credits, or the United States reaches agreement on
the provisions of a tax sparing credit with any other country.

I have the honor to request Your Excellency to confirm the
foregoing understanding on behalf of Your Excellency's
Government.
I avail myself of this opportunity to assure Your Excellency
of my highest consideration.

President of the United States of America Ronald Reagan


His Excellency
Ronald Reagan,
President of the United States of America.
Beijing, April 30, 1984
Excellency:
I have the honour to acknowledge receipt of Your
Excellency's Note of today's date, which reads as follows:
"I have the honor to refer to the Agreement between the
Government of the United States of America and the Government
of the People's Republic of China for the Avoidance of Double
Taxation and the Prevention of Tax Evasion with Respect to
Taxes on Income which was signed today (hereinafter referred
to as "the Agreement" ) and to confirm, on behalf of the
Government of the United States of America, the following
understanding reached between the two Governments.
Both sides agree that a tax sparing credit shall not be
provided in Article 22 of the Agreement at this time. However,
the Agreement shall be promptly amended to incorporate a tax
sparing credit provision if the United States hereafter amends
its laws concerning the provision of tax sparing credits, or
the United States reaches agreement on the provision of a tax
sparing credit with any other country.
I have the honor to request Your Excellency to confirm the
foregoing understanding on behalf of Your Excellency's
Government.
"I avail myself of this opportunity to assure Your
Excellency of my highest consideration. "
I have the honour to confirm the understanding contained in
Your Excellency's Note, on behalf of the Government of the
People's Republic of China.
I avail myself of this opportunity to assure Your Excellency
of my highest consideration.
Premier of the State Council of the People's Republic of China
Zhao Ziyang





PROTOCOL CONCERNING THE INTERPRETATION OF PARAGRAPH 7 OF THE
PROTOCOL TO THE AGREEMENT BETWEEN THE GOVERNMENT OF THE
PEOPLE'S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE UNITED
STATES OF AMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE
PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME,
SIGNED AT BEIJING ON
APRIL 30, 1984.

The Government of the People's Republic of China and the
Government of the United States of America, desiring to
conclude a Protocol in addition to the Agreement between them
for the avoidance of double taxation and the prevention of tax
evasion, and the supplementary Protocol attached thereto, have
agreed as follows:
Both sides have agreed, with respect to the interpretation
of paragraph 7 of the Protocol to the Agreement, that their
understanding is as follows:
1. A person (other than an individual) which is a resident
of a Contracting State shall not be entitled under this
Agreement to relief from taxation in the other Contracting
State unless:
(a)
(i) more than 50 percent of the beneficial interest in such
person (or in the case of a company more than 50 percent of
the number of shares of each class of the company's shares) is
owned, directly or indirectly, by any combination of one or
more of:
(A) individuals who are residents of one of the
Contracting States;
(B) citizens of the United States;
(C) companies as described in subparagraph 1 (b) of this
protocol; and
(D) one of the Contracting States, its political
subdivisions or local authorities; and
(ii) in the case of relief from taxation under Articles 9
(dividends), 10 (interest), and 11 (royalties), not more than
50 percent of the gross income of such person is used to make
payments of interest to persons who are other than persons
described in clauses (A) through (D) of subparagraph (a) (i),
whether directly or indirectly; or
(b) it is a company which is a resident of a Contracting
State and in whose principal class of shares there is
substantial and regular trading on a recognized stock
exchange.
2. Paragraph 1 shall not apply if the establishment,
acquisition and maintenance of such person and the conduct of
its operations did not have as a principal purpose the purpose
of obtaining benefits under the Agreement.
3. For the purposes of paragraph 1 (b), the term "a
recognized stock exchange" means:
(a) the NASDAQ System owned by the National Association of
Securities Dealers, Inc. and any stock exchange registered
with the Securities and Exchange Commission as a national
securities exchange for the purposes of the Securities
Exchange Act of 1934; and
(b) any national securities exchange approved to be
established by the Government of the People's Republic of
China or its authorized institution; and
(c) any other stock exchange agreed upon by the competent
authorities of the Contracting States.
4. Before a resident of a Contracting State is denied relief
from taxation in the other Contracting State by reason of
paragraph 1, 2 and／or 3, the competent authorities of the
Contracting States shall consult each other.
This Protocol is certified for addition to the Agreement and
its supplemental Protocol by the undersigned.
Done at Beijing on the 10th day of May, 1986, in duplicate, in
the Chinese and English languages, the two texts having equal
authenticity.

State Councillor and III Secretary of the Treasury Minister of Finance United States of America
James A. Baker,

People's Republic of China
Wang Bingqian

Bright Jon,  Attorney-at-law   Fax: +86-512-53516040   email@colaw.cn
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