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AGREEMENT BETWEEN THE GOVERNMENT OF THE PEOPLE'S
REPUBLIC OF
CHINA AND THE GOVERNMENT OF JAPAN FOR THE AVOIDANCE OF DOUBLE
TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO
TAXES ON INCOMEThe Government of the People's Republic of
China and the Government of Japan;
Desiring to conclude an Agreement for the avoidance of double taxation
and the prevention of fiscal 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 shall apply are:
(a) in the People's Republic of China:
(i) the individual income tax;
(ii) the income tax concerning joint ventures using Chinese
and foreign investment;
(iii) the income tax concerning foreign enterprises; and
(iv) the local income tax (hereinafter referred to as
"Chinese tax") ;
(b) in Japan:
(i) the income tax;
(ii) the corporation tax; and
(iii) the local inhabitant taxes (hereinafter referred to as
"Japanese tax") .
2. This Agreement shall also apply to any identical or
substantially similar taxes which are imposed after the date
of signature of this Agreement in addition to, or in place of,
those referred to in paragraph 1. The competent authorities of
the Contracting States shall notify each other of any
substantial changes which have been made in their respective
taxation laws within a reasonable period of time after such
changes.
Article 3
General Definitions
1. For the purposes of 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 sub-soil
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 "Japan" , when used in a geographical sense,
means all the territory of Japan, including its territorial
sea, in which the laws relating to Japanese tax are in force,
and all the area beyond its territorial sea, including the
seabed and subsoil thereof, over which Japan has jurisdiction
in accordance with international law and in which the laws
relating to Japanese tax are in force;
(c) the terms "a Contracting State" and "the other
Contracting State" mean the People's Republic of China or
Japan, as the context requires;
(d) the term "tax" means Chinese tax or Japanese tax, as the
context requires;
(e) the term "person" includes an individual, a company 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 possessing the
nationality of either Contracting State and all juridical
persons created or organized under the laws of that
Contracting State and all organizations without juridical
personality treated for the purposes of tax of that
Contracting State as juridical persons created or organized
under the laws of that Contracting State;
(i) the term "international traffic" means any transport by
a ship or aircraft operated by an enterprise of a Contracting
State, except when the ship or aircraft is operated solely
between places in the other Contracting State;
(j) the term "competent authority" means, in the case of the
People's Republic of China, the Ministry of Finance or its
authorized representative and, in the case of Japan, the
Minister of Finance or his authorized representative.
2. As regards the application of this Agreement by a
Contracting State, any term not defined in this Agreement
shall, unless the context otherwise requires, have the meaning
which it has under the laws of that Contracting State
concerning the taxes to which this 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 or main office 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 by mutual agreement 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 person
other than an individual is a resident of both Contracting
States, then it shall be deemed to be a resident of the
Contracting State in which its head or main office is
situated.
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. A building site, a construction, assembly or installation
project or supervisory activities in connection therewith,
constitute a permanent establishment only if such site,
project or activities continue for a period of more than six
months.
4. Notwithstanding the provisions of paragraphs 1 to 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.
5. An enterprise of a Contracting State shall be deemed to
have a permanent establishment in the other Contracting State
if it furnishes in that other Contracting State consultancy
services through employees or other personnel-other than an
agent of an independent status to whom the provisions of
paragraph 7 apply-provided that such activities continue (for
the same project or two or more connected projects) for a
period or periods aggregating more than six months within any
twelve-month period.
6. Notwithstanding the provisions of paragraphs 1 and 2,
where a person-other than an agent of an independent status to
whom the provisions of paragraph 7 apply-is acting in a
Contracting State on behalf of an enterprise of the other
Contracting State, that enterprise shall be deemed to have a
permanent establishment in the first-mentioned Contracting
State in respect of any activities which that person
undertakes for the enterprise, if:
(a) that person has, and habitually exercises in the
first-mentioned Contracting State, an authority to conclude
contracts in the name of the enterprise, unless his activities
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; or
(b) that person regularly secures orders in the
first-mentioned Contracting State wholly or almost wholly for
the enterprise itself or for the enterprise and other
enterprises which control or are controlled by that
enterprise.
7. 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.
8. 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
immovable property situated in the other Contracting State may
be taxed in that other Contracting State.
2. The term "immovable 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 immovable property,
livestock and equipment used in agriculture and forestry,
rights to which the provisions of general law respecting
landed property apply, usufruct of immovable 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 immovable property.
3. The provisions of paragraph 1 shall apply to income
derived from the direct use, letting, or use in any other form
of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to
the income from immovable property of an enterprise and to
income from immovable 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 that 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 determining 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 Contracting State in which the
permanent establishment is situated or elsewhere.
4. Insofar as it has been customary in a Contracting State
to determine the profits to be attributed to a permanent
establishment on the basis of an apportionment of the total
profits of the enterprise to its various parts, nothing in
paragraph 2 shall preclude that Contracting State from
determining the profits to be taxed by such an apportionment
as may be customary; the method of apportionment adopted
shall, however, be such that the result shall be 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 to 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
Shipping and Air Transport
1. Profits from the operation of ships or aircraft in
international traffic carried on by an enterprise of a
Contracting State shall be taxable only in that Contracting
State.
2. In respect of the operation of ships or aircraft in
international traffic carried on by an enterprise of a
Contracting State, that enterprise, if an enterprise of the
People's Republic of China, shall be exempt from the
enterprise tax in Japan, and, if an enterprise of Japan, shall
be exempt from any tax similar to the enterprise tax in Japan
which is imposed in the People's Republic of China.
3. The provisions of paragraphs 1 and 2 shall also apply to
profits from the participation in a pool, a joint business or
an international operating agency.
Article 9
Associated Enterprises
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 directly 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 conditions are made or imposed
between the two enterprises in their commercial or financial
relations which differ from those which would be made between
independent enterprises, then any profits which would, but
for those conditions, 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.
Article 10
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 dividend may also be taxed in the
Contracting State of which the company paying the dividends is
a residnet, 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 per cent of
the gross amount of the dividends.
The provisions of 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 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 Article 14, 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 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 11
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 per cent 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 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 local authority there of, 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 and 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 Article 14, 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, a
local authority thereof 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 12
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 per cent 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 cinematograph films and films or
tapes for radio or television broadcasting, any patent, trade
mark, 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 Article 14, as the
case may be, shall apply.
5. Royalties shall be deemed to arise in a Contracting State
when the payer is the Government of that Contracting State, a
local authority thereof 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.
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 13
Capital Gains
1. Gains derived by a resident of a Contracting State from
the alienation of immovable 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 any property, other than
immovable property, forming part of the business property of a
permanent establishment which an enterprise of a Contracting
State has in the other Contracting State or of any property,
other than immovable 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 of 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 any property, other than immovable property,
pertaining to the operation of such ships or aircraft shall be
taxable only in that Contracting State.
4. Gains derived by a resident of a Contracting State from
the alienation of any property other than that referred to in
paragraphs 1 to 3 and arising in the other Contracting State
may be taxed in that other Contracting State.
Article 14
Independent Personal Services
1. Income derived by 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 15
Dependent Personal Services
1. Subject to the provisions of Articles 16, 18, 19, 20 and
21, 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 Contracting
State, if:
(a) the recipient is present in that 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 that other Contracting
State; and
(c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in that
other Contracting State.
3. Notwithstanding the provisions of paragraphs 1 and 2,
remuneration in respect of an employment exercised aboard a
ship or aircraft operated in international traffic by an
enterprise of a Contracting State may be taxed in that
Contracting State.
Article 16
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 17
Artistes and Athletes
1. Notwithstanding the provisions of Articles 14 and 15,
income derived by an individual who is a resident of a
Contracting State as an entertainer such as a theater, motion
picture, radio or television artiste, and 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.
2. The income shall, however, be exempt from tax in that
other Contracting State whose activities are exercised by an
individual who is a resident of the first-mentioned
Contracting State pursuant to a special programme for cultural
exchange agreed upon between the Governments of the
Contracting States.
3. Where income in respect of personal activities exercised
in a Contracting State by an entertainer or an athlete in his
capacity as such accrues not to the entertainer or athlete
himself but to another person who is a resident of the other
Contracting State, that income may, notwithstanding the
provisions of Articles 7, 14 and 15, be taxed in the
first-mentioned Contracting State.
Such income shall, however, be exempt from tax in the
first-mentioned Contracting State if such activities are
exercised pursuant to a special programme for cultural
exchange agreed upon between the Governments of the
Contracting States.
Article 18
Pensions
Subject to the provisions of paragraph 2 of Article 19,
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.
Article 19
Government Service
1.
(a) Remuneration, other than pensions, paid by the
Government of a Contracting State or a local authority thereof
to an individual in respect of services rendered to the
Government of that Contracting State or a local authority
thereof, in the discharge of functions of a governmental
nature, 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 to which
contributions are made by, the Government of a Contracting
State or a local authority thereof to an individual in respect
of services rendered to the Government of that Contracting
State or a local authority thereof 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 15, 16, 17 and 18 shall apply
to remuneration and pensions in respect of services rendered
in connection with a business carried on by the Government of
a Contracting State or a local authority thereof.
Article 20
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 in the
first-mentioned Contracting State shall be exempt from tax in
the first-mentioned Contracting State, for a period not
exceeding three years from the date of his first arrival in
the first-mentioned Contracting State, in respect of
remuneration for such teaching, lectures or research.
Article 21
Students and Trainees
Payments or income received for the purpose of his
maintenance, education or training by a student, business
apprentice or trainee who is present in a Contracting State
solely for the purpose of his education, training or the
acquisition of his special technical experience and who is, or
immediately before being so present was, a resident of the
other Contracting State shall be exempt from tax of the
first-mentioned Contracting State.
Article 22
Other Income
1. The 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 be taxed in that other
Contracting State.
2. However, items of income of a resident of a Contracting
State, not dealt with in the foregoing Articles of this
Agreement, and other than those referred to in paragraph 1,
shall be taxable only in that Contracting State.
3. The provisions of paragraphs 1 and 2 shall not apply to
income, other than income from immovable property as defined
in paragraph 2 of Article 6, if the recipient of such income
who is 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 Article 14, as the case may be,
shall apply.
Article 23
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 the People's Republic of China
derives income from Japan, the amount of Japanese 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 as appropriate to that income in accordance with the
taxation laws and regulations of the People's Republic of
China.
(b) Where the income derived from Japan is a dividend paid
by a company which is a resident of Japan to a company which
is a resident of the People's Republic of China and which owns
not less than 10 per cent of the shares of the company paying
the dividend, the credit shall take into account the Japanese
tax payable by the company paying the dividend in respect of
its income.
2. Subject to the laws of Japan regarding the allowance as a
credit against Japanese tax of tax payable in any country
other than Japan:
(a) Where a resident of Japan derives income from the
People's Republic of China and that income may be taxed in the
People's Republic of China in accordance with the provisions
of this Agreement, the amount of Chinese tax payable in
respect of that income shall be allowed as a credit against
the Japanese tax imposed on that resident. The amount of
credit, however, shall not exceed that part of the Japanese
tax which is appropriate to that income.
(b) Where the income derived from the People's Republic of
China is a dividend paid by a company which is a resident of
the People's Republic of China to a company which is a
resident of Japan and which owns not less than 25 per cent
either of the voting shares of the company paying the
dividend, or of the total shares issued by that company, the
credit shall take into account the Chinese tax payable by the
company paying the dividend in respect of its income.
3. For the purposes of the credit referred to in
sub-paragraph (a) of paragraph 2, Chinese tax shall be deemed
to have been paid:
(a) at the rate of 10 per cent in the case of dividends paid
by a joint venture in the People's Republic of China and 20
per cent in the case of the other dividends, to which the
provisions of paragraph 2 of Article 10 apply; and
(b) at the rate of 10 per cent in the case of interest to
which the provisions of paragraph 2 of Article 11 apply; and
(c) at the rate of 20 per cent in the case of royalties to
which the provisions of paragraph 2 of Article 12 apply.
4. For the purposes of the credit referred to in paragraph
2, the term "Chinese tax payable" shall be deemed to include
the amount of Chinese tax which would have been paid if the
Chinese tax had not been exempted, reduced or refunded in
accordance with:
(a) the provisions of Articles 5 and 6 of the Income Tax Law
of the People's Republic of China Concerning Joint Ventures
Using Chinese and Foreign Investment and the provisions of
Article 3 of the Detailed Rules and Regulations for the
Implementation of the Income Tax Law of the People's Republic
of China Concerning Joint Ventures Using Chinese and Foreign
Investment;
(b) the provisions of Articles 4 and 5 of the Income Tax Law
of the People's Republic of China Concerning Foreign
Enterprises; or
(c) any other similar special incentive measures designed to
promote economic development in the People's Republic of China
which may be introduced in the laws of the People's Republic
of China after the date of signature of this Agreement, and
which may be agreed upon by the Governments of the Contracting
States.
Article 24
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. The provisions of this
paragraph shall, notwithstanding the provisions of Article 1,
also 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 Contraciing State has in the other Contracting
State shall not be less favourably levied in that other
Contracting State than the taxation levied on enterprises of
that other Contracting State carrying on the same activities.
3. Except where the provisions of Article 9, paragraph 7 of
Article 11, or paragraph 6 of Article 12 apply, interest,
royalties and other disbursements paid by an enterprise of a
Contracting State to a resident of the other Contracting State
shall, for the purpose of determining the taxable profits of
such enterprise, 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.
5. Nothing contained in this Article shall be construed as
obliging a Contracting State to grant to residents of the
other Contracting State any personal allowances, reliefs and
reductions for tax purposes which are by law available only to
residents of the first-mentioned Contracting State.
Article 25
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 laws 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 24, 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 endeavour, 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 by
mutual agreement with the competent authority of the other
Contracting State, with a view to the avoidance of taxation
which is not in accordance with the provisions of this
Agreement. Any agreement reached shall be implemented
notwithstanding any time limits in the domestic laws of the
Contracting States.
3. The competent authorities of the Contracting States shall
endeavour 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. When
it seems advisable for the purpose of reaching agreement, the
competent authorities may meet together for an oral exchange
of opinions.
Article 26
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 the
provisions of this Agreement, or for the prevention of fiscal
evasion with respect to such taxes. The exchange of
information is not restricted by Article 1. Any information so
exchanged shall be treated as secret and shall be disclosed
only to persons or authorities, including courts, involved in
the assessment or collection of the taxes covered by this
Agreement or the determination of appeals in relation thereto.
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 the 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; or
(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 27
Explanation to Tax Exemption, Reduction or Other Allowance
Nothing in this Agreement shall be construed as restricting
in any manner any tax exemption, reduction or other allowance
which are or may hereafter be accorded in a Contracting State
to the nationals or residents of the other Contracting State
by the laws of the first-mentioned Contracting State or any
agreement between the Governments of the Contracting States.
Article 28
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 29
Entry into Force
1. This Agreement shall enter into force on the thirtieth
day after the date on which diplomatic notes indicating the
completion of internal legal procedures necessary in each
country for the entry into force of this Agreement have been
exchanged.
2. This Agreement shall have effect:
(a) in the People's Republic of China:
(i) as respects income derived during the taxable years
beginning on or after the first day of January in the calendar
year next following that in which this Agreement enters into
force; and
(ii) as respects any tax similar to the enterprise tax in
Japan referred to in paragraph 2 of Article 8 levied for the
taxable years beginning on or after the first day of January
in the calendar year next following that in which this
Agreement enters into force;
(b) in Japan:
as respects income derived during the taxable years
beginning on or after the first day of January in the calendar
year next following that in which this Agreement enters into
force.
Article 30
Termination
This Agreement shall continue in effect indefinitely but
either of the Contracting States may, on or before the
thirtieth day of June in any calendar year beginning after the
expiration of a period of five years from the date of its
entry into force, give to the other Contracting State, through
the diplomatic channel, written notice of termination.
In such event this Agreement shall cease to have effect:
(a) in the People's Republic of China:
(i) as respects income derived during the taxable years
beginning on or after the first day of January in the calendar
year next following that in which the notice of termination is
given; and
(ii) as respects any tax similar to the enterprise tax in
Japan referred to in paragraph 2 of Article 8 levied for the
taxable years beginning on or after the first day of January
in the calendar year next following that in which the notice
of termination is given;
(b) in Japan:
as respects income derived during the taxable years
beginning on or after the first day of January in the calendar
year next following that in which the notice of termination is
given.
IN WITNESS WHEREOF the undersigned, duly authorized thereto by
their respective Governments, have signed this Agreement.
DONE at Beijing on the day of September 6, 1983, in duplicate
in the Chinese, Japanese and English languages, all three
texts being equally authentic. In case of any divergence of
interpretations, the English text shall prevail.
For the Government For the
Government
of the People's of
Japan
Republic of China
PROTOCOL
At the signing of the Agreement between the Government of
the People's Republic of China and the Government of Japan for
the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income (hereinafter referred
to as "the Agreement"), the undersigned have agreed upon the
following provisions which form an integral part of the
Agreement.
1. Notwithstanding the provisions of paragraph 5 of Article
5 of the Agreement, an enterprise of a Contracting State shall
be deemed not to have a permanent establishment in the other
Contracting State if it furnishes in that other Contracting
State consultancy services in connection with the sale or
lease of machinery or equipment through employees or other
personnel.
2. With reference to paragraph 3 of Article 7 of the
Agreement, no deduction shall be allowed in respect of amounts
paid or charged (other than reimbursement of actual expenses)
by a permanent establishment of an enterprise to the head
office of the enterprise or any other offices thereof, by way
of:
(a) royalties, fees or other similar payments in return for
the use of patents or other rights;
(b) commission, for specific services performed or for
management; and
(c) interest on moneys lent to the permanent establishment;
except where the enterprise is a banking institution.
IN WITNESS WHEREOF the undersigned, duly authorized thereto
by their respective Governments, have signed this Agreement.
DONE at Beijing on the day of September 6, 1983, in duplicate
in the Chinese, Japanese and English languages, all three
texts being equally authentic. In case of any divergence of
interpretations, the English text shall prevail.
For the Government For the
Government
of the People's of
Japan
Republic of China
EXCHANGE OF NOTES
His Excellency Mr. Shintaro Abe
Minister for Foreign Affairs of Japan
Beijing, September 6, 1983
Excellency,
I have the honour to refer to the Agreement between the
Government of the People's Republic of China and the
Government of Japan for the Avoidance of Double Taxation and
the Prevention of Fiscal 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
People's Republic of China, the following understanding
reached between the two Governments:
1. It is understood that the term "any tax similar to the
enterprise tax in Japan which is imposed in the People's
Republic of China" referred to in paragraph 2 of Article 8 of
the Agreement, means the industrial and commercial
consolidated tax and its surcharge in the People's Republic of
China.
2. The arrangement contained in the Exchange of Notes
between the two Governments dated September 28, 1974 and that
dated May 20, 1975 concerning the reciprocal exemption from
taxation of income derived from the operation in international
traffic of aircraft and ships, respectively, as amended by the
Exchange of Notes between the two Governments dated December
9, 1982 shall cease to have effect as respects income or taxes
to which the Agreement shall have effect in accordance with
the provisions of paragraph 2 of Article 29 thereof.
I have further the honour to request Your Excellency to be
good enough to confirm the foregoing understanding on behalf
of Your Excellency's Government.
I avail myself of this opportunity to renew to Your
Excellency the assurances of my highest consideration.
State Councillor
and Minister of Foreign Affairs
of the People's Republic of China
His Excellency
Mr. Wu Xueqian
State Councillor
and Minister of Foreign Affairs
of the People's Republic of China
Beijing, September 6, 1983
Excellency,
I have the honour to acknowledge receipt of Your
Excellency's Note of today's date, which reads as follows:
"I have the honour to refer to the Agreement between the
Government of the People's Republic of China and the
Government of Japan for the Avoidance of Double Taxation and
the Prevention of Fiscal 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 People's Republic of China, the following understanding
reached between the two Governments:
1. It is understood that the term "any tax similar to the
enterprise tax in Japan which is imposed in the People's
Republic of China" referred to in paragraph 2 of Article 8 of
the Agreement, means the industrial and commercial
consolidated tax and its surcharge in the People's Republic of
China.
2. The arrangement contained in the Exchange of Notes
between the two Governments dated September 28, 1974 and that
dated May 20, 1975 concerning the reciprocal exemption from
taxation of income derived from the operation in international
traffic of aircraft and ships, respectively, as amended by the
Exchange of Notes between the two Governments dated December
9, 1982 shall cease to have effect as respects income or taxes
to which the Agreement shall have effect in accordance with
the provisions of paragraph 2 of Article 29 thereof.
I have further the honour to request Your Excellency to be
good enough to confirm the foregoing understanding on behalf
of Your Excellency's Government. "
I have further the honour to confirm the understanding
contained in Your Excellency's Note, on behalf of the
Government of Japan.
I avail myself of this opportunity to renew to Your
Excellency the assurances of my highest consideration.
Minister for Foreign Affairs
of Japan
(Translation)
Beijing, December 27, 1983
(83) Bu Tiao Zi No. 312
Japanese Embassy:
The Ministry of Foreign Affairs of the People's Republic of
China presents its compliments to the Embassy of Japan in
China and, has the honour to acknowledge the receipt of the
Embassy's note dated December 27, 1983 which reads as follows:
"The Embassy of Japan in the People's Republic of China
presents its compliments to the Ministry of Foreign Affairs of
the People's Republic of China and, with reference to the
Agreement between the Government of Japan and the Government
of the People's Republic of China for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to
Taxes on Income which was signed on September 6, 1983, has the
honour to inform the latter a typographical error in
concluding part of the English text, kept by both Japanese and
Chinese Governments, of the Protocol of the said Agreement,
where the word "this Agreement" is printed, although "this
Protocol" should appear.
The Embassy proposes on behalf of the Government of Japan
that the word in question shall be regarded hereafter to read
"this Protocol" without going through formalities to correct
the original text.
The Embassy would appreciate it if the Ministry agrees on
behalf of the Government of the People's Republic of China to
the proposal mentioned above. "
The Ministry agrees on behalf of the Government of the
People's Republic of China to the proposal mentioned above.
The Ministry avails itself of this opportunity to renew to
the Embassy the assurances of its highest consideration.
The Ministry of Foreign Affairs
of the People's Republic of China
Beijing, December 26, 1991
H. E. Hiroshi Hashimoto Ambassador Extraordinary and
Plenipotentiary of Japan to the People's Republic of China
I have the honour to refer to the Agreement between the
Government of the People's Republic of China and the
Government of Japan for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with respect to Taxes on
Income signed at Beijing on September 6, 1983 (hereinafter
referred to as "the Agreement" ) and to propose on behalf of
the Government of the People's Republic of China the following
arrangement:
1. The measures set forth in the following Articles and
paragraphs of the Income Tax Law of the People's Republic of
China for Enterprises with Foreign Investment and Foreign
Enterprises (hereinafter referred to as "the incentive
provisions" ) are "any other similar special incentive
measures designed to promote economic development in the
People's Republic of China which may be introduced in the laws
of the People's Republic of China after the date of signature
of this Agreement" referred to in sub-paragraph (c) of
paragraph 4 of Article 23 of the Agreement:
(i) Paragraphs 1 and 2 of Article 7, paragraph 3 of Article
7 (only to the extent that the provisions contained therein
are referred to in sub-paragraphs (1), (2), (4), (5) and (6)
of Article 73 of the Detailed Rules and Regulations on
Implementation of the said Income Tax Law), paragraphs 1 and 3
of Article 8, Article 9 and Article 10; and
(ii) Paragraph 2 of Article 8 (only to the extent that the
provisions contained therein are referred to in sub-paragraphs
(1) to (4) and (6) to (8) of Article 75 of the Detailed Rules
and Regulations on Implementation of the said Income Tax Law)
.
Provided that only to the extent that the incentive provisions
are applied to the income derived from the business set forth
in paragraph 1 of Article 8 of the said Income Tax Law and the
business (other than international traffic business) set forth
in sub-paragraphs (1) to (9) of Article 72 and sub-paragraphs
(2) to (4) of Article 75 of the Detailed Rules and Regulations
on Implementation of the said Income Tax Law.
Commissioner of State Tax Bureau
of the People's Republic of China
Beijing, December 26, 1991
H. E. Hiroshi Hashimoto Ambassador Extraordinary and
plenipotentiary of Japan to the People's Republic of China
With reference to the Exchange of Notes dated today,
concerning sub-paragraph (c) of paragraph 4 of Article 23 of
the Agreement between the Government of the People's Republic
of China and the Government of Japan for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income. I have the honour to propose, on
behalf of the Government of the People's Republic of China,
that in case there is any divergence of interpretation of the
said Exchange of Notes which is done in the Chinese, Japanese
and English Languages, the English text shall prevail.
I avail myself of this opportunity to renew to Your
Excellency the assurances of my highest consideration.
Commissioner of State Tax Bureau
of the People's Republic of China |
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