Australian Tax Treaties

Chinese Agreement  

AGREEMENT BETWEEN THE GOVERNMENT OF AUSTRALIA 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  

ARTICLE 23   Methods of Elimination of Double Taxation  

1.    
In China, double taxation shall be eliminated as follows:

(a) Where a resident of China derives income from Australia, the amount of tax on that income payable in Australia in accordance with the provisions of this Agreement may be credited against the Chinese tax imposed on that resident. The amount of credit, however, shall not exceed the amount of the Chinese tax on that income computed in accordance with the taxation laws and regulations of China.

(b) Where the income derived from Australia is a dividend paid by a company which is a resident of Australia to a company which is a resident 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 tax paid to Australia by the company paying the dividend in respect of its income.

2.    
Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Chinese tax paid under the law of China and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in China shall be allowed as a credit against Australian tax payable in respect of that income.

3.    
Where a company which is a resident of China and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the first-mentioned company, the credit referred to in paragraph (2) shall include the Chinese tax paid by that first-mentioned company in respect of that portion of its profits out of which the dividend is paid.

4.    
For the purpose of paragraphs (2) and (3), Chinese tax paid shall include an amount equivalent to the amount of any Chinese tax forgone.

5.    
In paragraph (4), the term " Chinese tax forgone " means, subject to paragraph (6), an amount which, under the law of China relating to Chinese tax and in accordance with this Agreement, would have been payable as Chinese tax on income but for an exemption from, or reduction of, Chinese tax on that income in accordance with:

(a) Articles 5 and 6 of the Income Tax Law of the People ' s Republic of China concerning Joint Ventures with Chinese and Foreign Investment and 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 with Chinese and Foreign Investment;

(b) Articles 4 and 5 of the Income Tax Law of the People ' s Republic of China concerning Foreign Enterprises;

(c) Articles I, II, III, IV and X of Part I, Articles I, II, III and IV of Part II and Articles I, II and III of Part III of the interim provisions of the State Council of the People ' s Republic of China on reduction in or exemption from enterprise income tax and the consolidated industrial and commercial tax for special economic zones and fourteen coastal cities;

(d) Articles 12 and 19 of the State Council Regulations for the Encouragement of Investment in the Development of Hainan Island;

(e) Articles 8, 9 and 10 of the State Council Regulations concerning the Encouragement of Foreign Investment; and

(f) Articles 1, 2 and 3 of the interim provisions of the Ministry of Finance of the People ' s Republic of China regarding (reduction in or exemption from) enterprise income tax and industrial and commercial consolidated tax for encouraging foreign investment in the coastal open economic areas;

insofar as they were in force on, and have not been modified since, the date of signature of this Agreement, or have been modified only in minor respects so as not to affect their general character and any other provision which may subsequently be made granting an exemption from or reduction of tax which the Treasurer of Australia and the Commissioner of the State Taxation Administration of China agree from time to time in letters exchanged for this purpose to be of a substantially similar character, if that provision has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.

6.    
In the application of paragraph (5) in relation to dividend, interest and royalty income to which Articles 10, 11 and 12 respectively apply, the amount of Chinese tax shall be deemed to be the amount equal to:

(a) in the case of dividends, 15 per cent of the gross amount of those dividends;

(b) in the case of interest, 10 per cent of the gross amount of that interest; and

(c) in the case of royalties, 15 per cent of the gross amount of those royalties, but only where the rate of tax levied under the law of China, other than a provision specified in paragraph (5), is not less than 15 per cent.

7.    
Paragraphs (4), (5) and (6) shall apply only in relation to income derived in any of the first ten years of income in relation to which this Agreement has effect by virtue of subparagraph (a)(ii) of Article 27 and in any later year of income that may be agreed by the Treasurer of Australia and the Commissioner of the State Taxation Administration of China in letters exchanged for this purpose.

8.    
For the purposes of this Article, profits, income or gains derived by a resident of a Contracting State which are taxed in the other Contracting State in accordance with this Agreement shall be deemed to be income arising from sources in that other State.