The State Administration of Taxation (SAT) on 9 February 2018 issued the Bulletin on Certain Issues Relating to Implementation of Tax Treaties (bulletin No. 11), which revises and supplements China’s existing treaty interpretation rules under circular No. 75 with respect to permanent establishments (PEs), international shipping and air transport, artists and athletes, and partnerships. (Circular No. 75 refers to the Notice of the State Administration of Taxation on the Interpretation of the Agreement Between the Government of the People’s Republic of China and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income and the Protocols Thereof.) Bulletin No. 11 took effect on 1 April 2018.
Key provisions
Permanent establishments. Bulletin No. 11 introduces two noteworthy directives for assessing a non-resident enterprise’s PE exposure in China.
First, bulletin No. 11 provides that a foreign entity that operates a non-legal person joint educational institution or a joint educational programme with a Chinese partner in China should be treated as having a PE in China. This provision addresses a longstanding area of uncertainty that has led to tax disputes for foreign universities with operations in China.
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Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com
