China Tax/Business News Flash

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Jan 2013, Issue 2

Clarification of China's positions on treaty treatments for capital gains

The regulatory landscape of international taxation in China is changing rapidly as the tax authorities are getting more sophisticated in dealing with international tax matters and the country pledges to enforce anti-avoidance measures more vigorously. In just two and a half years' time after the issue of Circular Guoshuifa [2010] No.75 ("Circular 75") which sets out the Departmental Interpretation Notes (“DIN”) on the Double Tax Agreement between China and Singapore ("China-Singapore DTA") , the State Administration of Taxation ("SAT") issued SAT Public Notice [2012] No.59 ("Public Notice 59") to further clarify or revamp its interpretation on the capital gains article in relation to the alienation of shares as provided in Circular 75.

As Circular 75 is applicable to all DTAs that have similar provisions to those of the China-Singapore DTA, the clarification and changes stipulated in Public Notice 59 shall be relevant to tax residents of other China's treaty partners.

In this issue of the News flash, we will highlight the SAT's latest positions in interpreting the Capital Gains Article in relation to the alienation of shares, and share our observations.

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