Feb 2018, Issue 7
China’s current interpretation regarding the implementation of double taxation agreements (DTA) are mainly reflected in the "Notice Issued by the State Administration of Taxation (SAT) Releasing the <Interpretation of the Articles in the DTA between China and Singapore and the Relevant Protocols>" (Guoshuifa  No. 75 or Circular 75). The interpretation in Circular 75 is also applicable to other DTAs concluded by China if the provisions of the relevant articles in those DTAs are the same as those in the China-Singapore DTA.
The SAT issued SAT Public Notice  No.11 (Public Notice 11) on 9 February 2018 to update its interpretation of a few articles under DTAs concluded by China and clarify the DTA treatment of partnerships for the first time. Public Notice 11 will take effect from 1 April 2018. The major updates are as follows:
Public Notice 11 may have impact on non-residents who are engaged in Sino-foreign cooperative education institutions/programs in China or provide services in China, international transportation companies, non-resident artists/sportsmen who carry out relevant activities in China and domestic/foreign partnerships and their partners who derive income from China. They are suggested to review their cross-border business models and evaluate the potential tax implications. It is also important for them to pay attention to the interpretation in Public Notice 11 that deviates from international practice as well as the unclear issues. Where necessary, they may need to come up with solutions to mitigate the potential negative impacts.
Lead Partner, China Outbound Investment Service; China North Tax Leader, PwC China
Tel: + (10) 6533 2100