Circular on Issues Relevant to the Determination of Permanent Establishments and Other Matters for the Purpose of Tax Agreements
关于税收协定常设机构认定等有关问题的通知
With regard to tax agreements entered into by China with foreign states, the term 'permanent establishment' shall be deemed not to include the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any activity of a preparatory or auxiliary character.
(Issued by the State Administration of Taxation on March 14 2006.)
(国家税务总局于二零零六年三月十四日发布。)
Guo Shui Fa [2006] No.35
Tax offices of the State Administration of Taxation and local taxation bureaux of provinces, autonomous regions, municipalities directly under the central government and municipalities with independent development plans, and the Yangzhou Taxation Institute:
国税发 [2006] 35号
Item (1) of Article 5 (Permanent Establishments) of the tax agreements negotiated and entered into by China with foreign states specifies that "the term 'permanent establishment' means a fixed place of business through which the business of an enterprise is wholly or partly carried on" and Item (4) specifies that "the term 'permanent establishment' shall be deemed not to include the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any activity of a preparatory or auxiliary character." Based on the commentaries to the model tax convention of the United Nations, the commentaries to the model tax convention of the Organization for Economic Cooperation and Development and the practice of many countries worldwide, we give the following explanations on the meaning of the term 'business' and the expression "of a preparatory or auxiliary character" and on other issues relevant to permanent establishments.
1. The term "??" is the translation of the English word 'business' whose actual meaning does not solely cover production and operating activities, but also includes the general business activities carried on by non-profit organizations. Accordingly, the fixed base or place established in China to engage in business activities by a non-profit organization of the other contracting state to a tax agreement shall be deemed to constitute a permanent establishment in China unless such establishment carries on activities of a preparatory or auxiliary character.
各省、自治区、直辖市和计划单列市国家税务局、地方税务局，扬州税务进修学院：
我国对外谈签的税收协定第五条(常设机构)第一款规定：“常设机构”一语是指企业进行全部或部分营业的固定场所；第四款规定：应认为，常设机构不包括专门为本企业进行准备性或辅助性活动的目的所设的固定营业场所。根据联合国税收协定范本注释、经济合作发展组织税收协定范本注释以及世界上多数国家的做法，对“营业”一语和“准备性或辅助性”一语的含义以及其他涉及常设机构的问题，解释如下：
一、 “营业”一语是对英语'business'一词的翻译，实际含义不仅仅包括生产经营活动，还包括非赢利机构从事的一般业务活动。因此，税收协定缔约对方的非赢利机构，通过在我国设立的固定基地或场所从事业务活动，除为该机构进行准备性或辅助性活动外，应认为在我国构成常设机构。
二、 对于“准备性或辅助性”活动的判定，应注意以下原则：
2. When determining the "preparatory or auxiliary character" of activities, the following principles shall be considered:
(1) whether the fixed base or place provides services solely for the head office/parent company or whether it has business dealings with other parties;
(一) 固定基地或场所是否仅为总机构提供服务，或者是否与他人有业务往来；
(2) whether the nature of the business of the fixed base or place is consistent with the nature of the business of the head office/parent company; and
(3) whether the business activities of the fixed base or place constitute an important integral part of the business of the head office/parent company.
(二) 固定基地或场所的业务性质是否与总机构的业务性质一致；
If the fixed base or place does not provide services solely to the head office/parent company but also has business dealings with other parties, or if the nature of the business of the fixed base or place is consistent with the nature of the business of the head office/parent company and its business constitutes an important integral part of the head office/parent company's business, the activities of the fixed base or place may not be deemed to be of a "preparatory or auxiliary character".
3. Individual income tax on the wage or salary income derived by a resident of the other contracting state for working for a permanent establishment shall be calculated and levied pursuant to the provisions on 'dependent personal services' (or 'employment remuneration') of the tax agreement and relevant domestic tax laws. If the services are provided to the government of the other contracting state, the levy of or, exemption from taxes, shall be determined based on the provisions on 'government service' of the tax agreement.
(三) 固定基地或场所的业务活动是否为总机构业务的重要组成部分。
4. If a taxpayer is of the opinion that its establishment or place in China provides services of a preparatory or auxiliary character solely for its head office/parent company and does not constitute a permanent establishment, it shall provide the relevant supporting documentation to the tax authorities who shall reach a determination thereon.
clp reference:3210/06.03.14prc reference:国税发 [2006] 35号promulgated:2006-03-14This premium content is reserved for
China Law & Practice Subscribers.
A Premium Subscription Provides:
- A database of over 3,000 essential documents including key PRC legislation translated into English
- A choice of newsletters to alert you to changes affecting your business including sector specific updates
- Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
Already a subscriber? Log In Now