State Administration of Taxation, Circular on How to Interpret and Recognise the “Beneficial Owner” in Tax Agreements

国家税务总局关于如何理解和认定税收协定中“受益所有人”的通知

December 08, 2009 | BY

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Conduit companies are not beneficial owners.

Clp Reference: 3230/09.10.27 Promulgated: 2009-10-27

Issued: October 27 2009

Applicability: The term “beneficial owner” means a person who has ownership or control over income or the rights or property from which income is derived. Beneficial owners, in general, engage in substantive business activities and may be individuals, companies or any other entities. Agents, conduit companies, etc. are not beneficial owners.

The term “conduit company” means a company that is established for the purpose of avoiding or reducing taxes, or diverting or aggregating profits. Such companies are only registered in the residing country to satisfy the organisational form required by law and do not engage in manufacturing, distribution, management or other such substantive business activities (Article 1).

Main contents: The Circular sets forth factors that are not conducive to the recognition of an applicant's status as a beneficial owner. For example, the contracting state (region) does not tax or exempts tax on income or, although it does levy tax, the actual tax rate is very low (Article 2).

clp reference:3230/09.10.27prc reference:国税函 [2009] 601号promulgated:2009-10-27

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