Supplementary Circular on Issues Relevant to the «Measures for the Administration of the Treatment for Which Non-tax-residents are Eligible Under Tax Agreements (Trial Implementation)»

(Issued by the State Administration of Taxation on June 21 2010.)

Guo Shui Han [2010] No.290

Offices of the State Administration of Taxation and local taxation bureaux of provinces, autonomous regions, municipalities directly under the central government and cities with independent development plans:

The Measures for the Administration of the Treatment for Which Non-tax-residents are Eligible Under Tax Agreements (Trial Implementation) (the Measures) were issued with, and implemented by virtue of, the State Administration of Taxation, Circular on the Issuance of the Measures for the Administration of the Treatment for Which Non-tax-residents are Eligible Under Tax Agreements (Trial Implementation) (Guo Shui Fa [2009] No.124). We hereby further notify you on the implementation of the Measures as follows:

1. The offices of the State Administration of Taxation and the local taxation bureaux specified in Article 6 of the Measures shall also include the tax authorities at various levels that satisfy the provisions of Article 14 of the PRC Law on the Administration of the Levy and Collection of Taxes.

2. The proof of identity of a tax-paying resident that a taxpayer shall be required to submit pursuant to Item (3) of the first paragraph of Article 9 or Item (2) of the first paragraph of Article 12 of the Measures, includes the proofs of identity of tax-paying residents issued by either of the following means by the competent authority of the other contracting state to the tax agreement:

(1) the relevant information provided as required by item 27 of Attachment 1 or item 25 of Attachment 2 to document Guo Shui Fa [2009] No.124; or

(2) a certificate specifically issued for that purpose.

3. The documentation that a non-tax-resident has previously submitted to the competent tax authority that it may be exempted from submitting pursuant to the second paragraph of Article 9 or the second paragraph of Article 12 of the Measures shall be limited to that documentation that it previously submitted to the same competent tax authority. If a non-tax-resident is required to submit examination and approval applications or record-filing reports to more than one competent tax authority, it shall submit the relevant documentation to each such competent tax authority.

4. If, pursuant to Article 11 of the Measures, a taxpayer or withholding agent carries out with the competent tax authority the record-filing procedures for the treatment under the agreement for which the taxpayer is eligible before reporting the relevant tax obligation, it shall, when filling in the Record-filing Form for the Treatment for Which a Non-tax-resident is Eligible Under a Tax Agreement, provisionally provide the contractual amount or estimated amount in item 20, “income amount or taxable income”, and item 21, “tax reduction/exemption”. Subsequently, when reporting said recorded tax obligation in accordance with domestic law, the taxpayer or withholding agent shall complete and submit to the competent tax authority a Form for Reporting on the Implementation of the Treatment for Which a Non-tax-resident is Eligible Under a Tax Agreement (see Attachment 3) to report on the actual implementation of the treatment for which it is eligible under the tax agreement.

5. Income subject to record filing that is being withheld as specified in Article 11 and addressed in Article 13 of the Measures does not include income that, pursuant to domestic tax laws, is subject to withholding at source and, pursuant to Article 7 of the Measures, is subject to examination and approval.

When a withholding agent implements treatment under a tax agreement that requires record filing, it shall complete the record-filing procedure in accordance with Article 13 of the Measures regardless of whether the taxpayer has submitted the relevant documentation to the competent tax authority. If the taxpayer refuses to provide the relevant documentation to the withholding agent, the withholding agent may not implement the relevant treatment under the tax agreement.

6. For the purposes of the second paragraph of Article 17 of the Measures, the “time specified in Article 16 hereof” means the period of time specified in Item (1) of the first paragraph of Article 16 of the Measures, that is to say that a tax authority at any level handling forwarded information pursuant to Article 17 of the Measures shall, within 20 working days from the date on which it received the forwarded information, render its handling decision, and directly or via the hierarchy notify the tax authority with the approval authority or complete the further forwarding procedure.

7. Article 2 of the State Administration of Taxation, Circular on the Interpretation and Implementation of Relevant Articles of the 《Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income》 (Guo Shui Han [1998] No.381) and Item (3) of Article 3 of the State Administration of Taxation, Circular on the Interpretation and Implementation of Relevant Articles of the 《Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income》 (Guo Shui Han [2007] No.403) are provisions derived based on the agreement on the enforcement of the tax arrangements reached from the negotiations between the State Administration of Taxation and the Internal Revenue Department of the Hong Kong Special Administrative Region. Pursuant to Article 44 of the Measures, in the event of a discrepancy between the aforesaid two provisions and the Measures, matters shall be handled in accordance with the two provisions.

8. The types of income and the codes therefor specified in the “instructions for filling out the form” on Attachments 1, 2 and 5 to document Guo Shui Fa [2009] No.124 are amended as follows: business profits – 7; dividends – 10; interest – 11; royalties – 12; capital gains – 13; independent personal services – 14; dependent personal services – 15; artistes and athletes – 17; pensions – 18; students and trainees – 20; other income – 21. For the revised forms, see Attachments 1, 2 and 3.

9. The “seal or signature of the competent tax authority or the person authorised by it” in item 26 of Attachment 2 to document Guo Shui Fa [2009] No.124 is amended to read as follows: “seal or signature of the accepting tax authority or the person authorised by it”. The “accepting tax authority” means the competent tax authority that accepts the non-tax-resident's examination and approval application or the tax authority with examination and approval authority as specified in Article 7 of the Measures (see Attachment 2).

10. The “most recent year” in items 15 to 21 of Attachment 3 to document Guo Shui Fa [2009] No.124 means the year before the applicant obtained the income.

11. Attachment 5, the Form for Reporting on the Implementation of the Treatment for Which a Non-tax-resident is Eligible Under a Tax Agreement that Has Been Approved, and Attachment 6, the Form Summarising Information on the Treatment Under Tax Agreements of Which Non-tax-residents Have Availed Themselves (by Country), of document Guo Shui Fa [2009] No.124 are respectively superseded by Attachment 3, the Form for Reporting on the Implementation of the Treatment for Which a Non-tax-resident is Eligible Under a Tax Agreement, and Attachment 4, the Form Summarising Information on the Implementation of the Treatment for Which Non-tax-residents are Eligible Under Tax Agreements, attached hereto.

12. The forms that are to be completed pursuant to the Measures shall be in duplicate, with one copy retained by the person filling in the form and one copy submitted to the relevant tax authority.

13. Each region is asked to summarise on an annual basis the information on the implementation of tax agreements in the region, complete the relevant form for the summarisation of such information and submit the same to the State Administration of Taxation by the end of March of the following year.

Attachments:

Attachment 1. Record-filing Form for the Treatment for Which a Non-tax-resident is Eligible Under a Tax Agreement

Attachment 2. Application for Approval of Treatment for Which a Non-tax-resident is Eligible Under a Tax Agreement

Attachment 3. Form for Reporting on the Implementation of the Treatment for Which a Non-tax-resident is Eligible Under a Tax Agreement

Attachment 4. Form Summarising Information on the Implementation of the Treatment for Which Non-tax-residents are Eligible Under Tax Agreements