SPECIFICATION OF ARRANGEMENTS (THE MAINLAND OF CHINA) (AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME) (SECOND PROTOCOL) ORDER
L.N. 89 of 2008
THE SECOND PROTOCOL TO 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
The Mainland of China and the Hong Kong Special Administrative Region agreed to amend 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” (“the Arrangement”), done in the Hong Kong Special Administrative Region on 21 August 2006, as follows:
To repeal subparagraph (1) of paragraph 3 of Article 2 of the Arrangement and substitute:
“(1) in the Mainland of China:
(i) individual income tax;
(ii) enterprise income tax.”.
To repeal subparagraph (1) of paragraph 1 of Article 4 of the Arrangement and substitute:
“(1) in the case of the Mainland of China, any person who, under the laws of the Mainland of China, is liable to tax therein by reason of his domicile, residence, place of establishment, place of effective management or any other criterion of a similar nature. This term, however, does not include any person who is liable to tax in the Mainland of China in respect only of income from sources in the Mainland of China;”.
To amend subparagraph (2) of paragraph 3 of Article 5 of the Arrangement by repealing “6 months” and substituting “183 days”.
The provision in paragraph 4 of Article 13 of the Arrangement, as read with paragraph 2 of the Protocol, which refers to a company the assets of which comprise not less than 50% immovable property situated in One Side, shall be implemented in accordance with the following provision:
Not less than 50% of the assets of the company must consist of immovable property at any time within the 3 years before the alienation of the shares of the company by the holder of the shares.
To repeal paragraph 5 of Article 13 of the Arrangement and substitute:
“5. Gains derived by a resident of One Side from the alienation of shares, other than the shares referred to in paragraph 4, or other rights in the capital of a company which is a resident of the Other Side may be taxed in that Other Side if, at any time within the 12 months before the alienation, the recipient of the gains had a participation, directly or indirectly, of not less than 25% of the capital of the company.”.
This Protocol shall, upon the written notifications by both Sides of the completion of their respective required approval procedures, enter into force on the date of the later of these notifications.
In witness whereof the undersigned, being duly authorized, have signed this Protocol.
Done in duplicate in Beijing on 30 January 2008 in the Chinese language.
The Hong Kong Special Administrative
Region of the People’s Republic of China
Secretary for Financial Services and the
K C CHAN
The People’s Republic of China
State Administration of Taxation