AGREEMENT BETWEEN THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS The Government of the People's Republic of China and the Government of the United Kingdom of Great Britain and Northern Ireland; 　　Desiring to conclude an Agreement for the reciprocal avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains; 　　Have agreed as follows: 　　Article 1 Personal Scope 　　This Agreement shall apply to persons who are residents of one or both of the Contracting States. 　　Article 2 Taxes Covered 　　1.The existing taxes to which this Agreement applies are: 　　(a)in the People's Republic of China: 　　(ⅰ)the individual income tax; 　　(ⅱ)the income tax (including the additional local income tax) concerning joint ventures with Chinese and foreign investment; and 　　(ⅲ)the income tax (including the local income tax) concerning foreign enterprises; 　　(hereinafter referred to as "Chinese tax"); 　　(b)in the United Kingdom of Great Britain and Northern Ireland: 　　(ⅰ)the income tax; 　　(ⅱ)the corporation tax; and 　　(ⅲ)the capital gains tax; 　　(hereinafter referred to as "United Kingdom tax"). 　　2.This Agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of this Agreement in addition to, or in place of, the taxes referred to in paragraph (1) of this Article. The competent authorities of the Contracting States shall notify each other of any changes which are made in their respective taxation laws. 　　Article 3 General Definitions 　　1.In this Agreement, unless the contest otherwise requires: 　　(a)the term "China" means the People's Republic of China, including all the territory and the territorial sea of the People's Republic of China, in which the laws relating to Chinese tax are in force, and all the area beyond its territorial sea, and the sea bed and sub-soil thereof, over which the People's Republic of China has jurisdiction in accordance with international law and in which the laws relating to Chinese tax are in force; 　　(b)the term "United Kingdom" means Great Britain and Northern Ireland, including any area outside the territorial sea of the United Kingdom which in accordance with international law has been or may hereafter be designated, under the laws of the United Kingdom concerning the Continental Shelf, as an area within which the rights of the United Kingdom with respect to the sea-bed and sub-soil and their natural resources may be exercised; 　　(c)the terms "a Contracting State" and "the other Contracting State" mean China or the United Kingdom as the context requires; 　　(d)the term "national" means: 　　(ⅰ)in relation to China any individual who under the law in China possesses Chinese nationality; and any legal person, partnership or other body of persons deriving its status as such from the law in force n China; 　　(ⅱ)in relation to the United Kingdom, any individual who has under the law in the United Kingdom the status of United Kingdom national, provided he has the right of abode in the United Kingdom; and any legal person, partnership, association or other entity deriving its status as such from the law in force in the United Kingdom; 　　(e)the term "person" means an individual, a company and any other body of persons; 　　(f)the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes; 　　(g)the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State " mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State; 　　(h)the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management of the business in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State; 　　(i)the term "competent authority" means, in the case of China, the General Taxation Bureau of the Ministry of Finance or its authorised representatives, and in the case of the United Kingdom, the Board of Inland Revenue or their authorised representatives. 　　2.As regards the application of this Agreement by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the law of that Contracting state relating to the taxes to which this Agreement applies. 　　Article 4 Resident 　　1.For the purposes of this Agreement, the term "resident of a Contracting State" means any person who, under the law of that State, is liable to tax therein by reason of his domicile, residence, place of head office, place of effective management or any other criterion of a similar nature. 　　2.Where by reason of the provisions of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules: 　　(a)he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer ( centre of vital interests); 　　(b)if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; 　　(c)if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is national; 　　(d)if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 　　3.Where by reason of the provisions of paragraph (1) of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which the place of effective management of its business is situated. However, where such a person has the place of effective management of its business in one of the Contracting States and the place of head office of its business in the other Contracting State, then the competent authorities of the Contracting State shall determine by mutual agreement the State of which the company shall be deemed to be a resident for the purposes of this Agreement. 　　Article 5 Permanent Establishment 　　1.For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of enterprise is wholly or wholly partly carried on. 　　2.The term "permanent establishment" includes especially: 　　(a)a place of management; 　　(b)a branch; 　　(c)an office; 　　(d)a factory; 　　(e)a workshop; 　　(f)a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; and 　　(g)an installation or structure used for the exploration or exploitation of natural resources. 　　3.A building site or a construction, installation or assembly project constitutes a permanent establishment only if it lasts more than six months. 　　4.Notwithstanding the provisions of paragraphs (1) to (3) of this Article, the term "permanent establishment" shall be deemed not to include: 　　(a)the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise; 　　(b)the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; 　　(c)the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise: 　　(d)the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting in formation, for the enterprise; 　　(e)the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; 　　(f)the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e) of his paragraph, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 　　5.Notwithstanding the provisions of paragraphs (1) and (2) of this Article, where a person, other than an agent of an independent status to whom paragraph (6) of this Article applies, is acting in a Contracting State on behalf of an enterprise of the other Contracting State and has, and habitually exercises, in the first-mentioned Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, unless the activities of such a person are limited to those mentioned in paragraph (4) of this Article which, if exercised through a fixed place of business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph. 　　6.An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such a person is acting in the ordinary course of his business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he shall not be considered an agent of an independent status within the meaning of this paragraph. 　　7.The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. Article 6 Income from Immovable Property 1.Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State. 2.The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. the term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships and aircraft shall not be regarded as immovable property. 3.The provisions of paragraph (1) of this Article shall apply to income derived from the direct use, letting, or use in any other form of immovable property. 4.The provisions of paragraphs (1) and (3) of this Article shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services. Article 7 Business Profits 1.The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. if the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. 2.Subject to the provisions of paragraph (3) of this Article, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. 3.In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or by way of fees for technical services, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, of amounts charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or by way of fees for technical services, or, except in the case of a banking enterprise, by way of interest on moneys lent to the head office of the enterprise or any of its other offices. 4.No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. 5.Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 　　Article 8 Shipping and Air Transport 　　1.Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the business of the enterprise is situated. 　　2.If the place of effective management of the business of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident. 　　3.The provisions of this Article shall also apply to profits derived from participation in a pool, a joint business or an international operating agency. 　　Article 9 Associated Enterprises 　　Where: 　　(a)an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or 　　(b)the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State; and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. 　　Article 10 Dividends 　　1.Dividends derived from a company which is a resident of a Contracting State by a resident of the other Contracting State may be taxed in that other State. 　　2.However, such dividends may also be t axed in the Contracting State of which the company paying the dividends is a resident and according to the law of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State the tax so charged shall not exceed 10 per cent of the gross amount of the dividends. 　　3.The term "dividends" as used in this Article shall have the meaning which it has under the taxation law of the Contracting State of which the company paying the dividend is a resident and shall included any item which is treated under that law as a dividend or distribution. 　　4.The provisions of paragraph (2) of this Article shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 5.The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply. 6.Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State. Article 11 Interest 1.Interest arising in a Contracting State which is derived by a resident of the other Contracting State may be taxed in that other State. 　　2.However, such interest may also be taxed in the Contracting State in which it arises, and according to the law of that State; but if the beneficial owner of the interest is a resident of the other Contra ting State the tax so charged shall not exceed 10 per cent of the gross amount of the interest. 　　3.Notwithstanding the provisions of paragraph (2) of this Article, interest arising in a Contracting State and derived by the Government of the other Contracting State, a political sub-division or local authority thereof, the Central Bank of that other Contracting State or any agency of that Government, or by any other resident of that other Contracting State with respect to debt-claims of that resident which are financed, guaranteed or insured by the government of that other Contracting State, a political sub-division or local authority thereof, the Central Bank of that other Contracting State or any agency of that Government, shall be exempt from tax in the first-mentioned Contracting State. 　　4.The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, but shall not include any item which is treated as a distribution under the provisions of Article 10 of this Agreement. 　　5.The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply. 　　6.Interest shall be deemed to arise in a Contracting State when the payer is the Government of that State or a political sub-division thereof or a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by that permanent establishment or fixed base, then such interest shall such interest is borne by that permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 　　7.Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest paid exceeds, for whatever reason, the amount which would have been agreed upon be the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement. 　　Article 12 Royalties 　　1.Royalties arising in a Contracting State which are derived by a resident of the other Contracting State may he taxed in that other Sate. 　　2.However, such royalties may also be taxed in the Contracting State in which they arise and according to the law of that State; but if the beneficial owner of the royalties is a resident of the other Contracting State the tax so charged shall not exceed: 　　(a)in the case of royalties referred to in sub-paragraph (a) of paragraph (3) of this Article, 10 per cent of the gross amount of the royalties; and 　　(b)in the case of royalties referred to in sub-paragraph (b) of paragraph (3) of this Article, 10 per cent of the adjusted amount of the royalties. For the purpose of this subparagraph "the adjusted amount" means 70 per cent of the gross amount of the royalties. 　　3.The term "royalties" as used in this Article comprises: 　　(a)payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films, and films or tapes for radio or television broadcasting, or any patent, know-how, trade-mark, design or model, plan, secret formula or process; and 　　(b)payments of any kind received as a consideration for the use of, or the right to use, any industrial, commercial or scientific equipment. 　　4.The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner of the royalties, begin a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Artic4le 7 or Article 15, as the case may be, shall apply. 　　5.Royalties shall be deemed to arise in a Contracting State when the payer is the government of that State or a political subdivision thereof or a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a Fixed base in connection with which the obligation to pay the royalties was incurred, and such royalties are borne by that permanent establishment or fixed base, then such royalties shall bedeemed to arise in the State in which the permanent establishment or fixed base is situated. 　　6.Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties paid exceeds, for whatever reason, the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement. 　　Article 13 Technical Fees 　　1.Technical fees arising in a Contracting State which are derived by a resident of the other Contracting State may be taxed in that other State. 　　2.However, such technical fees may also be taxed in the Contracting State in which they arise, and according to the law of that State; but if the beneficial owner of the technical fees is a resident of the other Contracting State the tax so charged shall not exceed 10 per cent of the adjusted amount of the technical fees. For the purpose of this paragraph, "the adjusted amount" means 70 per cent of the gross amount of the technical fees. 　　3.The term "technical fees" as used in this Article means payments of any kind to any person in consideration for any services of a technical, supervisory or consultancy nature, including the use of, or the right to use, information concerning industrial, commercial or scientific experience, but it does not include payments made to an employee of the person making the payments for dependent personal services mentioned in Article 16. 　　4.The provisions of paragraphs (1) and (2) of this Article shall not apply if the beneficial owner of the technical fees, begin a resident of a Contracting State, carries on business in the other Contracting State in which the technical fees arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the technical fees are effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply. 　　5.Technical fees shall be deemed to arise in a Contracting State when the payer is the Government of that State or a political subdivision thereof or a local authority or a resident of that State. Where, however, the person paying the technical fees, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to pay the technical fees was incurred, and such technical fees are borne by that permanent establishment or fixed base, then such technical fees shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 　　6.Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the technical fees paid exceeds, for whatever reason, the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Agreement. 　　Article 14 Capital Gains 　　1.Subject to the provisions of paragraph (2) of this Article, capital gains which arise in a Contracting State may be taxed by that State in accordance with the provisions of its domestic law. 　　2.Gains from the alienation of ships or aircraft operated in international traffic and any property, other than immovable property, pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the business of the enterprise is situated. 　　Article 15 Independent Personal Services 　　1.Subject to the provisions of Article 13, income derived by a resident of a Contracting State in respect of professional services or other activities of independent character shall be taxable only in that State except in the following circumstances, when such income may also be taxed in the other Contracting State: 　　(a)if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case so much of the income as is attributable to that fixed base may be taxed in that other State; or 　　(b)if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in the fiscal year concerned; in that case so much of the income as is derived from his activities performed in that other State may be taxed in that other State. 　　2.The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.