The Government of the People's Republic of China and the Government of Malaysia; Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, have agreed as follows: 　　Article 1 Personal Scope 　　1.This Agreement shall apply to persons who are residents of one or both of the Contracting States Article 2 Taxes Covered This Agreement shall apply to taxes on income imposed on behalf of a Contracting State, irrespective of the manner in which they are levied. 2.The existing taxes to which the Agreement shall apply are: (a)in the People's Republic of China: (i)the individual income tax; 　　(ii)the income tax concerning joint ventures with Chinese and foreign investment (including local income tax); and 　　(iii)the income tax concerning foreign enterprises (including local income tax); 　　(hereinafter referred to as "Chinese tax"); 　　(b)in Malaysia: 　　(i)the income tax and excess profit tax; 　　(ii)the supplementary income taxes, that is, tin profits tax, development tax and timber profits tax; and 　　(iii)the petroleum income tax; 　　(hereinafter referred to as "Malaysian tax"). 　　3.This Agreement shall also apply to any identical or substantially similar taxes which are imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes referred to in paragraph 2. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respective taxation laws within a reasonable period of time after such changes. 　　Article 3 General Definitions 　　1.In this Agreement, unless the context otherwise requires: 　　(a)the term "China" means the People's Republic of China; when used in geographical sense, means all the territory of the People's Republic of China, including its territorial sea, in which the Chinese laws relating to taxation apply, and any area beyond its territorial sea, within which the People's Republic of China has sovereign rights of exploration for and exploitation of resources of the sea-bed and its sub-soil and superjacent water resources in accordance with international law; 　　(b)the term "Malaysia" means the Federation of Malaysia and includes any area beyond and adjacent to the territorial waters of Malaysia within which Malaysia has and exercises under the laws of Malaysia in consistence with international law, sovereign rights for the purpose of exploring and exploiting the natural resources, whether living or non-living of the sea-bed and the sub-soil, and the waters superjacent to the sea-bed; 　　(c)the terms "a Contracting State" and "the other Contracting State" mean China or Malaysia as the context requires; 　　(d)the term "tax" means Chinese tax or Malaysian tax, as the context requires; 　　(e)the term "person" includes 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 "national" means: 　　(i) in case of China all individuals possessing the nationality of China in accordance with Chinese laws and any legal person, partnership and other body corporate deriving its status as such from Chinese laws; 　　(ii)in relation to Malaysia, any individual possessing the Citizenship of Malaysia, and any legal person, partnership, association and any other entity deriving its status as such from the laws in force in Malaysia; 　　(i)the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State; 　　(j)the term "competent authority" means: 　　(i)in the case of China, the Ministry of Finance or its authorised representative; and 　　(ii)in the case of Malaysia, the Minister of Finance or his authorised representative. 　　2.In the application of the Agreement by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that State concerning the taxes to which the 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 laws of that Contracting 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 and 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 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 a 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, 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 its place of effective management is situated. However, if such person has a place of effective management in a Contracting State and a head office in the other Contracting State, the competent authorities of the Contracting States shall by mutual agreement determine the State of which the person in question is a resident. 　　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 an enterprise is wholly or 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 will, a quarry or any other place of extraction of natural resources including timber or other forest production; 　　(g)a farm or plantation. 　　3.The term "permanent establishment" likewise encompasses: 　　(a)a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than six months; 　　(b)the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, Provided that such activities continue for the same project or a connected project for a period or periods aggregating more than six months within any twelve-month period. 　　4.Notwithstanding the provisions of paragraphs 1 to 3, 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 of merchandise, or of collecting information, 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. 　　5.Notwithstanding the provisions of paragraphs 1 and 2, where a person --other than an agent of an independent status to whom the provisions of paragraph 6 apply--is acting in a Contracting State on behalf of an enterprise of the other Contracting State, has and habitually exercises 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 State in respect of any activities which that person undertakes for the enterprise, unless his activities are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this 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 persons are acting in the ordinary course of their 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 situated in the other Contracting State may be taxed in that other State. 　　2.For the purposes of this Agreement, the term "immovable property" shall be defined in accordance with the laws 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 and other natural resources including timber or other forest produce. Ships and aircraft shall not be regarded as immovable property. 　　3.The provisions of paragraph 1 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 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, 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 determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes 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 amount, 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, 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, for 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, 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.If the information available to the competent authority of a Contracting State is inadequate to determine the profits to be attributed to the permanent establishment of an enterprise, nothing in paragraph 2 shall affect the application of any law of that State relating to the determination of the tax liability of that permanent establishment by the exercise of a discretion or the making of an estimate of the profits to be taxed of that permanent establishment by the competent authority of the Contracting State, provided that the law shall be applied, so far as the information available to the competent authority permits, in accordance with the principle of his Article. 　　5.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. 　　6.For the purposes of paragraphs 1 to 5, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. 　　7.Where profits include items of income which are dealt with separately in other Articles of his 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 derived by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be taxable only in that State. 　　2.Income of an enterprise of one of the Contracting States derived from the other Contracting State from the operation of ships in international traffic may be taxed in that other State, but the tax chargeable in that other State on such income shall be reduced by an amount equal to fifty per cent of such tax. 　　3.The provisions of paragraphs 1 and 2 shall also apply to profits from the 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 paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 　　2.Dividends paid by a company which is a resident of China to a resident of Malaysia shall be taxed in China according to Chinese laws, but if the beneficial owner of the dividends is a resident of Malaysia the tax so charged shall not exceed 10 per cent of the gross amount of the dividends. 　　The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 　　3.Dividends paid by a company which is a resident of Malaysia to a resident of China who is the beneficial owner thereof shall be exempt from any tax in Malaysia which is chargeable on dividends in addition to the tax chargeable in respect of the income of the company. Nothing in this paragraph shall affect the provisions of the Malaysian law under which the tax in respect of a dividend paid by a company which is a resident of Malaysia from which Malaysian tax has been, or has been deemed to be, deducted may be adjusted by reference to the rate of tax appropriate to the Malaysian year of assessment immediately following that in which the dividend was paid. 　　4.The term "dividends" as used in this Article means income from shares, or other rights, not being debt-claims, participating in profits, as well as income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. 　　5.The provisions of paragraphs 1, 2 and 3 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, and the holding in a respect of which the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 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 permenent establishment situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State. 　　Article 11 Interest 　　1.Interest arising in a Contracting State and paid to 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 laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest. 　　3.Notwithstanding the provisions of paragraph 2, interest to which a resident of China is beneficially entitled shall be exempt from Malaysian tax if the loan or other indebtedness in respect of which the interest is paid is an approved loan as defined in section 2 (1) of the Income Tax Act, 1967 of Malaysia. 　　4.Notwithstanding the provisions of paragraphs 2 and 3, the Government of a Contracting State shall be exempt from tax in the other Contracting State in respect of interest derived by the Government from that other State. 　　5.For the purposes of paragraph 4, the term "Government": 　　(a)in the case of Malaysia means the Government of Malaysia and shall include: 　　(i)the governments of the States; 　　(ii)the local authorities; 　　(iii)the Bank Negara Malaysia; and 　　(iv)such institutions, the capital of which is wholly owned by the Government of Malaysia or the governments of the States, or the local authorities thereof, as may be agreed upon from time to time between the competent authorities of the Contracting States; 　　(b)in the case of China means the Government of the People's Republic of China and shall include; 　　(i)the local government; 　　(ii)the People's Bank of China, the head office of Bank of China, and the China International Trust and Investment Corporation; and 　　(iii)such institutions, the capital of which is wholly owned by the Government of the People's Republic of China, as may be agreed upon from time to time between the competent authorities of the Contracting States. 　　6.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. 　　7.The provisions of paragraphs 1, 2 and 3 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, and the debt-claim in respect of which the interest is paid effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply. 　　8.Interest shall be deemed to arise in a Contracting State when the payer is the Government of that State, a political subdivision, a local authority thereof, 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 in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated. 　　9.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, having regard to the debt-claim for which it is paid, exceeds 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 laws 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 and paid to a resident of the other Contracting State may be taxed in that other State. 　　2.However, such royalties may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, the tax so charged shall not exceed: 　　(a)10 per cent of the gross amount of the royalties referred to in paragraph 3 (a); 　　(b)15 per cent of the gross amount of the royalties referred to in paragraph 3 (b). 　　3.The term "royalties" as used in this Article means payments of any kind received as a consideration for: 　　(a)the use of, or the right to use, any patent, know-how, trade mark, design or model, plan, secret formula or process, copyright of any scientific work, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience; 　　(b)the use of, or the right to use any copyright of literary or artistic work including cinematograph films, or tapes for radio or television broadcasting. 　　4.The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being 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, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply. 　　5.Royalties shall be deemed to arise in a Contracting State when the payer is the Government of that State, a political subdivision, a local authority thereof, 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 in connection with which the liability to pay the royalties was incurred, and such royalties are brone by such permanent establishment, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment 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, having regard to the use, right or information for which they are paid, exceeds the amount which 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 laws of each Contracting State, due regard being had to the other provisions of this Agreement. 　　7.Royalties derived by a resident of China which are subjected to film hire duty under the Cinematograph Film-Hire Duty Act in Malaysia shall not be liable to Malaysian tax to which this Agreement applies. 　　Article 13 Gains from the Alienation of Property 　　1.Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in paragraph 2 of Article 6 and situated in the other Contracting State may be taxed in that other State. 　　2.Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise may be taxed in that other State. 　　3.Gains from the alienation of ships or aircraft operated in international traffic and movable property, pertaining to the operation of such ships or aircraft shall be taxable only in the State of which the enterprise is a resident. 　　4.Gains from the alienation of shares of the capital stock of a company, the principal property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that State. Gains from the alienation of an interest in a partnership or a trust, the property of which consists principally of immovable property situated in a Contracting State, may be taxed in that State. 　　5.Gains derived by a resident of a Contracting State from the alienation of any property other than that referred to in paragraphs 1 to 4 and arising in the other Contracting State may be taxed in that other State.