The government of the People's Republic of China and the Movement of the Republic of Hungary， Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income，for further devel01PnGent and promotion of their economic relationship， Have agreed as follows： Article l Personal Scope This Agreement shall apply to persons who are residents of one or both of the Contracting States. Article 2 Taxes Covered 1．This Agreement shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivision on or local authorities，irrespective of the manner in which they are levied． 　　2. There shall be regarded as taxes on income all taxes imposed on total income, or one elements of income including Texas on gains from the alienation of movable or immovable property, tax on the toal amounts of wages or salaries paid by enterprise, as well as well as taxes on capital appreciation. 　　3.The existing taxes to which the Agreement shall apply are in particular: 　　(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; 　　(iii) the income tax concerning foreign enterprises ;and 　　(iv) the local income tax (hereinafter referred to as "Chinese tax"); 　　(b) in the Republic of Hungary: 　　(i) the income tax on individuals; 　　(ii) the profit taxes (hereinafter referred to as "Hungarian tax"). 　　4. 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 tax referred to in paragraph3. The competent authorities of the Contraction 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. for the purposes of this Agreement, unless the context otherwise requires: 　　(a) the term "China" means the People's Republic of China; 　　(b) the term "Hungary" means the Republic Hungary; 　　(c) the terms "a Contraction State" and "the other Contraction State" mean China or Hungary as the context requires; 　　(d) the term "tax "means Chinese tax or Hungarian tax, as the context requires; 　　(e) the term "person" includes an individual, a company and any other blade 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 Contraction 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 Contraction State; 　　(h) the term "nationals "means: 　　(i) all individuals possessing the nationality of a Contraction State; 　　(j) all legal persons, partnerships and associations deriving their status as such from the laws in force in a Contracting State; 　　(i) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of head office or effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contraction State; 　　(j) the term "competent authority" means, in the case of China, the State Tax Bureau or its authorized representative, and in the case of Hungary, the Minister of Finance or his authorized representative. 　　2. As regards the application this 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 Contracting State concerning 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 laws of that Contracting State, is liable to tax therein by reason of his domicile, residence, place of head office or effective management or any other criterion of a similar nature. 　　2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his status shall be determined as follows: 　　(a) He shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him ; if he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting 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 Contracting State, he shall be deemed to be a resident of the State in which be has a habitual abode; 　　(c) If he has a habitual abode in both Contracting State or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national; 　　(d) If he is a national of both Contracting State or of neither of them, the competent authorities of the Contracting State 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 State, then it shall be deemed to be a resident of the Contracting 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 an enterprise in 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 ; and 　　(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. 　　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 twelve months; 　　(b) the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other engaged personnel in the other Contracting States, provided that such activities continue for the same project or a connected project for a period or periods aggregating more than twelve months. 　　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 enterprises; 　　(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; 　　(e) the maintenance of a fixed palace 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 nay combination of activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character. 　　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 Contracting 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 fight 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 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 Contracting 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 Contracting State but only so much of them a 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, thee 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 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 , 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. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary. The method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this 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 Ariticles 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 head office or effective management of the enterprise is situated. 　　2. If the place of head office or effective management 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 paragraph 1 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 resident of the other Contracting State may be taxed in that other Contracting State. 　　2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that Contracting State, but if the recipient is the beneficial owner 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. 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 from other corporate rights 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. 　　4. The provisions of paragraphs 1 and 2 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 Contracting 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 14, as the case may be, shall apply. 　　5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other Contracting 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 Contracting State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other Contracting 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 Contracting 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 Contracting State. 　　2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that Contracting 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 arising in a Contracting State and derived by the Government of the other Contracting State or its political subdivision or a local authority and the Central Bank there of or any financial institution wholly owned by that Government, or by any other resident of that other Contracting State with respect to debt-claims indirectly financed by the Government of that other Contracting State or its political subdivision or a local authority there of and the Central Bank thereof or any financial institution wholly owned by 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. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. 　　5. 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, or performs in that other Contracting 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 14, 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 Contracting State or its political subdivision or a local authority thereof or a resident of that Contracting State. Where, however, the person paying the interest, establishment or a fixed base in connection which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment of fixed base, then such interest shall be deemed to arise in the Contracting 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, 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 the Article shall remain taxable according to the laws of each Contracting State, due regard being bad 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 Contracting State. 　　2. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties. 　　3. The term "royalties" as used in this Article means 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, any patent, know-how, trade mark, design or model, plan, secret formula. or process, or for the use of , or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. 　　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, or performs in that other Contracting 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 Article 7 or Article 14, 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 Contracting State or its political subdivision or a local authority thereof or a resident of that Contracting 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 liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the Contracting 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, having regard to the use, right or information for which they are 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 13 Capital Gains 　　1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other Contracting 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 pertaining to a fixed base 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)or of such a fixed base, may be taxed in that other Contracting State. 　　3. .Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State. In which the place of head office or effective management of the enterprise is situated. 　　4. Gains from the alienation of shares of the capital stock of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State. May be taxed in that Contracting State.. 　　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 Contracting State..