The government of the People's Republic of China and the Government of the State of Israel 　　Desiring to conclude and Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, 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 and on capital imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied． 　　2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. 　　3.The existing taxes to which the Agreement shall apply are : 　　(a) in China: 　　(i) the individual income tax; 　　(ii) the income tax for Enterprises with Foreign Investment and Foreign Enterprises; 　　(iii) the local income tax; 　　(hereinafter referred to as "Chinese tax") 　　(b) in Israel: 　　(i)the income tax ( including the company tax and the capital gains tax); 　　(ii) the tax imposed upon gains from the alienation of real property under the Land Appreciation Tax Law; and 　　(iii) the tax imposed on real property according to the Property Tax Law; 　　 (hereinafter referred to as "Israeli 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 taxes referred to in paragraph 3. 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; when used in a geographical sense, means 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 "Israel "means the State of Israel; and when used in a geographical sense, the term "Israel" includes its territorial sea, continental shelf, and other maritime areas over which it exercises rights according to international law; 　　(c)the terms "a Contracting State" and "the other Contracting State" mean China or Israel as the context requires; 　　(d)the term "person " includes an individual, a company any other body of persons; 　　(e) the term "company " means any body corporate or any entity which is treated as a body corporate for tax purposes; 　　(f) the terms "enterprise of a Contracting States " and "enterprise of the other Contracting States " mean respectively, an enterprise carried on by a resident of a Contracting States and an enterprise carried on by a resident of the other Contracting States; 　　(g) the term "nationals " means 　　(i) any individual possessing the nationality of a Contracting States; 　　(ii) and any legal person, partnership or association deriving its status as such from the laws in force in a Contracting States; 　　(h) 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 in the case of China, the State Administration of Taxation or its authorized representative, and in the case of Israel, the Ministry 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, place of incorporation, place of control and 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 Contracting 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 Contracting the State in which he 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 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 its head office is situated. If the State in which its head office is situated cannot be determined, the competent authorities of the Contracting States shall settle the question by mutual 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 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 12 months; 　　(b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for the same or a connected project ) within the country for a period or periods aggregating more than 12 months within any 24-month period. 　　4.Notwithstanding the preceding of provisions 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 palace of business solely for the purpose of purchasing goods or 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; 　　(f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting form this combination is of a preparatory or auxiliary character. 　　5. Notwithstanding the provisions of paragraphs 1and 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 and 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 Contracting State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person 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 Contracting 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 will 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 resident of the other Contracting State, or which carries on business in that other Contracting 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 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 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 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 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 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. 　　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 applying 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 permanent paragraphs, 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 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 of an enterprise of a Contracting state from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State. 　　　2.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 　　 1. 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. 　　2. Where a Contracting State includes in the profits of an enterprise of that Contracting State and taxes accordingly profits on which an enterprise of the other Contracting State has been charged to tax in that other Contracting State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned Contracting State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other Contracting State shall make an appropriate adjustment to the amount of tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting State shall, if necessary, consult each other. 　　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 tat 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 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. 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 other 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 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 State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed: 　　(a) 7% of the gross amount of the interest if it is received by any bank or financial institution; 　　(b)10% of the gross amount of the interest in all other cases. 　　3. 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. 　　4. The provisions of paragraphs 1, and 2 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 Article 14, as the case may be, shall apply. 　　5. Interest shall be deemed to arise in a Contracting State when the payer is the Government of that Contracting State, a political subdivision or a local authority thereof or a resident of that Contracting 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 which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest 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 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 bad to the other provisions of this Agreement. 　　Article 12 Royalties 　　1. Royalties arising 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 1and 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, a political subdivision, 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 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 with the whole enterprise) or of such a fixed base, may be taxed in that other Contracting State. 　　3. Gains of an enterprise of a Contracting State 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. 　　4. Gains from the alienation of shares 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. 　　5.Gains from the alienation of any property other than that referred to in paragraphs 1 to 4, shall be taxable only in the Contracting State of which the alienator is a resident.