Tax Convention and Protocol Between the People's Republic of China and the Federal Republic of Germany
Tax Convention and Protocol Between the People's Republic of China and the Federal Republic of Germany
Tax Convention and Protocol Between the People's Republic of China and the Federal Republic of Germany
June 10, 1985
Chapter I Convention
The People's Republic of China and the Federal Republic of Germany desire to further their economic relations and to avoid double taxation of income and property as well as to eliminate tax evasion and have, following amicable negotiations by the representatives of each government, agreed as follows:
Article 1 Scope of Persons
The Tax Convention Between the People's Republic of China and the Federal Republic of Germany (hereinafter referred to as the "Convention") shall apply to persons who are residents of one or both of the contracting states.
Article 2 Taxes Covered
1. The Convention shall apply to taxes on income and on property imposed in a contracting state, irrespective of the manner in which they are levied.
2. There shall be regarded as taxes on income and on property all taxes imposed on total income, on total property, or on elements of income or of property, including taxes on gains from the alienation of movable or immovable property, as well as taxes on property appreciation.
3. The existing taxes to which the Convention shall apply are:
(1) in the People's Republic of China:
A. the individual income tax;
B. the income tax concerning joint ventures with Chinese and foreign investment;
C. the income tax concerning foreign enterprises; and
D. the local income tax.
(hereinafter referred to as "Chinese tax")
(2) in the Federal Republic of Germany:
A. the individual income tax (die Einkommensteuer);
B. the corporate income tax (die Korperschaftsteuer);
C. the property tax (die Vermgensteuer); and
D. the business tax (die Gewerbesteuer).
(hereinafter referred to as "German tax")
4. The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. Within reasonable periods of time, the competent authorities of the contracting states shall notify each other of changes which have been made in their respective taxation laws.
Article 3 General Definitions
1. For the purposes of the Convention, unless the context otherwise requires:
(1) the terms "a contracting state" and "the other contracting state" refer to, as the context requires, the People's Republic of China or the Federal Republic of Germany, and when used in a geographical sense, the territory in which the tax laws of the relevant contracting state are in force, including the territorial sea and areas beyond the territorial sea within which the relevant contracting state may, in accordance with international law, exercise the sovereign right of exploration for and exploitation of the resources of the seabed and its subsoil;
(2) the term "person" includes an individual, a company and any other body of persons;
(3) the term "company" refers to anybody corporate or any entity which is treated as a body corporate for tax purposes;
(4) the terms "enterprise of a contracting state" and "enterprise of the other contracting state" refer to 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;
(5) the term "national" refers to an individual who under the law of a contracting state possesses the nationality of that contracting state, as well as a legal person, partnership and association deriving its status as such from the law of a contracting state;
(6) the term "international traffic" refers to any transport by a ship or aircraft operated by an enterprise which has its head office in a contracting state, except when the ship or aircraft is operated solely between places in the other contracting state;
(7) the term "competent authority" refers to in the case of the People's Republic of China the Ministry of Finance or its authorized representative and in the case of the Federal Republic of Germany the Federal Ministry of Finance.
2. As regards the implementation of the Convention by a contracting state, any term not defined herein shall, unless the context otherwise requires, have the meaning which it has under the law of that contracting state concerning the taxes applicable to the Convention.
Article 4 Resident
1. For the purposes of the Convention, the term "resident of a contracting state" refers to any person who, under the law of that contracting state, is liable to tax therein by reason of his domicile, residence, place of head office 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:
(1) 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 (center of vital interests);
(2) if the contracting state in which he has his center of vital interests cannot be determined, or if he does not have a permanent home available to him in either contracting state, he shall be deemed to be a resident of the contracting state in which he has a habitual abode;
(3) if he has a habitual abode in both contracting states or in neither of them, he shall be deemed to be a resident of the contracting state of which he is a national; and
(4) if he is a national of both contracting 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 contracting state in which its head office is situated.
Article 5 Permanent Establishment
1. For the purposes of the Convention, the term "permanent establishment" refers to 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:
(1) a place of management;
(2) a branch;
(3) an office;
(4) a factory;
(5) a workshop; and
(6) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.
3. The term "permanent establishment" shall also include:
(1) a building site, building or assembly or installation project or any supervising activities connected therewith, provided that such site, project or activities shall last for at least six consecutive months; and
(2) the furnishing of services, including consultancy services, by an enterprise of a contracting state through its employees or other personnel, for the same or a connected project in the other contracting state, which continues for a period or periods aggregating more than six months within any 12-month period.
4. Notwithstanding Paragraphs 1 to 3 of the Article, the term "permanent establishment" shall be deemed not to include:
(1) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(2) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
(3) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
(4) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;
(5) 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; and
(6) the maintenance of a fixed place of business solely for any combination of activities mentioned in Items 1 to 5, 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, where a person-other than an agent of an independent status provided in Paragraph 6-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 that contracting state in respect of any activities 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, who are acting in the ordinary course of their business.
7. The fact that a resident company of a contracting state controls or is controlled by a resident company of the other contracting state, or a company 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 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 regarding landed property apply, usufruct of immovable property and rights to variable or fixed income as consideration for the exploitation of, or the right to exploit, mineral deposits, water sources and other natural resources; ships and aircraft shall not be regarded as immovable property.
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