Interpretation of the announcement of the State Administration of Taxation on certain issues concerning the implementation of tax treaties

This bulletin further clarifies the provisions of the tax agreements concerning the establishment of institutions, maritime and air transport, entertainers and athletes, and the application of tax agreements in partnerships. The main contents are as follows:

One. issues relating to standing bodies

(1) make clear that the institutions and establishments of Sino foreign cooperative education constitute permanent institutions.

The announcement clearly states that the Chinese-foreign cooperatively-run schools without legal personality and the places where educational and teaching activities are carried out in Chinese-foreign cooperatively-run schools constitute the permanent institutions of the residents of the other party to the tax agreement in China.

(2) make clear the same understanding of "six months" and "183 days".

The announcement clearly states that the term "continuous or cumulative exceedance of six months in any twelve months" in the terms of the permanent establishment regarding the composition of the permanent establishment of labour services shall be applied in accordance with the expression "continuous or cumulative exceedance of 183 days in any twelve months".

Two. Shipping and air transport clauses

(1) it is clear that wet lease, rent and term rent belong to international transportation business.

Enterprises engaged in international transport business often lease ships in the form of long-term charter or term charter or aircraft in the form of wet charter in order to save money and ease the shortage of transport capacity. The announcement refers to the annotations of the Organisation for Economic Co-operation and Development (OECD) Model and the UN Model of the United Nations (UN) Model of the Organisation for Economic Co-operation and Development (2011) as well as international practices, and makes it clear that the income obtained through such leasing forms is also international transport revenue; at the same time, according to industry practices, long-term lease, term lease, wet lease, light lease, dry lease in international transport. Statements are distinguished.

(2) clear the issues related to the application of shipping and air transport by light and dry rent.

The announcement makes it clear that the income from leasing business, such as leasing ships or aircraft in the form of light lease or dry lease, and the use, preservation or leasing of containers (including trailers and related equipment for transporting containers) for the transport of goods or commodities, does not belong to international transport income, but is in accordance with the provisions of the Sino-Singapore Tax Agreement. Article 8, paragraph 4, the above-mentioned leasing business income attached to international transport business shall be treated as international transport income.

At the same time, the announcement refers to the OECD Model Notes of the 2014 edition, which stipulates that if the provisions of the sea and air transport do not contain the provisions of Article 8, paragraph 4, of the Sino-Singapore Tax Agreement, the income derived from the above-mentioned leasing business subsidiary to the international transport business by the residents of the other party to the tax agreement shall be handled with reference to the above-mentioned provisions.

(3) define the criteria for judging "affiliated" businesses.

The announcement refers to the OECD Model Notes of the 2014 edition, standardizes the criteria for judging the "subsidiary" business, and makes it clear that the subsidiary business an enterprise engages in should be an activity that contributes less to the main business but is closely related to the main business and cannot be used as a separate business or source of income when it conducts international transport business.

Three. Questions related to entertainers and sportsmen terms

(1) clarify the scope of activities applicable to the terms of entertainers and athletes.

The announcement clearly states that performers'activities include performers' activities in various artistic forms such as stage, film and television, music, and other personal activities carried out as performers, such as film publicity activities carried out by performers, performers or athletes participating in advertising shooting, annual business meetings, corporate ribbon cutting, etc. Meeting speeches are not generally entertainers'activities. For example, foreign dignitaries who were invited to attend academic conferences and make speeches in China are not entertainers' activities. However, if they make speeches of a performing nature in commercial activities, they should not be conference speeches but entertainers'activities. In addition, it is clear that the terms of entertainers and sportsmen are applicable to E-sports.

(2) clarify the specific rules of application for the terms of entertainers and athletes.

The announcement specifies the specific rules applicable to the terms of the performer and the athlete, whether obtained directly or indirectly by the performer or the athlete, and where the proceeds from the performance activities are collected by others. For ease of understanding, examples are as follows:

Example 1: The members of the symphony orchestra do not get their income directly from each performance, but in the form of salary. According to Article 17, paragraph 1, of the Sino-Singapore Tax Agreement, one of the contracting parties to a performance has the right to levy taxes on the part of the members'salaries corresponding to the performance. In accordance with the provisions of Article 17, paragraph 2, of the Sino-Singapore Tax Agreement, one of the Contracting Parties to a symphony orchestra may levy taxes on the profits derived from the performance of the orchestra, whether or not it constitutes a permanent institution, in respect of part of the performance remuneration collected by the orchestra but not paid to the members of the orchestra.

Example 2: Where an entertainer or an athlete is employed by a "one-man company" of one of the Contracting Parties, if the "one-man company" of the other Contracting Party where the performance takes place is regarded as a taxpayer of its own non-resident enterprise under the domestic law of the other Contracting Party, the treatment is in accordance with that of the above-mentioned Symphony Orchestra and is taken against the individual and the company respectively. Part of the remuneration paid for the performance. If the other party considers the "one-man company" as a tax transparent entity in its domestic law and regards the performance remuneration it receives as being paid directly by the performers or athletes, the other party may, in accordance with the provisions of Article 17, paragraph 1, of the Sino-Singapore Tax Agreement, make all the income generated by the performers or athletes in respect of the performance activities. Taxation does not consider whether the remuneration is paid to the above individuals.

Example 3: In some tax avoidance arrangements, performance rewards are not paid to performers or athletes, but to others (including individuals, companies and others)