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NOTICE OF THE STATE TAXATION ADMINISTRATION ON RELEVANT ISSUES CONCERNING THE IMPLEMENTATION OF THE INTEREST CLAUSES IN TAX AGREEMENTS

Modified date:

the State Taxation Administration

Notice of the State Taxation Administration on Relevant Issues concerning the Implementation of the Interest Clauses in Tax Agreements

Guo Shui Han [2006] No. 299

To the bureaus of state taxation and local taxation of all provinces, autonomous regions, municipalities directly under the Central
Government, and cities under separate state planning, and Yangzhou Institute of Taxation,

As prescribed in the interest clauses of the agreements concluded between China and other countries on the avoidance of double taxation
(hereinafter referred to as agreements), the interest obtained by the residents of the signatory country within China shall be obliged
to pay taxes in China, with the tax rate generally not higher than 10%, with only a few exceptions with tax rate lower or higher
than 10%. Not withstanding the aforesaid taxation provisions, some agreements prescribe that the interest obtained by the financial
institutions or other organizations of the central bank or government of one of the signatory countries shall be exempted from tax
in the other country in order to encourage the flow of funds between both countries, and some agreements further list the names of
tax-exemption banks or financial institutions in the interest clauses, protocols or exchange letters. For the purpose of guaranteeing
the correct implementation of the provisions in the agreement on levying tax on or exempting tax from interest income, notice on
relevant issues is made as follows:

Where the interest clauses in an agreement prescribe that the interest obtained from China by the financial institution or other organization
of the central bank or government of the signatory country shall be exempted from tax in China, the said bank (institution) may file
an applications to the competent taxation authority at the locality where the interest occurs for relevant agreement-based treatments
after signing a loan contract. The competent taxation authority where the interest occurs shall go through the procedures on the
exemption of interest income tax. When applying for exemption from the interest income tax, the taxpayer shall attach the proof document
issued by the competent taxation authority of the signatory country on its status as a bank or financial institution owned by the
government as well as a counterpart of the relevant loan contract.

II.

Where any relevant clause of an agreement, protocols, meeting minutes or exchange letter, etc. has specified the signatory country’s
banks and financial institutions that shall be exempted from interest income tax in China, each taxpayer shall go through the procedures
for exemption of interest income tax in accordance with Article 1 of the present Notice, and only needs to attach a counterpart
of the relevant contract.

III.

When receiving the request of a taxpayer for exemption of interest income tax under the agreement, the local competent department
of taxation where interest occurs is requested to correctly implement the agreement, and handle the procedures as soon as possible.
In case that it is hard to clarify whether the taxpayer may enjoy the abovementioned agreement-based treatments, and any difficulty
or objection arises in the implementation process due to the change of the name or there structuring, etc. of a listed bank during
the implementation process, the matter shall be reported to the State Taxation Administration level by level for confirmation.

IV.

The present Notice shall come into force as of the date of promulgation. The Notice of the State Taxation Administration on the Relevant
Issues concerning Exemption of Tax from Interest Income for Implementing Tax Agreements (Guo Shui Fa [1996] No. 029) shall be repealed
simultaneously.

Appendix: Table of Relevant Provisions in Interest Clauses of Tax Agreements

State Taxation Administration

March 1, 2006 AppendixTable of Relevant Provisions in Interest Clauses of Tax Agreementshtm/e04789.htmAppendix

The tax rates on the interest under the agreements with the following countries shall be lower or higher than 10%.	The loan interest of the financial institutions owned by the state (central) bank or government under the agreements with the following countries shall be exempted from tax.	The tax-exemption banks or financial institutions listed in the agreements or protocols with the following countries.	The agreements with the following countries have no provisions on the exemption of tax from interest.
Singapore: 7% (limited to banks or financial institutions) Kuwait: 5% Austria: 7% (limited to banks or financial institutions) Israel: 7% (limited to banks or financial institutions) Jamaica: 7.5% United Arab Emirates:7% Cuba: 7.5% Venezuela: 5%(limited to banks or financial institutions) Brazil: 15%	Japan, USA, France, UK, Belgium, Malaysia, Norway, Denmark, Finland, Canada, New Zealand, Italy, Czech, Poland, Bulgaria, Pakistan, Kuwait, Switzerland, Romania, Brazil, Mongolia, Hungary, Malta, Luxemburg, Korea, Russia, India, Mauritius, White Russia, Vietnam, Ukraine, Armenia, Jamaica, Lithuan, Latvia, Uzbekistan, Serbia, Estonia, Sudan, Egypt, Ireland, South Africa, the Philippines, Moldova, Croatia, United Arab Emirates, Papua New Guinea, Bengal, Macedonia, Seychelles, Cuba, Kazakhstan, Indonesia, Tunis, Kirghizia, Bahrein Islands, Sri Lanka, Albania, Georgia	Japan: Bank of Japan, Export & Import Bank of Japan, Overseas Economic Cooperation Fund, International Cooperation Agency France: Bank of France, French Bank for Foreign Trade, COFACE Germany: the German Federal Bank, the Credit Institute for Reconstruction, the German Finance Company for Investment in Developing Countries, Euler HermesKreditversicherungs-AG Malaysia: the Bank Negara Malaysia Singapore: the Monetary Authority of Singapore, the Government of Singapore Investment Corporation Pte. Ltd., the Head Office of the Development Bank of Singapore Finland: the Finnish Export Credit Ltd., the Finnish Fund for Industrial Development Cooperation Ltd. Canada: the Bank of Canada, the Canadian Export Development Corporation Sweden: the Bank of Sweden, the Swedish Export Credit Guarantee Board, the National Debt Office, the Swedish Fund for Industrial Cooperation with Developing Countries Thailand: the Bank of Thailand, the Exim Bank of Thailand, the Government Savings Bank, the Government Housing Bank The Netherlands: the Netherlands Bank (Central Bank), Netherlands Finance Company for Developing Countries, Netherlands Investment Bank for Developing Countries Pakistan: the State Bank of Pakistan Austria: the Austrian Nation Bank, the Austrian Control Bank Corporation Korea: the Bank of Korea, the Korea Development Bank, the Korea Export-Import Bank Vietnam: Vietcom Bank Turkey: Central Bank of the Republic of Turkey, Turkish Exim Bank, the Development Bank of Turkey Iceland: Central Bank of Iceland, the Industrial Loan Fund, the Industrial Development Fund Laos: the Bank of Lao, the Bank for Foreign Trade of Lao Portugal: General Deposits Bank, National Overseas Bank, Investment, Trade and Tourism of Portugal Barbados: Central Bank of Barbados Oman: the Central Bank of Oman, the State General Reserve Fund, the Omani Development Bank Venezuela: the Central Bank of Venezuela	Australia, Cyprus, Spain, Slovenia

Note:
1. For countries other than those listed in Column1 of the table, the tax rate on the interest under the agreements shall be 10%;
and
2. The tax arrangement between the Mainland of China and Hong Kong has no interest clauses. For the interest income obtained by residents
of Hong Kong from the Mainland of China, relevant provisions of the domestic law shall be observed. Article 11 of the tax arrangement
between the Mainland of China and Macao shall be an interest clause, and shall apply to the interest income obtained by residents
of Macao from the Mainland of China.

NOTICE OF THE STATE TAXATION ADMINISTRATION ON RELEVANT ISSUES CONCERNING THE IMPLEMENTATION OF THE INTEREST CLAUSES IN TAX AGREEMENTS

CONSTITUTION ACT, 1982 – page 22

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CONSTITUTION ACT, 1982 – page 7

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