See treaty text. The usual provision found in the OECD Model is used but with different time limits. Where a person considers that the actions of one or both of the States result or will result for him in taxation not in accordance with the provisions of this Treaty, he may present his case to the competent authority of the State of which he is resident or if not resident in either China or Russia, to the competent authority of which he is a national. This is so irrespective of the remedies provided by domestic law. The time limit for bringing a claim is three years from the date of first notification of the disputed tax liability. The two tax authorities will try to resolve the case by mutual agreement. They will also try to agree on definitions of terms not specifically defined in the Treaty and on general matters of interpretation of the Treaty. Thus this Article removes the need for the tax authorities in each State to go through diplomatic channels, they may simply contact each other directly. The mutual agreement procedure is commonly used to decide matters concerning income and expense allocations and transfer pricing.
See treaty text. The usual OECD provisions, that nationals of one of the States shall not be subjected in the other State to any taxation or any requirement connected with tax, which is other or more burdensome than the taxation and connected requirements to which nationals of the other State in the same circumstances are or may be subjected. There is an extension so that the principle of non-discrimination also applies to persons not residents of either the Netherlands or China. It applies to all taxes, not merely those listed in Article 2.
See treaty text. Any income not dealt with in the preceding Articles is taxable only in the State of residence but if it arises in the other State then the other State may tax it according to domestic law. Thus the default position regarding the two States is that the State of source has primary taxing rights. Income not arising in either State may only be taxed by the State of residence. These rules follow the UN Model Treaty. There is an express provision that income in respect of rights or property which is connected to a permanent establishment is taxed under Article 7 as the income of that permanent establishment. Income from immovable property remains taxable under Article 6 in the State in which the property is located.
See treaty text. Only profits actually arising from a permanent establishment may be taxed by the source State. If an enterprise has both a permanent establishment in a State and also derives other income, say, dividends or interest unconnected with the permanent establishment, then the dividends or interest may only be taxed in accordance with Articles 10 and 11 of the Treaty and not this Article. The profits to be attributed to the permanent establishment are the profits that would be expected if the permanent establishment was a distinct and separate enterprise. The starting point for the computation will be the branch accounts. Provided there is symmetry in the amounts recorded and in the methods of valuation applied in recording the transactions in the books of the different parts of the enterprise, the accounts will normally be an acceptable basis for attributing profit to the permanent establishment. However, any assumptions used in maintaining branch accounts, for instance, an assumption that the branch acts as principal in all cases, when in fact it only acts as intermediary would lead to a downwards adjustment in profit allocated to the branch. The usual provision providing for the deduction of expenses from the profits of the permanent establishment in accordance with the rules laid down by domestic law is present. Deductions for executive and general administrative expenses are permitted whether incurred in the State where the permanent establishment is situated or elsewhere. There are some particular rules which reflect the use of the UN Model Treaty: No deductions are permitted for certain payments by the Head Office or any of the enterprise's other offices, unless they represent reimbursement for actual expenses: • Royalties, fees and other similar payments in return for the use of patents; • Commission or fees for specific services performed or for management; • Fees for technical services; and • Interest on money lent to the permanent establishment (except in the case of a banking enterprise). On the other hand, no amounts charged by the permanent establishment to the Head Office, or any other office of the enterprise for these items are to be included in the taxable profits of the permanent establishment.
See treaty text. This Article allows the source State to levy withholding tax on dividends paid to a resident of the other Contracting State which may be below those charged under domestic law. In all cases, the recipient of the dividend must also be the beneficial owner. • Where the beneficial owner of the dividends is a company which owns at least 10% of the voting stock of the paying company, the maximum rate of withholding tax is 10%. • In all other cases, the maximum rate of withholding tax is 15%. Paragraph (3) defines the term “dividends” to include income from shares or other rights (which are not debt-claims) which participate in profits. Also included is income from other corporate rights which is treated as income from shares under the law of the State in which the distributing company is tax resident. Paragraph (4) provides that where, say, a Canadian company receives a dividend from a Chinese company, and that dividend is effectively connected with a permanent establishment which the Canadian company has in China then the dividend income will be deemed to be part of the income of the permanent establishment and the provisions of Article 7, dealing with the attribution of business profits will apply. Paragraph (5) contains the usual provision that a State does not have the right to levy any tax on a dividend unless either the dividend is paid by a resident company or received by a resident shareholder. Thus the fact that a dividend paid by a Chinese company may be sourced from profits earned by a permanent establishment which that Chinese company has in Canada, does not give Canada any taxing rights over that dividend, unless of course, it is received by Canadian shareholders. In Paragraph (6) Canada imposes a branch profits tax in order to compensate it for the fact that there is no withholding tax on the repatriation of profits by the branch. This is levied at a maximum rate of 10% on the earnings attributable to the permanent establishment after some deductions: • Business losses attributable to the permanent establishment from the current and previous years; • All taxes chargeable in Canada on the profits of the permanent establishment, other than this branch profits tax; • The profits reinvested in Canada (with special rules regarding investment in property in Canada); and • C$500,000 less the amount of any of the other permitted deductions (by the company itself or a related person from the same or similar business). Thus the minimum deduction is C$500,00...
See treaty text. Any income not dealt with in the preceding Articles is taxable only in the State of residence but if it arises in the other State then the other State may tax it according to domestic law. Thus the default position regarding the two States is that the State of source has primary taxing rights. This is normal in Canadian tax treaties and also in treaties based on the UN Model.
See treaty text. The usual provision founding the OECD Model is used but with different time limits. Where a person considers that the actions of one or both of the States result or will result for him in taxation not in accordance with the provisions of this Treaty, he may present his case to the competent authority of the State of which he is resident or if not resident in either Canada or China, to the competent authority of which he is a national. This is so irrespective of the remedies provided by domestic law. No time limit for bringing a claim is set. The two tax authorities will try to resolve the case by mutual agreement. They will also try to agree on definitions of terms not specifically defined in the Treaty and on general matters of interpretation of the Treaty. Thus this Article removes the need for the tax authorities in each State to go through diplomatic channels: They may simply contact each other directly. The mutual agreement procedure is commonly used to decide matters concerning income and expense allocations and transfer pricing. As both States are Member States of the EU, the provisions of the EU Arbitration Convention will also apply (see analysis of Article 9).
See treaty text. The scope of this Article is quite wide ranging in that it provides for exchange of such information as is “necessary for carrying out the provisions of this Agreement”, for the purposes of domestic law of the two States and also for the prevention of tax evasion. The exchange of information is not limited to that only concerning persons who are residents of one of the States. The Article includes the usual provisos relieving the States from any obligation to: • Carry out administrative measures at variance with the laws or administrative practices of either State; • Supply information which is not obtainable under the laws or in the normal course of the administration of either State; and • Supply information which would disclose any trade, business, industrial commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public). There is no requirement to supply any information that the requested State would not need for its own tax purposes. Neither is there any bar on declining a request solely due to secrecy concerns.
See treaty text. The provisions of this Convention shall not affect the fiscal privileges of diplomatic agents or consular officials under the general rules of international law.
See treaty text. This Article provides for the source State to levy withholding tax on dividends paid to a resident of the other Contracting State at a rate which may be lower than that charged under domestic law. The recipient of the dividend must also be the beneficial owner. Withholding tax under this Treaty: 10%. Paragraph (3) defines the term “dividends” to include income from shares or other rights (which are not debt-claims) which participate in profits. Also included is income from other corporate rights which is treated as income from shares under the law of the State in which the distributing company is tax resident. There is no inclusion of distributions of profits from joint ventures. Paragraph (4) provides that where, say, a Czech company receives a dividend from a Chinese company, and that dividend is effectively connected with a permanent establishment which the Czech company has in China, then the dividend income will be deemed to be part of the income of the permanent establishment and the provisions of Article 7 dealing with the attribution of business profits will apply. Paragraph (5) contains the usual provision that a State does not have the right to levy any tax on a dividend unless either the dividend is paid by a resident company or received by a resident shareholder. Thus the fact that a dividend paid by, say, a Czech company may be sourced from profits earned by a permanent establishment which that Czech company has in China, does not give China any taxing rights over that dividend, unless of course, it is received by Chinese shareholders. Domestic law China Per Article 4 of CITL which came into effect on January 1, 2008: 10% withholding tax. This replaces the previous exemption from withholding tax for dividends.
