The Double Taxation Relief (Taxes on Income) (China) Order 1996

ARTICLE 5

(1) Paragraphs (3), (4) and (5) of Article 23 of the Agreement shall be deleted and replaced by the following:

“(3) Subject to paragraph (4) of this Article, for the purpose of paragraph (2) of this Article, the term “Chinese tax payable” shall be deemed to include any amount which would have been payable as Chinese tax for any year but for an exemption from, or reduction of, tax granted for that year or any part thereof under any of the following provisions of Chinese law:

(a) Articles 7, 8, 9, 10, 19(1), 19(3) and 19(4) of the Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises and Articles 73, 75 and 81 of the Detailed Rules and Regulations for the Implementation of the Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises where the exemption from or reduction of tax so granted is for the purpose of promoting new industrial, commercial, scientific, educational or other development in China, so far as they were in force on, and have not been modified since, the date of signature of the Protocol amending this Agreement signed at Beijing on 2nd September 1996, or have been modified only in minor respects so as not to affect their general character; or

(b) any other provision which may subsequently be made granting an exemption from or reduction of tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.

(4) Relief from United Kingdom tax by virtue of paragraph (3) shall not be given:

(a) where income or profits in respect of which tax would have been payable but for the exemption or reduction of tax granted under the provisions referred to in that paragraph arise or accrue more than ten years after the date on which the Protocol to this Agreement referred to in that paragraph enters into force;

(b) in respect of income or profits from any source if that income or those profits arise in a period beginning more than ten years, or more than thirteen years if the income or profits arise from an infrastructure project, agricultural, forestry or animal husbandry projects or projects in remote underdeveloped areas, after the exemption or reduction referred to in that paragraph was first granted in respect of that source whether that period began before or after the entry into force of that Protocol.

(5) The period referred to in paragraph (4)(a) may be extended by agreement between the competent authorities of the Contracting States.

(6) For the purposes of paragraphs (1) and (2) of this Article profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Agreement shall be deemed to arise from sources in that other Contracting State.

(7) Where profits on which an enterprise of a Contracting State has been charged to tax in that State are also included in the profits of an enterprise of the other State and the profits so included are profits which would have accrued to that enterprise of the other State if the conditions made between the enterprises had been those which would have been made between independent enterprises dealing at arm’s length, the amount included in the profits of both enterprises shall be treated for the purposes of this Article as income from a source in the other State of the enterprise of the first-mentioned State and relief shall be given accordingly under the provisions of paragraph (1) or paragraph (2) of this Article.”.

(2) Where Article 23(3) of the Agreement as it was before its amendment by this Protocol would have afforded greater relief from tax than is due under that provision as so amended, it shall continue to have effect in relation to dividends paid to a company which is a resident of the United Kingdom by a company which is a resident of China out of income or profits arising during any period before this Protocol entered into force.