China-Syria DTA Takes Effect

November 24, 2011 Posted by China Briefing Reading Time: 2 minutes

Nov. 24 – The “Agreement between the Government of the People’s Republic of China and the Government of the Syrian Arab Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (China-Syria DTA)” – signed on October 31, 2010 – came into effect on September 1, 2011, according to the State Administration of Taxation.

The China-Syria DTA – which specifies the definition of a permanent establishment (PE), lists the taxation on different types of incomes, and clarifies the exchange of tax information – will apply to incomes obtained by both countries’ residents from January 1, 2012. The details of the agreement can be found below.

Permanent establishment
A PE includes:

A place of management
A branch
An office
A factory
A workshop
A mine, an oil or gas well, a quarry or any other place of extraction of natural resources
A building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than nine months

Taxation on various incomes

Income from immovable property: Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State.
Business profits: The profits of an enterprise of a Contracting State shall only be taxed in that State. However, if the enterprise carries on business in the other Contracting State through a PE, then the profit attributable to that PE may be taxed in the other State.
Income from shipping and air transport: Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that Contracting State.
Profits of associated enterprises: In cases where the profits an enterprise of a Contracting State should have received have not accrued because of its association to an enterprise in the other Contracting State, that part of profits may be counted as the income of the former enterprise and taxed accordingly.
Dividends, interest and royalties: Dividends, interest and royalties paid by a resident company of a Contracting State to a resident of the other Contracting State may be taxed in that other State but may also be taxed in the State where the payments arise. However, in the latter case, if the beneficial owner is a resident of the other Contracting State, the tax charged shall not exceed 10 percent of the gross amount of the dividends, interest and royalties.

The DTA also clarifies taxation on a series of other income types, including income from personal services, directors’ fees, the incomes of artists, sportsmen, teachers, researchers, students as well as trainees, pensions, and incomes from government services.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. Foreign investors in China who find they are pertinent candidates for DTA status and who wish to know what tax reductions may be applicable to them under the terms of their specific DTA may contact the firm at china@dezshira.com for further assistance.

This article is also available on Dezan Shira & Associates’ online business resource library. To view the article, and other regulatory updates, please click here.

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