DTA China - DBA China - CDI Chine


DTA China - DBA China - CDI Chine

AGREEMENT BETWEEN THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA AND THE SWISS FEDERAL COUNCIL FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND CAPITAL 

The Government of the People’s Republic of China, and the Swiss Federal Council; Desiring to conclude an Agreement for the avoidance of double taxation with respect to taxes on income and capital; Have agreed as follows: 

Art. 1 Personal scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States. 

Art. 2 Taxes covered



1. This Agreement shall apply to taxes on income and on capital imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, as well as taxes on capital appreciation.

3. The existing taxes to which this Agreement shall apply are in particular:
    (a) in China:
        (i) the individual income tax;
        (ii) the income tax concerning joint ventures with Chinese and foreign investment;
        (iii) the income tax concerning foreign enterprises; and
        (iv) the local income tax;
    (hereinafter referred to as “Chinese tax” ) ;
    (b) in Switzerland: the federal, cantonal and communal taxes
        (i) on income (total income, earned income, income from capital, industrial and commercial profits, capital gains, and other items of income) ; and
        (ii) on capital (total property, movable and immovable property, business assets, paid-up capital and reserves, and other items of capital) ;
        (hereinafter referred to as “Swiss tax” )

Art. 3 General definitions

1. For the purposes of this Agreement, unless the context otherwise requires:
    (a) the term “China” means the People’s Republic of China, including all the territory and the territorial sea of the People’s Republic of China, in which the laws relating to Chinese tax apply, and all the area        beyond its territorial sea, and the sea bed and sub-soil thereof, over which the People’s Republic of China has jurisdiction in accordance with international law and in which the laws relating to Chinese tax            apply; 
    (b) the term “Switzerland” means the Swiss Confederation;
    (c) the terms “a Contracting State” and “the other Contracting State” mean China or Switzerland, as the context requires;
    (d) the term “tax” means Chinese tax or Swiss tax, as the context requires;
    (e) the term “person” includes an individual, a company and any other body of persons;
    (f) the term “company” means any body corporate or any entity which is treated as a body corporate for tax purposes;
    (g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a     resident of the other Contracting State;
    (h) the term “nationals” means all individuals possessing the nationality of a Contracting State and all legal persons, partnerships and associations deriving their status as such from the laws in force in a                Contracting State;
    (i) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise which has its place of head office (place of effective management) in a Contracting State, except when        the ship or aircraft is operated solely between places in the other Contracting State;
    (j) the term “competent authority” means: 
        (i) in the case of China, the State Tax Bureau or its authorised representative;
        (ii) in the case of Switzerland, the Director of the Federal Tax Administration or his authorised representative.

2. As regards the application of this Agreement by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that Contracting State concerning the taxes to which this Agreement applies. 

Art. 4 Resident

1. For the purposes of this Agreement, the term “resident of a Contracting State” means any person who, under the laws of that Contracting State, is liable to tax therein by reason of his domicile, residence, place of head office (place of effective management) or any other criterion of a similar nature.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
    (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both Contracting States, he shall be deemed     to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests) ;
    (b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident     of the Contracting State in which he has an habitual abode;
    (c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
    (d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of head office (place of effective management) is situated. 

Art. 5 Permanent establishment

1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:
    (a) a place of management;
    (b) a branch;
    (c) an office;
    (d) a factory;
    (e) a workshop; and
    (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3. The term “permanent establishment” likewise encompasses:
    (a) 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 six months;     (b) the furnishing of services, including consultancy services, by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, provided that such activities continue     for the same project or a connected project for a period or periods aggregating more than six months within any twelve-month period.

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:
    (a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
    (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
    (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
    (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;
    (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;
    (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall  activity of the fixed place of business resulting from        this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person–other than an agent of an independent status to whom the provisions of paragraph 6 apply–is acting in a Contracting State on behalf of an enterprise of the other Contracting State, and has and habitually exercises an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, unless his activities are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

6. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that Contracting State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.

7. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other Contracting State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. 


Art. 6 Income from immovable property

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other Contracting State.

2. The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services. 

Art. 7 Business profits


1. The profits of an enterprise of a Contracting State shall be taxable only in that Contracting State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other Contracting State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the Contracting State in which the permanent establishment is situated or elsewhere.

4. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the paragraphs 1 to 5, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article. 

Art. 8 Shipping, inland waterways transport and air transport

1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of head office (place of effective management) of the enterprise is situated.

2. If the place of head office (place of effective management) of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contacting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.

3. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

Art. 9  Associated enterprises

Where
    (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or
    (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,
and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Art. 10 Dividends

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other Contracting State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed 10 per cent of the gross amount of the dividends.

The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
3. The term “dividends” as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the Contracting State of which the company making the distribution is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other Contracting State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other Contracting State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other Contracting State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other Contracting State. 

Art. 11 Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State.

2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and derived by a resident of the other Contracting State with respect to debt-claims guaranteed, insured or indirectly financed by that other Contracting State, its political subdivisions or local authorities, or any financial institution wholly owned by that other Contracting State shall be exempt from tax in the first-mentioned Contracting State.

4. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

5. The provisions of paragraphs 1 to 3 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision, a local authority or a resident of that Contracting State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in Connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment of fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.  

Art. 12 Royalties

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State.

2. However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.

3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision, a local authority or a resident of that Contracting State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. 

Art. 13 Capital gains

1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other Contracting State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other Contracting State.

3. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the Contracting State in which the place of head office (place of effective management) of the enterprise is situated.

4. Gains from the alienation of the shares of a company the property of which consists directly or indirectly principally of immovable property situated in a Contracting State may be taxed in that Contracting State.

5. Gains from the alienation of any property other than that referred to in paragraphs 1 to 4, shall be taxable only in the Contracting State of which the alienator is a resident. 

Art. 14 Independent personal services

1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that Contracting State except in one of the following circumstances, when such income may also be taxed in the other Contracting State:
    (a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may        be taxed in that other Contracting State;
    (b) if his stay in the other Contracting State is for a period or periods exceeding in the aggregate 183 days in the calendar year concerned; in that case, only so much of the income as is derived from his                activities performed in that other Contracting State may be taxed in that other Contracting State.

2. The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. 

Art. 15 Dependent personal services

1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other Contracting State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other contracting State shall be taxable only in the first-mentioned Contracting State if:
    (a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and
    (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other Contracting State; and
    (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other Contracting State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, shall be taxable only in the Contracting State in which the place of head office (place of effective management) of the enterprise is situated.


Art. 16 Directors' fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other Contracting State.

Art. 17 Entertainer and athlete

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artist, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other Contracting State.

2. Where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply to remuneration or profits, salaries, wages and similar income derived from activities performed in a Contracting State by entertainers or athletes if their visit to that Contracting State is substantially supported from public or governmental funds of the other Contracting State, a political subdivision or a local authority thereof. In such case the provisions of Articles 7, 14 or 15, as the case may be, shall apply. 

Art. 18 Pensions

Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that Contracting State. 

Art. 19 Government service

1. (a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that Contracting State or subdivision        or authority 15 in the discharge of functions of a governmental nature shall be taxable only in that Contracting State. 
    (b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other Contracting State and the individual is a resident of that other Contracting State        who: 
        (i) is a national of that other Contracting State; or
        (ii) did not become a resident of that other Contracting State solely for the purpose of rendering the services.

2. (a) Any pension paid by, or out of funds to which contributions are made by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that            Contracting State or subdivision or authority in the discharge of functions of a governmental nature shall be taxable only in that Contracting State. 
    (b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that other Contracting State.

3. The provisions of Articles 15, 16, 17 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof. 

Art. 20 Professors and teachers

An individual who is, or immediately before visiting a Contracting State was, a resident of the other Contracting State and is present in the first-mentioned Contracting State for a period not exceeding two years for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or educational institution or scientific research institution accredited by the Government of the first-mentioned Contracting State shall be exempt from tax in the first-mentioned Contracting State in respect of remuneration for such teaching, lectures or research. 

Art. 21 Students

1. Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that Contracting State.

2. An individual who is or was immediately before visiting a Contracting State a resident of the other contracting State and who is present in the first-mentioned Contracting State for the purpose of study, research or training or of acquiring technical, professional or business experience, shall be exempt from tax in that Contracting State for a period or periods not exceeding in the aggregate twelve months on remuneration in respect of an employment in such Contracting State provided that such employment is directly related to his studies, research, training or acquiring of experience and that the remuneration from that employment does not exceed 18000 Swiss francs or the equivalent thereof in Chinese currency at the official rate of exchange. 

Art. 22 Capital

1. Capital represented by immovable property referred to in Article 6, owned by a resident of a Contracting State and situated in the other Contracting State, may be taxed in that other Contracting State.

2. Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or by movable property pertaining to a fixed base available to a resident of a contracting State in the other Contracting State for the purpose of performing independent personal services, may be taxed in that other Contracting State.

3. Capital represented by ships and aircraft operated in international traffic, and by movable property pertaining to the operation of such ships and aircraft, shall be taxable only in the Contracting State in which the place of head office (place of effective management) of the enterprise is situated.

4. All other elements of capital of a resident of a Contracting State shall be taxable only in that contracting State. 

Art. 23 Elimination of double taxation

1. In China, double taxation shall be eliminated as follows: 
    (a) Where a resident of China derives income from Switzerland, the amount of tax on that income payable in Switzerland, in accordance with the provisions of this Agreement, may be credited against the            Chinese tax imposed on that resident. The amount of credit, however, shall not exceed the amount of the Chinese tax on that income computed in accordance with the taxation laws and regulations of China.
    (b) Where the income derived from Switzerland is a dividend paid by a company which is a resident of Switzerland to a company which is a resident of China and which owns not less than 10 per cent of the            shares of the company paying the dividend, the credit shall take into account the tax payable in Switzerland by the company paying the dividend in respect of its income.

2. In Switzerland, double taxation shall be eliminated as follows: 
    (a) Where a resident of Switzerland derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in China, Switzerland shall, subject to the provisions of sub-               paragraph (b), exempt such income or capital from tax but may, in calculating tax on the remaining income or capital of that resident, apply the rate of tax which would have been applicable if the exempted     income or capital had not been so exempted.
    (b) Where a resident of Switzerland derives dividends, interest or royalties which, in accordance with the provisions of Articles 10, 11 and 12, may be taxed in China, Switzerland shall allow, upon request, a        relief to such resident. The relief may consist of:
        (i) a deduction from the tax on the income of that resident of an amount equal to the tax levied in China in accordance with the provisions of Articles 10, 11 and 12; such deduction shall not, however,                exceed that part of the Swiss tax, as computed before the deduction is given, which is appropriate to the income which may be taxed in China; or
        (ii) a lump sum deduction of the Swiss tax determined by standardised formula which have regard to the general principles of the relief referred to in sub–paragraph (i) above; or 18
        (iii) a deduction from such dividends, interest or royalties consisting at least of the tax levied in China on the gross amount of the dividends, interest or royalties. Switzerland shall determine the applicable            relief and regulate the procedure in accordance with the Swiss provisions relating to the carrying out of international conventions of the Swiss Confederation for the avoidance of double taxation.
    (c) Where a resident of Switzerland derives interest or royalties (including payments for the use, or the right to use, industrial, commercial or scientific equipment) which, in accordance with the Tax Law of        China providing for special incentive measures designed to promote the economic development of China, are exempt from Chinese tax or taxed at a rate lower than the rate provided for in paragraph 2 of            Articles 11 and 12, Switzerland shall allow, upon request, a credit to such resident, to the extent that he is entitled thereto, of an amount equal to 10 per cent of the gross amount of the interest or royalties        (including payments for the use, or the right to use, industrial, commercial or scientific equipment) . The provisions of sub-paragraph b) of this paragraph shall apply accordingly. 
    (d) A company which is a resident of Switzerland and which derives dividends from a company which is a resident of China shall be entitled for the purposes of Swiss tax with respect to such dividends, to the        same relief which would be granted to the company if the company paying the dividends were a resident of Switzerland. 

Art. 24 Non-discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other Contracting State in the same circumstances are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other Contracting State than the taxation levied on enterprises of that other contracting State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

3. Except where the provisions of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned Contracting State. Similarly, any debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident of the first-mentioned Contracting State.

4. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned Contracting State are or may be subjected.

5. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description. 

Art. 25 Mutual agreement procedure

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those Contracting States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of this Agreement.

2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with this Agreement.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of this Agreement. They may also consult together for the elimination of double taxation in cases not provided for in this Agreement. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of paragraphs 2 and 3. When it seems advisable for reaching agreement, representatives of the competent authorities of the Contracting States may meet together for an oral exchange of opinions.

Art. 26 Exchange of information

1. The competent authorities of the Contracting States shall exchange such information (being information which is at their disposal under their respective taxation laws in the normal course of administration) as is necessary for carrying out the provisions of this Agreement in relation to the taxes which are the subject of this Agreement. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of the taxes which are the subject of this Agreement. No information as aforesaid shall be exchanged which would disclose any trade, business, industrial or professional secret or trade process.

2. In no case shall the provisions of this Article be construed as imposing upon either of the Contracting States the obligation to carry out administrative measures at variance with the regulations and practice of either Contracting State or which would be contrary to its sovereignty, security or public policy or to supply particulars which are not procurable under its own legislation or that of the Contracting State making application.  


Art. 27 Diplomatic agent and consular officers

1. Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

2. This Agreement shall not apply to international organisations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State, being present in a Contracting State and not treated in either Contracting State as residents in respect of taxes on income or on capital. 


Art. 28 Entry into force

This Agreement shall enter into force on the thirtieth day after the date on which diplomatic notes indicating the completion of internal legal procedures necessary in each country for the entry into force of this Agreement have been exchanged. This Agreement shall have effect for any taxable year beginning on or after the first day of January of 1990. 

Art. 29 Termination

This Agreement shall continue in effect indefinitely but either of the Contracting State may, on or before the thirtieth day of June in any calendar year beginning from the date of its entry into force, give written notice of termination to the other Contracting State through the diplomatic channel. In such event this Agreement shall cease to have effect for any taxable year beginning on or after the first day of January in the calendar years next following that in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have signed this Agreement.

DONE in duplicate at Beijing, this 6th day of July, 1990, in the Chinese, French and English languages, all texts being equally authentic. In case there is any divergency of interpretation between the French and the Chinese texts, the English text shall prevail. 

Protocol

The Government of the People’s Republic of China and the Swiss Federal Council have agreed at the signing of the Agreement between the two States for the avoidance of double taxation with respect to taxes on income and on capital upon the following provisions which shall form an integral part of the said Agreement:
1. Notwithstanding the provision of sub-paragraph (b) of paragraph 3 of Article 5 it is understood that an enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State if it furnishes in that other Contracting State consultancy services in connection with the sale or lease of machinery or equipment through employees or other personnel; such consultancy services include instructions for the installation of the machinery or equipment and consultations on technical materials, training of personnel as well as providing design services related to the installation and use of the machinery or equipment.

2. With respect to paragraphs 1 and 2 of Article 7, where an enterprise of a Contracting State, having a permanent establishment in the other Contracting State, sells goods or merchandise or carries on any other business activity in the other Contracting State, the profits of that permanent establishment shall be determined only on the basis of that part of the receipts which is attributable to the actual activity of the permanent establishment for such sales or business activity.

3. With respect to paragraph 3 of Article 10 it is understood that the term “dividends” also includes remittances or deemed remittances of profits derived by a resident of Switzerland from a Joint Venture established in China.

4. With respect to Article 12 it is understood that for the application of the percentage rate referred to in paragraph 2 of Article 12, 60 per cent of the gross amount of the royalties paid for the use of, or the right to use, any industrial, commercial or scientific equipment, shall be taken as the taxable base.

5. With respect to Article 18 it is understood that the provisions of that Article shall also apply to an annuity paid to a resident of a Contracting State. The term “annuity” means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

6. The provisions of this Agreement shall not be construed as restricting in any manner any tax benefits which are or may hereafter be accorded in a Contracting State by the laws of that Contracting State or by any agreement between the Governments of the Contracting States.

DONE in duplicate at Beijing, this 6th day of July, 1990, in the Chinese, French and English languages, all texts being equally authentic. In case there is any divergency of interpretation between the French and the Chinese texts, the English text shall prevail. 

Exchange of notes

His Excellency

Mr. JIN Xin General Director of the STATE TAX ADMINISTRATION

BEIJING 6th July, 1990

Excellency,

Referring to the Agreement between the Government of the People’s Republic of China and the Swiss Federal Council on the avoidance of double taxation with respect to taxes on income and on capital which was signed today, I can confirm the following:

According to the laws and practice in force in Switzerland

1. The Government of the People’s Republic of China is exempt from Swiss tax on interest on deposits opened 

    (a) with a Swiss bank if these deposits are held exclusively for the purpose of the diplomatic and consular missions of the People’s Republic of China in Switzerland and if the People’s Republic of China grants        reciprocal treatment to interest on deposits held by the Swiss Government in China for the same purpose, or

    (b) With the BANK FOR INTERNATIONAL SETTLEMENTS in Basle, Switzerland.

2. The CENTRAL BANK OF CHINA is exempt from Swiss tax on interest on deposits held on its own account

    (a) with a Swiss bank if such deposits originate from money market transactions carried out by the CENTRAL BANK OF CHINA, or 

    (b) with the BANK FOR INTERNATIONAL SETTLEMENTS in Basle, Switzerland.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration. 


Varia


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