State Taxation Administration Announcement No.56 of 2013

 Note:

In accordance with the Announcement of the State Taxation Administration on Amending Some Tax Normative Documents (State Taxation Administration Announcement No.31 of 2018), the phrase “State Tax Bureau or Local Tax Bureau” in Article 4 is amended as “Tax Service”; and Article 12 is deleted.

In order to correctly apply tax treaties, avoid double taxation, resolve international tax disputes, safeguard the legitimate interests of Chinese residents (nationals) and the tax right and interests of the State, and standardize the mutual agreement procedure in relation to tax treaties with competent authorities of foreign countries (regions), the State Taxation Administration has formulated Implementation Measures for the Mutual Agreement Procedure of Tax Treaties, which is hereby promulgated and shall enter into force from November 1, 2013.

This announcement is hereby made.

Annex:

1.Application Form for Initiation of the Mutual Agreement Procedure of Tax Treaties

2.Application Form for Objection to the Mutual Agreement Procedure of Tax Treaties

State Taxation Administration

 September 24, 2013

Implementation Measures for Mutual Agreement Procedure of Tax Treaties

 Chapter I   General Provisions

Article 1 In order to correctly apply tax treaties, avoid double taxation, resolve international tax disputes, safeguard the legitimate interests of Chinese residents (nationals) and the tax right and interests of the State, and standardize the mutual agreement procedure of tax authorities, in accordance with agreements concluded by the government of the People’s Republic of China and the governments of other jurisdictions for the avoidance of double taxation (including the tax arrangements concluded between Chinese Mainland and the Hong Kong and Macao Special Administrative Regions, hereinafter collectively referred to as tax treaties), and Tax Collection and Administration Law of the People’s Republic of China (hereinafter referred to as Tax Collection and Administration Law) and its Implementation Rules, as well as other relevant laws and regulations, the Measures are formulated based on China’s actual condition of tax collection and administration.

Article 2 The mutual agreement procedure (hereinafter referred to as the MAP) mentioned in the Measures refers to the process of dealing with issues relating to the interpretation and application of tax treaties between the competent authority of China and the competent authority of the other Contracting Party through consultations in accordance with the relevant provisions of the tax treaties. The main purpose of the MAP is to ensure the correct and effective application of tax treaties, so as to effectively avoid double taxation and eliminate disputes between the Contracting Parties in the interpretation or application of tax treaties.

Article 3 MAP is limited to matters within the application scope of the tax treaty, but matters beyond the application scope of the tax treaty which may result in double taxation or have a significant impact on the interests of one Contracting Party or both Contracting Parties may be subject to the MAP as agreed by the competent authority of China and the competent authority of the other Contracting Party.

Article 4 The competent authority responsible for the work of MAP in China is the State Taxation Administration (hereinafter referred to as the STA); the authorized representative of the STA dealing with MAP matters is the Director-General or Deputy Director-General of the International Taxation Department of the STA, and such other personnel as designated by the STA. Tax services of provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the State plan (hereinafter referred to as provincial tax authorities) and tax authorities at all lower levels shall be responsible for assisting the STA in handling the MAP-related matters within their respective regions.

Article 5 Tax authorities at all levels shall keep confidential the information provided by the competent authority of the other Contracting Party, relevant taxpayers, withholding agents and agents in the MAP.

Article 6 The Contracting Party mentioned in the Measures refers to the country or region with which China has concluded tax treaties that have entered into force and are being implemented.

Chapter II   MAP Initiated by Chinese Residents (Nationals)

Article 7 If a Chinese resident (national) considers that the measures taken by the Contracting Party have resulted or will result in taxation that is not in compliance with the provisions of the tax treaty, he (she) may apply to the provincial tax authorities in accordance with the provisions of the Measures, requesting the STA to resolve the relevant issues through MAP with the competent authority of the Contracting Party .

Article 8 The term “Chinese residents” in the Measures refers to individuals, legal persons or other organizations that are liable to pay taxes in China in respect of their income sourced from both inside and outside China in accordance with Individual Income Tax Law of the People’s Republic of China and Enterprise Income Tax Law of the People’s Republic of China. The term “Chinese nationals” refers to individuals with Chinese nationality, as well as legal persons or other organizations established in accordance with Chinese laws.

Article 9 Chinese residents may apply for the initiation of MAP if one of the following circumstances occurs:

(1) Disputes over the determination of the resident status, especially when the relevant tax treaty stipulates that final confirmation through Mutual Agreement Procedure is required in the case of dual resident status;

(2) Disputes over the determination of permanent establishment, or the attribution of profits and deduction of expenses of permanent establishment;

(3) Disputes over tax collection, tax exemptions or applicable tax rates on income or property;

(4) Violation of the provisions on non-discrimination treatment in the tax treaty, which may result in or has resulted in tax discrimination;

(5) Disputes over the interpretation and application of other provisions of the tax treaty that cannot be resolved independently;

(6) Other circumstances that may lead or have led to double taxation between different tax jurisdictions.

Article 10 Chinese nationals may apply for the initiation of MAP when they believe that the other Contracting Party has violated the provisions of the non-discrimination treatment of the tax treaty, and is likely to or has resulted in tax discrimination against them.

Article 11 The applicants shall submit a written application form to provincial tax authorities for initiation of MAP within the time limit specified in the relevant tax treaties (Annex 1, both paper and electronic copies are required).

Article 12 Where an applicant applies for the initiation of MAP in accordance with Article 10 of the Measures and does not constitute a tax resident of China, the tax authority of the province in which the individual’s household registration is located or the place where the legal person or other organization is established shall be the tax authority that accepts the application.

Article 13 Tax authorities shall accept an application for MAP filed by an applicant in accordance with the provisions of this chapter if all of the following conditions are met:

(1) The applicant is a Chinese resident or a Chinese national who is entitled to file a request for initiating MAP in accordance with the provisions of Article 9 or 10 of the Measures;

(2) The filing time of the application has not exceeded the time limit stipulated in the tax treaty;

(3) The matters for which consultation is requested are the violations of the provisions of the tax treaty that have been or are likely to be committed by the Contracting Party;

(4) The facts and evidence provided by the applicant can confirm or cannot reasonably exclude the suspicion that the other Contracting Party’s behavior violates the provisions of the tax treaty;

(5) The matters for which the application for MAP is made do not fall into the circumstances stipulated in Article 18 of the Measures.

For applications that do not meet all the conditions set forth in the preceding paragraphs, the tax authorities may also decide to accept the application if they consider that it involves serious double taxation or jeopardizes the tax rights and interests of China, and that it is necessary to carry out MAP.

Article 14 The provincial tax authorities accepting the application shall, within fifteen working days, report the application to the STA and inform the applicant about the status, while also notifying the competent authority below the provincial level.

Article 15 Where an application does not meet the requirements for initiating MAP due to incomplete information submitted by the applicant, the provincial tax authority may request the applicant to supplement the documents. If the applicant still does not meet the requirements for initiating MAP after supplementing the documents, the provincial tax authority may refuse to accept the application and notify the applicant in written form.

If the applicant is not satisfied with the decision made by the provincial tax authority about not accepting the application, the applicant may, within fifteen working days from the date of receipt of the written notification, submit an application for objection to the provincial tax authority or the STA (Annex 2, both paper and electronic copies are required). Upon receipt of the application for objection, the provincial tax authority shall report the applicant's documents, together with the opinion of the provincial tax authority, to the STA within five working days.
    Article 16 Upon receipt of an application reported by a provincial tax authority, the STA shall, within twenty working days, deal with the application in accordance with the following circumstances respectively:

(1) If the application meets the requirements for initiating MAP and the STA decides to initiate MAP, the STA shall inform the provincial tax authority that has accepted the application about the situation. The provincial tax authority shall inform the applicant afterwards;

(2) If the application has exceeded the time limit stipulated in the tax treaty, or if the applicant’s application obviously lacks factual and legal basis, or where there are other circumstances that do not meet the requirements for MAP, MAP shall not be initiated and the provincial tax authority that has accepted the application shall be informed of the situation in written form. The provincial tax authority shall inform the applicant of the situation afterwards;

(3) If the application does not meet the requirements for initiating MAP due to incomplete information submitted by the applicant or other similar reasons, the STA shall request the applicant to supplement the documents or explain the situation through the provincial tax authority that has accepted the application. After the applicant supplements the documents or explains the situation, the application shall then be processed in accordance with the first two provisions.

Article 17 After the STA has initiated MAP, it may request the applicant, through the provincial tax authority that has accepted the application, to further supplement documents or explain the situation, and the applicant shall submit the documents within the prescribed time and ensure that they are true and comprehensive.

For urgent cases, the STA may contact the applicant directly.

Article 18 Where one of the following circumstances occurs, the STA may decide to terminate MAP and inform the provincial tax authority in written form, and the provincial tax authority shall inform the applicant:

(1) The applicant intentionally conceals important facts or makes false statements in the information submitted;

(2) The applicant refuses to provide the necessary information requested by the tax authority which is relevant to the case;

(3) For various reasons, both the applicant and the tax authority are unable to obtain the necessary evidence, resulting in the relevant facts or the applicant's position not being able to be proved and MAP not being able to continue;

(4) The competent authority of the other Contracting Party unilaterally refuses or terminates MAP;

(5) Any other circumstances that make it impossible to carry out MAP or prevent MAP from achieving the desired objective.

Article 19 Before the competent authorities of the two countries reach an agreement, the applicant may withdraw the application for MAP in written form. If the applicant withdraws the application or refuses to accept the results of the MAP agreed upon by the competent authorities of the Contracting Parties, the tax authorities shall no longer accept the application based on the same facts and reasons.

Article 20 With respect to the result of MAP, the STA shall inform the provincial tax authority that has accepted the application in written form, and the provincial tax authority shall inform the applicant.

Chapter III   MAP Initiated at the Request of the Competent Authority of the Other Contracting Party

Article 21 The scope of acceptance by the STA of the request for MAP of the competent authority of the other Contracting Party shall be determined by referring to the provisions of Articles 9 and 10 of the Measures.

Article 22 Under any of the following circumstances, the STA may refuse the request of the competent authority of the other Contracting Party to initiate MAP, or request the competent authority of the other Contracting Party to supplement documents:

(1) The matters requested for MAP do not fall in the scope of application of the tax treaty;

(2) The taxpayer’s application for MAP exceeds the time limit stipulated in the tax treaty;

(3) The request made by the competent authority of the other Contracting Party obviously lacks factual or legal basis;

(4) The facts and documents provided by the competent authority of the other Contracting Party are incomplete or unclear, which makes it impossible for the tax authority to conduct investigation or verification.

Notwithstanding one or more of the circumstances set forth in the preceding paragraph, if the STA considers that it is conducive to the avoidance of double taxation, the safeguarding of China's tax rights and interests, or the promotion of economic cooperation, it may still decide to accept the request of the Contracting Party to initiate MAP.

Article 23 Upon receipt of the letter from the other Contracting Party initiating MAP, the STA shall, after ascertaining the facts, decide whether to agree to initiate MAP, and reply to the other party in writing. Before making a decision on whether to initiate MAP, if the STA considers it necessary to seek the opinions of the relevant provincial tax authority, it may inform the provincial tax authority of the relevant situation and requirements, and the provincial tax authorities shall reply within the time required by the STA.

Article 24 At the time when the STA receives the request for initiating MAP from the competent authority of the other Contracting Party, if the decision of the relevant tax authority has not yet been made, the STA shall inform the relevant tax authorities of the situation that the other party has initiated MAP. MAP shall not affect the investigation and handling of the cases by the relevant tax authority, unless the STA deems it necessary to stop the investigation and handling.

Article 25 During the process of MAP, the implementation of the decisions that has come into effect shall not be suspended, unless the tax authority or the STA deems it necessary to stop the implementation.

Article 26 In the course of MAP, if the competent authority of the Contracting Party withdraws the request for MAP, or other circumstances make the MAP impossible to continue, the STA may terminate the MAP.

Article 27 After the STA decides to initiate MAP, it may, if necessary, issue in writing to the relevant provincial tax authority the basic information and main evidence of the case involved in the request for MAP made by the competent authority of the other Contracting Party, and request the relevant provincial tax authority to complete the verification within the prescribed time limit.

Article 28 The provincial tax authority that receive the assignment shall organize specially-assigned personnel to carry out the verification of the case and report the verification results to the STA in official documents within the time limit required by the STA. For complex or serious cases, if the verification cannot be completed within the time limit, an application for extension shall be submitted to the STA five working days before the deadline for verification. Time for reporting the verification results may be extended with the consent of the STA, but the time extension shall not exceed one month.

Article 29 If the provincial tax authority receiving the assignment is of the opinion that the verification of the case submitted by the competent authority of the other Contracting Party requires the other party to provide additional documents or to make further clarification on a certain matter, it shall make a request to the STA in a timely manner. If the STA agrees to make an additional request to the competent authority of the other Contracting Party, the time spent waiting for the reply from the other party shall not be counted as the time for verification. If the competent authority of the other Contracting Party changes its position in its reply or makes a new request, the verification time shall be recalculated.

Article 30 The verification results reported by the provincial tax authority shall include the investigation process of the case, views on the case involved, factual basis and legal basis, etc.

Chapter IV   Initiation of MAP Requested by the STA to Other Contracting Parties

Article 31 The STA may, on its own initiative, make a request for MAP to the competent authority of the other Contracting Party under the following circumstances:

(1) Mistakes are found in cases or matters agreed upon by MAP in the past, or new circumstances require alterations in the handling of the case;

(2) It is necessary to reach an agreement on the interpretation of an issue in the tax treaty and the related application procedures;

(3) The STA considers it necessary to conduct MAP with the competent authority of the other Contracting Party on other issues related to the application of the tax treaty.

Article 32 When applying a tax treaty, if tax authorities below the provincial level identify the circumstances stipulated in Article 31 of the Measures and considers it necessary to make a request for MAP to the competent authority of the other Contracting Party, it shall report it to the STA through higher-level tax authorities hierarchically.

Chapter V   Enforcement of the Agreement and Legal Responsibility

Article 33 Where a consensus is reached by the competent authorities of both Contracting Parties through MAP, it shall be handled as follows:

(1) If the Contracting Parties reach a consensus on the interpretation of an article or on the understanding of a matter, the STA shall publish the result in the form of an announcement;

(2) If the Contracting Parties reach a consensus on the handling of a specific case, which needs to be implemented by the tax authorities involved, the STA shall notify the relevant tax authorities of the result in writing. 

Article 34 Where a case agreed upon by the competent authorities of the Contracting Parties through MAP involves tax refund or other treatment by the tax authorities of China, the relevant tax authorities shall complete the implementation within three months after the date of receipt of the notice and report the situation to the STA.

Article 35 If taxpayers, withholding agents, agents, etc. falsify information or commit other illegal acts during the process of MAP, the tax authorities shall deal with the situation in accordance with Tax Collection and Administration Law and other relevant regulations.

Article 36 During the process of MAP, where one of the following circumstances occurs, in addition to issuing a reminder or urging additional verification or re-verification, the STA shall circulate a notice depending on the actual situation:

(1) The provincial tax authority fails to accept the request for MAP by a Chinese resident (national) in accordance with the prescribed procedures, or fail to report the request to the STA within the prescribed time limit;

(2) The provincial tax authority fails to report the verification report of MAP cases within the prescribed time limit;

(3) The verification report is incomplete in content or inaccurate in data, and fails to meet the needs of the STA for responding to other Contracting Parties;

(4) The provincial tax authority fails to implement the consensus reached through MAP within the prescribed time.

Chapter VI   Supplementary Provisions

Article 37 Where an applicant applies for MAP to the provincial tax authority in accordance with the provisions of Article 7 of the Measures, the documents filled out or submitted shall be in Chinese. If the relevant original documents are in a foreign language and the tax authority require the translation of the documents into Chinese in accordance with relevant regulations, the applicant shall translate the documents into Chinese in accordance with the requirements of the tax authority.

Article 38 Measures for the implementation of the Mutual Agreement Procedure on special tax adjustments shall be stipulated separately.

Article 39 The Measures shall be interpreted by the STA.

Article 40 The Measures shall enter into force from November 1, 2013. Circular of the STA on the Issuance of the Provisional Measures for Chinese Residents (Nationals) to Apply for the Initiation of Mutual Agreement Procedure on Taxation (Guo Shui Fa [2005] No.115) shall be repealed simultaneously.

The Measures shall apply to the MAP cases that have been accepted in accordance with Guo Shui Fa [2005] No.115 before the implementation of the Measures, but have not been concluded yet.

All information in this document is authentic in Chinese. English is provided for reference only. In case of any discrepancy, the Chinese version shall prevail.