Administrative Measures for Non-resident Taxpayers Claiming Tax Treaty Benefits

Announcement of the State Taxation Administration on Issuing the Administrative Measures for Non-resident Taxpayers Claiming Tax Treaty Benefits
State Taxation Administration Announcement No. 35 of 2019

In order to deepen reforms to streamline administration and delegate power, improve regulation, and upgrade services, further optimize the tax environment, and improve the convenience of non-resident taxpayers claiming tax treaty benefits, the State Taxation Administration has formulated Administrative Measures for Non-resident Taxpayers Claiming Tax Treaty Benefits, which is hereby promulgated and shall enter into force from January 1, 2020.

Annex: Information Report Form for Non-resident Taxpayers Claiming Treaty Benefits.xls

State Taxation Administration
October 14, 2019

Administrative Measures for Non-resident Taxpayers Claiming Tax Treaty Benefits

Chapter I   General Provisions

Article 1 For purposes of implementing treaties concluded between the government of the People’s Republic of China and other jurisdictions for the avoidance of double taxation (hereinafter referred to as “tax treaties”) and the tax provisions in the international transport agreements, regulating the administration of non-resident taxpayers on entitlement of tax treaty benefits, the Measures are formulated based on Enterprise Income Tax Law of the People’s Republic of China (hereinafter referred to as “Enterprise Income Tax Law”) and its Implementation Regulations, Individual Income Tax Law of the People’s Republic of China (hereinafter referred to as “Individual Income Tax Law”) and its Implementation Regulations 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 (hereinafter collectively referred to as “domestic tax laws and regulations”).

Article 2 The Measures shall be applicable to non-resident taxpayers who have tax obligations within China and have the intention to enjoy tax treaty benefits.

Article 3 Non-resident taxpayers enjoy tax treaty benefits by means of “self-discretion, filing for eligibility and retention of relevant materials for future review”. Non-resident taxpayers who, in their own judgements, meet the conditions to enjoy the tax treaty benefits can do so on filing tax returns by themselves or through the withholding tax returns filed by the withholding agents. They shall also collect and retain relevant materials for future review and be subject to follow-up administration by tax authorities.

Article 4 “Non-resident taxpayers” mentioned in the Measures refers to taxpayers who are considered as tax residents of the other Contracting Party in accordance with provisions of resident of relevant tax treaties.

“Treaty” mentioned in the Measures shall include tax treaties and international transport agreements, which include agreements relating to air transport, maritime transport, road transport, vehicle transport, and the agreements or exchange of letters relating to the mutual-exemption of tax on income derived from international transport, as well as other agreements on international transport concluded between the government of the People’s Republic of China and other countries or regions.

“Tax treaty benefits” mentioned in the Measures refers to reduction or exemption of enterprise income tax or individual income tax liabilities under domestic tax laws and regulations in accordance with tax treaties.

“Tax withholding agents” mentioned in the Measures refers to entities or individuals responsible for withholding taxes on income derived from China by the non-resident taxpayers in accordance with domestic tax laws and regulations, including legal withholding agents or withholding agents appointed under Enterprise Income Tax Law.

“Tax authority in charge” mentioned in the Measures refers to the tax authority which is responsible for tax collection and administration of non-resident taxpayers who have Chinese tax obligations in accordance with domestic tax laws and regulations.

Chapter II   Application of the Treaties and Tax Filing

Article 5 Where the non-resident taxpayers have the obligation to make a self-filing, they shall perform a self-discretion on their eligibility to enjoy the tax treaty benefits and have the intention to enjoy tax treaty benefits, and shall submit Information Report Form for Non-resident Taxpayers Claiming Treaty Benefits (see Annex) when filing tax returns, as well as collect and retain relevant materials for future review according to Article 7 of the Measures.

Article 6 In the situation of withholding at source or withholding by an appointed withholding agent, a non-resident taxpayer, considering that it meets the conditions to enjoy the tax treaty benefits, shall truthfully fill in Information Report Form for Non-resident Taxpayers Claiming Treaty Benefits, submit it to the withholding agent proactively, and collect and retain relevant materials for future review according to Article 7 of the Measures.

After receiving Information Report Form for Non-resident Taxpayers Claiming Treaty Benefits, if the withholding agents confirm all information submitted by the non-resident taxpayer are completed, they can withhold tax based on the domestic tax laws and regulations and tax treaty, and submit Information Report Form for Non-resident Taxpayers Claiming Treaty Benefits to the tax authority in charge as a supplementary form of withholding returns.

If a non-resident taxpayer fails to submit Information Report Form for Non-resident Taxpayers Claiming Treaty Benefits to the withholding agent proactively or the information is incomplete, the withholding agent shall withhold tax according to the domestic tax laws and regulations.

Article 7 “Relevant materials retained for future review” mentioned in the Measures shall include:

a) certificate of tax residency issued by the competent tax authority of the other Contracting Party to prove the residence status of non-resident taxpayer for the year or the previous year during which the payment is received; for enterprises enjoying the benefits under international transport articles of tax treaties or international transport agreements, certificate of tax residency can be replaced by other certificates that can prove the status specified in the treaty;

b) contracts, agreements, resolutions of board of directors or shareholders, payment vouchers and other ownership certificate documents related to the obtained income;

c) relevant materials to prove the status of “beneficial owner” should be retained in the case of enjoying the treaty benefits under the articles of dividends, interest and royalties;

d) other documents that can substantiate the entitlement to the tax treaty benefits in the judgement of non-resident taxpayers.

Article 8 Non-resident taxpayers take legal responsibility for the authenticity, accuracy and legitimacy of information reported in Information Report Form for Non-resident Taxpayers Claiming Treaty Benefits and relevant materials retained for future review.

Article 9 Where a non-resident taxpayer discovers that it shall not enjoy tax treaty benefits but has already enjoyed them, and which has resulted in underpayment or non-payment of tax, it shall proactively file the tax returns to its tax authority in charge and pay tax.

Article 10 Where a non-resident taxpayer eligible for tax treaty benefits has not enjoyed them, which has resulted in tax overpaid, it may apply for tax refund from the tax authority in charge within the period stipulated in Tax Collection and Administration Law by itself or through its withholding agent and, submit the documents stipulated in Article 7 of the Measures.

The tax authority in charge shall verify the application for refund of overpaid tax from the non-resident taxpayer or withholding agent within 30 days, and process the tax refund if the conditions of enjoying tax treaty benefits are met.

Article 11 Non-resident taxpayers who enjoy the treaty benefits shall retain relevant materials for future review in accordance with the period stipulated in Tax Collection and Administration Law and its Implementation Rules.

Chapter III   Follow-up Administration by the Tax Authorities

Article 12 Tax authorities at all levels shall conduct the follow-up administration on non-resident taxpayers enjoying tax treaty benefits, implement the tax treaties correctly, and prevent tax treaty abuse and tax evasion risks.

Article 13 During the follow-up administration, the tax authority in charge may require the non-resident taxpayer to provide relevant materials retained for future review within a prescribed period.

During the process of follow-up administration or verification on tax refund, if the tax authority in charge discovers that the materials stipulated in Article 7 of the Measures fail to substantiate that the non-resident taxpayer meets the conditions for enjoying the tax treaty benefits, or there is a suspicion of tax evasion by the non-resident taxpayer, the tax authority in charge may require the non-resident taxpayer or its withholding agent to provide other supplementary documents within a prescribed period and cooperate with the investigation.

Article 14 Where the relevant original materials stipulated in the Measures are in a foreign language, the Chinese translation of the materials as required by the tax authority in charge shall be provided and the non-resident taxpayers shall be responsible for the accuracy and integrity of the Chinese version.

The non-resident taxpayers or withholding agents are allowed to submit photocopy of the materials. The photocopy shall be annotated with the location of the original copy, sealed and signed by responsible persons. The original materials should be verified by the tax authorities as requested.

Article 15 Non-resident taxpayers and their withholding agents shall cooperate with the tax authorities to facilitate follow-up administration and investigation on non-resident taxpayers enjoying tax treaty benefits. Where a non-resident taxpayer and its withholding agent fails to provide the relevant materials as required by the tax authority, or evade, refuse, obstruct follow-up investigation by the tax authority, and the tax authority in charge cannot verify if the conditions for enjoying tax treaty benefits are met, the non-resident taxpayer shall be considered as not meeting the conditions for enjoying tax treaty benefits.

Article 16 Where a non-resident taxpayer who does not meet the conditions for enjoying tax treaty benefits had enjoyed the tax treaty benefits and resulted in underpayment or non-payment of tax, except for the condition that withholding agents fail to file withholding tax returns in accordance with Article 6 of the Measures, it shall be regarded as the non-resident taxpayer’s failure to file tax returns and pay tax in accordance with the provisions, and the tax authority in charge shall recover the tax and the non-resident taxpayer shall be held accountable for delayed tax payment in accordance with the law. In the case of withholding, the period of delayed tax payment shall be calculated from the date of filing withholding tax returns to enjoy the treaty benefits.

Article 17 Where a non-resident taxpayer fails to file withholding tax returns in accordance with Article 6 of the Measures or fails to provide relevant materials in accordance with Article 13 of the Measures, resulting in the situation that a non-resident taxpayer who does not meet the conditions for enjoying tax treaty benefits had enjoyed the tax treaty benefits and resulted in underpayment or non-payment of tax, the tax authority in charge shall hold the withholding agent accountable in accordance with the provisions and order the non-resident taxpayer to pay tax within a specified period of time.

Article 18 In accordance with Article 39 of Enterprise Income Tax Law, if a non-resident taxpayer fails to pay tax in accordance with the law, the tax authority in charge may recover the tax to be paid by the non-resident taxpayer from other income items of the non-resident taxpayer in China which shall be paid by the payer(s) of these income items.

Article 19 During the process of follow-up administration or verification on tax refund, if the tax authority in charge discovers that it cannot determine whether a non-resident taxpayer can enjoy the tax treaty benefits, it shall report to the tax authority at the upper level. Mutual Agreement Procedures or Exchange of Information shall be initiated pursuant to the relevant regulations if necessary.

Article 20 The period of time mentioned in Article 10 of the Measures does not include the time for non-resident taxpayers and their withholding agents to provide supplementary documents, requesting for instruction on specific case, Mutual Agreement Procedures or Exchange of Information. Where such period of time is to be extended due to the aforementioned causes, the tax authorities shall inform the tax refund applicants in writing about the relevant decisions and reasons.

Article 21 During the process of follow-up administration, if the tax authorities in charge discover that the article of Principal Purpose Test in the tax treaties or the general anti-avoidance rules in the domestic tax laws and regulations are applicable, the general anti-avoidance rules shall apply.

Article 22 The tax autho rities in charge shall establish credit files to record circumstances where non-resident taxpayers enjoy tax treaty benefits improperly, and conduct follow-up administrative procedures.

Chapter IV   Supplementary Provisions

Article 23 Where there are discrepancies between the Measures and the relevant tax treaties, the tax treaties shall prevail.

Article 24 Where non-resident taxpayers are eligible to enjoy the benefits of the Arrangement signed by the Chinese mainland with the Hong Kong Special Administrative Region and the Macao Special Administrative Region for the Avoidance of Double Taxation, it shall be implemented in accordance with this Announcement.

Article 25 The Measures shall enter into force from January 1, 2020. Administrative measures for Non-resident Taxpayers Claiming Tax Treaty Benefits (Promulgated by State Taxation Administration Announcement No. 60 of 2015 and amended by State Taxation Administration Announcement No. 31 of 2018) shall be repealed simultaneously.

Source：fgk.chinatax.gov.cn

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.