Sep 2009, Issue 22
Clearer rules for royalties under double tax treaties
Right after the circular Guoshuifa (2009) No.124 issued in late August ("Circular 124"), the State Administration of Taxation ("SAT") issued, on 14 September 2009, another circular, entitled "Questions about Implementation of the Article of "Royalties" under double tax treaties ("DTAs") - Guoshuihan [2009] No. 507" ("Circular 507"), to provide guidance on handling the related tax matters.
This is not the first time the SAT issued similar guidance specifically addressing how to implement certain article(s) under DTAs. Back in February 2009, another circular was issued to address the implementation of the Article of "Dividends" under DTAs ("Circular 81") (please refer to our News Flash 2009 Issue 7 for further details.) with the focus on assessing the qualification of non-tax residents claiming the DTA benefits for dividends.
Circular 124 (please refer to our News Flash 2009 Issue 20 for further details.) is to provide the administrative procedures for DTA residents to claim beneficial treatments on China-sourced income under DTAs. With slight different focus than Circular 81 and Circular 124, Circular 507 aims to address the core factors for determining the scope of "Royalties", and the applicability of DTA benefit.
In this issue of News Flash, we will walk through the key features of Circular 507 and share our observations and suggestions.
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