The State Taxation Administration ("STA") has recently issued the Announcement on the Effectiveness and Implementation of the Protocol Amending the Agreement between the Government of the People's Republic of China and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the "Announcement").
The Announcement suggests major revisions in seven respects. The first is about titles and the foreword, as the expression "tax avoidance" is added. The second is about the scope of persons. Provisions concerning transparent entities from the tax point of view are added. The third is revising the tie-breaker rule for tax residency of dual-resident entities. The fourth is regulating the permanent establishments in relation to construction and to labor services. The fifth touches upon the business profit. It is provided that if an enterprise of a contracting state does business through a permanent establishment established in the other contracting state, the other contracting state may tax merely profits attributable to the permanent establishment. The sixth is making clear what the term "central bank" refers to, to clarify interest-related issues. And the last is adding an article stipulating the identification of eligibility for tax preference under the agreement. In addition, it is noted that the Protocol has taken effect from June 5, 2019 and applies in China to income obtained during the tax year beginning on January 1, 2020 and thereafter.