The State Administration of Taxation ("SAT") has recently issued the Announcement on Several Issues Concerning the Implementation of Tax Treaties (the "Announcement"), with effect from April 1, 2018.
The Announcement further provides clarity on articles in respect of permanent establishments, sea transportation and air transportation, entertainers and athletes, and on issues regarding the application of tax treaties to partnerships. In particular, as to the application of tax treaties to partnerships, provisions are introduced for affairs in three respects, i.e. circumstances where partnerships are established within the territory of China, circumstances where partnerships are established outside the territory of China, and how to prove the tax resident identity of a partnership established under the laws of a foreign country (region). According to the Announcement, the partner in a partnership established under China's Partnership Law within the territory of China is a taxpayer for the income tax purpose in China. If the partner is a resident of the other contracting party to a tax treaty, such partner falls under the circumstances where the tax treaty shall apply, meaning that the taxable income obtained by this partner from China, which will be deemed by the other contracting party as the income obtained by its resident, may enjoy tax treaty treatment.