Permanent Establishment in the China-HK Double Tax Agreement

Update time:2016-03-31  source:

In the Arrangement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income signed between the Central Government of the People’s Republic of China (“PRC”) and the Hong Kong Special Administrative Region Government, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.


The “permanent establishment” includes especially:
(1) a place of management;
(2) a branch;
(3) an office;
(4) a factory;
(5) a workshop;
(6) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.


The “permanent establishment” also encompasses:
(1) a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only if such site, project or activities last more than 6 months;


(2) the furnishing of services, including consultancy services, by an enterprise of One Side directly or through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) in the Other Side for a period or periods aggregating more than 6 months within any 12-month period.


The “permanent establishment” shall be deemed not to include:
(1) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;


(2) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;


(3) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;


(4) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;


(5) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;


(6) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (1) to (5) of this paragraph, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.


An enterprise of One Side shall not be deemed to have a permanent establishment in the Other Side only because it carries on business in that Other Side through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.


However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.


The fact that a company which is a resident of One Side controls or is controlled by a company which is a resident of the Other Side, or which carries on business in that Other Side (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.


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