Australia Tax Treaties with China

Email: syd4ww@evershinecpa.com
Australia CA Lily Yan, speak both English and Chinese
2/172-176 Rowe St Eastwood, NSW 2122, Australia

CN-Q-10:
中國母公司在澳洲，是否可以依DTA申請沒有常設機構(PE)下零稅率?
China Parent Company, can apply for zero tax rate without PE under DTA in Australia?

CN-A-10:
Yes.
China has DTA with Australia, and if China Legal Resident company is without PE (Permanent Establishment), it will be redeemed as “non-Australia Domestic Sourced Income”.
That means Australia will levy zero-tax.
However, China Legal Resident company still needs to send zero-tax application to Australia Tax Bureau for being approved.

CN-Q-20:
中國母公司在澳洲設立了澳洲子公司，中國母公司替子公司服務收入能否申請零稅率?
When China Parent Company as an Investor, set up an Australian subsidiary, and provide services from China to Australia Subsidiary, can apply for zero tax rate without PE under DTA in Australia?

CN-A-20:
According to DTA Article 5 item 7, an Australian subsidiary will not be treated as PE of China Parent company as an investor because it is a separate legal entity.
That means if an Australian Subsidiary pays a service fee to China Parent Company through service contract signed between the subsidiary and China Parent company as an investor, China Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by Australia Tax Bureau.

CN-Q-30:
澳洲依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for Australia to apply for zero tax rate under DTA without PE?

CN-A-30:
In Australia, specific exemption provisions apply.
All requests for an exemption must be submitted in writing stating the reasons why you should be granted an exemption.

Send the requests for exemption to:
Foreign resident withholding – exemptions
Australian Taxation Office
GPO Box 9977
Sydney NSW 2001
AUSTRALIA

Below includes the documents required:
*A No PE declaration letter
*Certificate of residence (COR) issued by the competent authority of the beneficial owner’s country of residence.
Refer to the below link for more information:
https://www.ato.gov.au/Forms/PAYG-foreign-resident-withholding-variation/?page=2#Exemption_from_foreign_resident_withholding

CN-Q-40:
中國母公司有澳洲來源所得的各項所得扣繳稅率為何?
When China Resident company has Australian domestic sourced income, what are the withholding tax rates for various incomes in Australia?

CN-A-40:
China has DTA with Australia, and if you are with PE (Permanent Establishment) in Australia, your income will be considered as Australia domestic sourced income.
As for levying Tax Rate, please be aware:
if Australia Tax rate > DTA Rate, adopt DTA Rate; if Australia Tax rate < DTA Rate, adopt Australia Rate.

If DTA applied, the DTA rates between China and Australia are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.

CN-Q-50
當中國稅務居民有澳洲來源所得，依DTA優惠稅率申請的程序為何?
When China Tax Resident has Australia domestic sourced income, what is Australia’s application procedure based on the DTA preferential tax rate?

CN-A-50:
Below includes the documents required:
*Certificate of residence (COR) issued by the competent authority of the beneficial owner’s country of residence.
Refer to the below link for more information:
https://www.ato.gov.au/Forms/PAYG-foreign-resident-withholding-variation/?page=2#Exemption_from_foreign_resident_withholding

Summary of TAX TREATY between Australia and CHINA

The People’s Republic of China and The Government of Australia concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 17 November 1988 and take effects from 28 December 1990.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:
*A place of management
*A branch
*An office
*A factory
*A workshop
*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 6 months.

Withholding Tax

*Article 7 of DTA between Australia and China explained, Australia may not tax payments on business profits rendered by China corporations unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, dividends paid by Australia Resident enterprise to China Resident enterprise, the tax charged shall not exceed 15%.

*Article 11 states that where the beneficial owner of the interest is a non-resident, shall be taxed in the territory in which it arises at the rate not exceeding 10% of the gross interest.

*Article 12 explained royalties means payment for the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trademark or any industrial, commercial, or scientific equipment, or supply of scientific, technical, industrial, or commercial knowledge or information.

*Technical services are covered by the business profits in Article 7. Australian corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE. However, payments for supply of assistance fall within the definition of “royalties” where the assistance is ancillary to enabling the application under royalty definition, such payments may be taxed in Australia at 10%.

*A professional service or other activities provided by individuals of an independent character was explained in Article 14. Australian corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Australia for 183 days or more. An independent profession includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory. It shall be credited against the tax levied in the first-mentioned territory on that resident. However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.

Exchange of Information

Article 25 states that the competent authorities of the territories shall exchange such information relevant to the provision of this Agreement.

Please be aware of below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

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E-mail: syd4ww@evershinecpa.com
Australia CA Lily Yan, speak both English and Chinese
2/172-176 Rowe St Eastwood, NSW 2122, Australia
or
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