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These notes are issued for the information of taxpayers and their tax - page 36 / 68





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recognized by the competent authorities of both Sides are: in the case of the Mainland, China Development Bank, The Export-Import Bank of China and Agricultural Development Bank of China, and with effect from 11 September 2007 the National Council for Social Security Fund and China Export & Credit Insurance Corporation; and in the case of Hong Kong, the Hong Kong Monetary Authority.)


The term “interest”, as defined in paragraph 4 of Article 11, means

“income from debt-claims of every kind, whether or not it is secured by mortgage or whether or not it carries a right to participate in the debtor’s

profits” (i.e. interest is limited to income derived addition, “income from bonds, debentures and

from debt-claims).




including premiums and prizes attaching to such securities” are interest within the meaning of the speaking, the difference between the amount paid to

bonds, debentures or definition. Generally and received from an

issuing institution by a subscriber is the interest on debentures. charges for late payment will not be regarded as interest.



The provisions of paragraphs 1, 2 and 3 of Article 11 will not apply

if the beneficial owner of the interest, being the Government of One Side, a local authority thereof or a resident of that Side, carries on business in the Other Side in which the interest arises through a permanent establishment situated therein and the debt-claim in respect of which the interest is paid is

effectively connected with that permanent establishment. provisions of Article 7 (Business Profits) will apply.

In such a case, the


In a situation of the kind provided for in paragraph 7 of Article 11,

the provisions of Article 11 will have limited application. Such a situation is one where, by reason of a special relation between the payer and the beneficial owner of the interest or between both of them and some other person, the amount of interest paid exceeds, for whatever reasons, the amount which would have been agreed upon in the absence of such relation. In such a case, the provisions of Article 11 will apply only to the last-mentioned amount. The excess part of the payments will remain taxable according to the laws of each Side, but due regard will still be had to the other provisions of the

Comprehensive Arrangement.


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