China - Czech Republic Tax Treaty

AGREEMENT BETWEEN

THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE CZECH REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

The Government of the People’s Republic of China and the Government of the Czech Republic,

Desiring to conclude an Agreement for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income,

Have agreed as follows:

Article 1 PERSONS COVERED

This Agreement shall apply to persons who are residents of one or
both of the Contracting States.

Article 2 TAXES COVERED

    This Agreement shall apply to taxes on income imposed on behalf of a

Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

   There  shall  be  regarded  as  taxes  on  income  all  taxes

imposed on total income or on elements of income, including taxes on gains from the alienation of
movable or immovable property.

   The existing taxes to which the Agreement shall apply are in

particular:

a) in China:

(i) the individual income tax;

(ii) the enterprise income tax;

(hereinafter referred to as “the Chinese tax”);

b) in the Czech Republic:

(i) the tax on income of individuals;

(ii) the tax on income of legal persons; (hereinafter referred to as “the Czech tax”).

    The  Agreement shall apply also  to  any identical  or substantially

similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall
notify each other of any significant changes that have been made in their taxation laws.

Article 3 GENERAL DEFINITIONS

   For the purposes of this Agreement, unless the context otherwise

requires:

a) the term “China” means the People’s Republic of China; when used in
a geographical sense, it means all the territory of the People’s Republic of China, in which the Chinese laws relating to taxation apply, including its territorial sea, and
any area beyond its territorial sea, within which the People's Republic of China has sovereign rights for the purpose of exploring and exploiting the resources of the sea-bed and
its subsoil and superjacent water in accordance with international law and its domestic law;

b) the term “the Czech Republic” means the territory of the Czech
Republic over which, under Czech legislation and in accordance with international law, the sovereign rights of the Czech Republic are exercised;

c) the terms “a Contracting State” and “the other Contracting
State” mean the Czech Republic or China, as the context requires;

d) the term “person” includes an individual, a company and any other body of persons;

e) the term “company” means any body corporate or any entity that is
treated as a body corporate for tax purposes;

f) the term “enterprise” applies to the carrying on of any business;

g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

h) the term “national” means:

(i) any individual possessing the nationality of a Contracting State; and

(ii) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;

i) the term “business” includes the performance of professional
services and of other activities of an independent character;

j) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise that has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

k) the term “competent authority” means:

(i) in the case of China, the State Administration of Taxation or
its authorised representative;

(ii) in the case of the Czech Republic, the Minister of Finance or
his authorised representative.

    As regards the application of the Agreement at any time by a

Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the
taxes to which the Agreement applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4 RESIDENT

   For the purposes of this Agreement, the term “resident of a

Contracting State” means any person who, under the laws of that State, is liable to tax therein
by reason of his domicile,

residence, place of incorporation, place of effective management or
any other criterion of a similar nature, and also includes that State and any political
subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State.

    Where  by reason  of the  provisions  of paragraph  1  an

individual is a resident of both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);

b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be
deemed to be a resident only of the State in which he has an habitual abode;

c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;

d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

     Where by reason of the provisions of paragraph 1 a person other

than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

Article 5 PERMANENT ESTABLISHMENT

   For the purposes of this Agreement, the term “permanent

establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

   The term “permanent establishment” includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop, and

f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

   The term “permanent establishment” likewise encompasses:

a) a building site, or a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or
activities continue for a period of more than twelve months;

b) the furnishing of services, including consultancy services, by
an enterprise of a Contracting State or through employees or other personnel engaged by the enterprise for such purpose, but only where activities of that nature continue in
the territory of the other Contracting State for a period or periods exceeding in the aggregate nine months in any twelve month period commencing or ending in the fiscal year concerned.

    Notwithstanding   the   preceding   provisions   of   this

Article, the term “permanent establishment” shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

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

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

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

e) 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;

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

     Notwithstanding the provisions of paragraphs 1 and 2, where a

person — other than an agent of an independent status to whom paragraph 6 applies — is
acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State
an authority to conclude contracts in the name of the enterprise, that enterprise shall be
deemed to have a permanent establishment in that State in respect of any activities which that
person undertakes for the enterprise, unless the activities of such person are limited to those
mentioned in paragraph 4 which, if exercised through a fixed place of business, would not
make this fixed place of business a permanent establishment under the provisions of that paragraph.

An enterprise of a Contracting State shall not be deemed to have a

permanent establishment in the other Contracting State merely because it carries on business in that other State 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.

  The fact that a company which is a resident of a Contracting State

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

Article 6

INCOME FROM IMMOVABLE PROPERTY

    Income derived by a resident of a Contracting State from immovable

property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

   The term “immovable property” shall have the meaning which it has

under the law of the Contracting State in which the property in question is situated. The
term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships and aircraft shall not be regarded as immovable property.

    The provisions of paragraph 1 shall apply to income derived from the

direct use, letting, or use in any other form of immovable property.

    The  provisions of paragraphs 1  and  3 shall also  apply to  the

income from immovable property of an enterprise.

Article 7 BUSINESS PROFITS

  The profits of an enterprise of a Contracting State shall be taxable

only in that State unless the enterprise carries on business in the other Contracting
State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

 Subject to the provisions of paragraph 3, where an enterprise of a

Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

   In  determining  the  profits  of  a  permanent  establishment,

there shall be allowed as deductions expenses which are incurred for the purposes of the
permanent establishment, including executive and general administrative expenses so incurred,
whether in the State in which the permanent establishment is situated or elsewhere.

    Insofar  as  it  has  been  customary in  a  Contracting  State  to

determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be
customary; the method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

  No profits shall be attributed to a permanent establishment by reason

of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

   For the purposes of the preceding paragraphs, the profits to be

attributed to the permanent establishment shall be determined by the same method year by year unless
there is good and sufficient reason to the contrary.

   Where profits include items of income which are dealt with separately

in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

    Profits from the operation of ships or aircraft in international

traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

      If the place of effective management of a shipping enterprise is

aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.

    The provisions of paragraph 1 shall also apply to profits from the

participation in a pool, a joint business or an international operating agency.

Article 9 ASSOCIATED ENTERPRISES

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a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other
Contracting State,

and in either case conditions are made or imposed between the two
enterprises in their commercial or financial relations which differ from those which would
be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

      Where a Contracting State includes in the profits of an enterprise

of that State — and taxes accordingly — profits on which an enterprise of the other
Contracting State has been charged to tax in that other State and the profits so included are
profits which would have accrued to the enterprise of the first-mentioned State if the
conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

    The provisions of paragraph 2 shall not apply in the case of fraud,

gross negligence or wilful default.

Article 10 DIVIDENDS

 Dividends paid by a company which is a resident of a Contracting State

to a resident of the other Contracting State may be taxed in that other State.

 However, such dividends may also be taxed in the Contracting State of

which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends;

b) 10 per cent of the gross amount of the dividends in all other cases.

The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

     The term “dividends” as used in this Article means income from

shares or other rights, not being debt-claims, participating in profits, as well as other income which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

     The  provisions  of  paragraphs  1  and  2  shall  not  apply  if

the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a
resident through a permanent establishment situated therein and the holding in respect of which
the dividends are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

     Where a company which is a resident of a Contracting State derives

profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other State, nor subject the
company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11 INTEREST

   Interest arising in a Contracting State and paid to a resident of the

other Contracting State may be taxed in that other State.

   However, such interest may also be taxed in the Contracting State in

which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 7.5 per cent of the gross amount of the interest. The competent authorities of the Contracting States
shall by mutual agreement settle the mode of application of this limitation.

   Notwithstanding the provisions of paragraph 2, interest arising in a

Contracting State and derived by the Government of the other Contracting State, a political
subdivision or a local authority thereof, the Central Bank of that other Contracting State
or any agency of that Government, or by any other resident of that other Contracting State with respect to debt-claims of that resident which are financed, guaranteed or insured by the
Government of that other Contracting State, a political subdivision or a local authority thereof, the Central Bank of that

other Contracting State or any agency of that Government, shall be exempt from tax in the first- mentioned Contracting State.

       For  the  purpose  of  paragraph  3,  it  is  understood  that

the following institutions are agencies of the Government:

a) in the case of China:

(i) the China Development Bank;

(ii) the Agricultural Development Bank of China;

(iii) the Export-Import Bank of China;

(iv) the China Export & Credit Insurance Corporation; and

(v) any other institutions as may be agreed upon between the competent authorities of the Contracting States;

b) in the case of the Czech Republic:

(i) the Czech Export Bank (CEB);

(ii) the Export Guarantee and Insurance Company (EGAP); and

(iii) any other institutions as may be agreed upon between the competent authorities of the Contracting States.

    The term “interest” as used in this Article means income from

debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right
to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

    The provisions of paragraphs 1, 2  and  3  shall not apply if the

beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State 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 such permanent establishment. In such case the provisions of Article 7 shall apply.

     Interest shall be deemed to arise in a Contracting State when the

payer is a resident of that State. Where, however, the person paying the interest, whether
he is a resident of a Contracting State or not, has in a Contracting State a permanent
establishment in connection with which the indebtedness on which the interest is paid was
incurred, and such interest is borne by such permanent establishment, then such interest shall be deemed to arise in the State in which the permanent establishment is situated.

    Where, by reason of a special relationship between the payer and the

beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess
part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 12 ROYALTIES

     Royalties arising in a Contracting State and paid to a resident of

the other Contracting State may be taxed in that other State.

     However, such royalties may also be taxed in the Contracting State

in which they arise and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

     The term “royalties” as used in this Article means payments of any

kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, and films or tapes for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or any industrial, commercial or scientific equipment, or for information concerning
industrial, commercial or scientific experience.

     The  provisions  of  paragraphs  1  and  2  shall  not  apply  if

the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in
the other Contracting State in which the royalties arise through a permanent establishment
situated therein and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

    Royalties shall be deemed to arise in a Contracting State when the

payer is a resident of that State. Where, however, the person paying the royalties, whether
he is a resident of a Contracting State or not, has in a Contracting State a permanent
establishment in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment, then such royalties shall be deemed to arise in the State in which the permanent establishment is situated.

    Where, by reason of a special relationship between the payer and the

beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 13 CAPITAL GAINS

      Gains  derived  by a  resident  of a  Contracting State  from the

alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

      Gains from the alienation of movable property forming part of the

business property of a permanent establishment which an enterprise of a Contracting State
has in the other

Contracting State, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise), may be taxed in that other State.

      Gains  from  the  alienation  of  property  forming  part  of  the

business property of an enterprise and consisting of ships or aircraft operated by that enterprise in international traffic or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

      Gains derived by a resident of a Contracting State from the

alienation of shares or other interests in a company which is a resident of the other Contracting State may be taxed in that other State.

     Gains from the alienation of any property, other than that referred

to in paragraphs 1, 2, 3 and 4, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14

INCOME FROM EMPLOYMENT

     Subject to  the  provisions of Articles  15, 17  and 18, salaries,

wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

     Notwithstanding the provisions of paragraph 1, remuneration derived

by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and

b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

c) the remuneration is not borne by a permanent establishment which the employer has in the other State.

       The term “employer” mentioned in subparagraph b) of paragraph 2

means the person having right on the work produced and bearing the responsibility and risk connected with the performance of the work.

       Notwithstanding  the  provisions  of  paragraphs  1  and  2  of

this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

Article 15 DIRECTORS’ FEES

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or any other similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 16

ARTISTES AND SPORTSPERSONS

        Notwithstanding the provisions of Articles 7 and 14, income

derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his or her personal activities as such exercised in the other Contracting State, may be taxed in that other State.

        Where  income  in  respect  of  personal  activities  exercised

by an entertainer or a sportsperson in his or her capacity as such accrues not to the entertainer or sportsperson himself or herself but to another person, that income may, notwithstanding the provisions of Articles 7 and 14, be taxed in the Contracting State in which the activities
of the entertainer or sportsperson are exercised.

Article 17 PENSIONS

Subject to the provisions of paragraph 2 of Article 18, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

Article 18 GOVERNMENT SERVICE

a) Salaries, wages and other similar remuneration paid by a Contracting
State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

(i) is a national of that State; or

(ii) did not become a resident of that State solely for the purpose
of rendering the services.

a) Notwithstanding the provisions of paragraph 1, pensions and other similar remuneration paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

b) However, such pensions and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.

    The provisions of Articles 14, 15, 16 and 17 shall apply to

salaries, wages, pensions and other similar remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 19 STUDENTS

Payments which a student or business apprentice who is or was
immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed
in that State, provided that such payments arise from sources outside that State.

Article 20 OTHER INCOME

    Items of income of a resident of a Contracting State, wherever

arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

   The  provisions  of  paragraph  1  shall  not  apply  to  income,

other than income from immovable property as defined in paragraph 2 of Article 6, if the
recipient of such income, being a resident of a Contracting State, carries on business in the
other Contracting State through a permanent establishment situated therein and the right or property in respect of which the income is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 shall apply.

Article 21

PREVENTING IMPROPER USE OF THE AGREEMENT

  Notwithstanding the provisions of any other Articles of this

Agreement, benefits provided under this Agreement shall not be granted to companies of either
Contracting State if the purpose of such companies is to obtain benefits under this Agreement that would not otherwise be available.

   The provisions of this Agreement shall in no case prevent a

Contracting State from the application of the provisions of its domestic laws aiming at the prevention of fiscal evasion and avoidance, provided that the taxation in that State on the income concerned is not contrary to the Agreement.

  The competent authority of a Contracting State may, after consultation

with the competent authority of the other Contracting State, deny the benefits of this Agreement to any person, or with respect to any transaction, if in its opinion the granting of those benefits would constitute an abuse of the Agreement.

Article 22 ELIMINATION OF DOUBLE TAXATION

   In China, double taxation shall be eliminated as follows:

a) Where a resident of China derives income from the Czech Republic the amount of tax on that income payable in the Czech Republic in accordance with the
provisions of this Agreement, may be credited against the Chinese tax imposed on that
resident. The amount of the credit, however, shall not exceed the amount of the Chinese tax on that income computed in accordance with the taxation laws and regulations of China.

b) Where the income derived from the Czech Republic is a dividend
paid by a company which is a resident of the Czech Republic to a company which is a resident of China and which owns not less than 20 per cent of the shares of the company paying the dividend, the credit shall take into account the tax paid to the Czech
Republic by the company paying the dividend in respect of its income.

    In the case of a resident of the Czech Republic, double taxation

shall be eliminated as follows:

a) The Czech Republic, when imposing taxes on its residents, may include in the tax base upon which such taxes are imposed the items of income which
according to the provisions of this Agreement may also be taxed in China, but shall allow as a deduction from the amount of tax computed on such a base an amount equal to
the tax paid in China. Such deduction shall not, however, exceed that part of the
Czech tax, as computed before the deduction is given, which is appropriate to the
income which, in accordance with the provisions of this Agreement, may be taxed in China.

b) Where in accordance with any provision of the Agreement income derived by a resident of the Czech Republic is exempt from tax in the Czech Republic, the Czech Republic may nevertheless, in calculating the amount of tax on the remaining
income of such resident, take into account the exempted income.

Article 23

NON-DISCRIMINATION

    Nationals of a Contracting State shall not be subjected in the other

Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that
other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

   The taxation on a permanent establishment which an enterprise of a

Contracting State has in the other Contracting State shall not be less favourably levied in
that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to
residents of the other Contracting State any personal allowances, reliefs and reductions for
taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

   Except where the provisions of paragraph 1 of Article 9, paragraph 8

of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other
disbursements paid by an enterprise of a Contracting State to a resident of the other
Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be
deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

     Enterprises of a  Contracting  State, the  capital  of which  is

wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.

    The provisions of this Article shall, notwithstanding the provisions

of Article 2, apply to taxes of every kind and description.

Article 24

MUTUAL AGREEMENT PROCEDURE

    Where a person considers that the actions of one or both of the

Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 23, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.

    The competent authority shall endeavour, if the objection appears to

it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

    The competent authorities of the Contracting States shall endeavour

to resolve by mutual agreement any difficulties or doubts arising as to the interpretation
or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.

    The competent authorities of the Contracting States may communicate

with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

   For the purposes of paragraph 3 of Article XXII (Consultation) of the

General Agreement on Trade in Services, the Contracting States agree that,
notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Agreement may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 3 of this Article or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States.

Article 25 EXCHANGE OF INFORMATION

   The competent authorities of the Contracting States shall exchange

such information as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as

the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Articles 1 and 2.

    Any information received under paragraph 1 by a Contracting State

shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts
and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

     In no case shall the provisions of paragraphs 1 and 2 be construed

so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

      If information is requested by a Contracting State in accordance

with this Article, the other Contracting State shall use its information gathering measures
to obtain the requested information, even though that other State may not need such
information for its own tax purposes. The obligation contained in the preceding sentence is
subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information.

     In no case shall the provisions of paragraph 3 be construed to

permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 26

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

Article 27 ENTRY INTO FORCE

    Each of the Contracting States shall notify to the other, through

the diplomatic channels, the completion of the procedures required by its domestic law for the bringing into force of this Agreement. This Agreement shall enter into force on the date of the later of these notifications and its provisions shall have effect:

a) in respect of taxes withheld at source, to income paid or credited on or after 1st January in the calendar year next following that in which the Agreement enters into force;

b) in respect of other taxes on income, to income in any taxable year beginning on or after 1st January in the calendar year next following that in which the Agreement enters into force.

     The provisions of the Agreement between the Government of the

People’s Republic of China and the Government of the Czechoslovak Socialist Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes
on Income, signed at Prague on 11th June 1987, shall cease to be in force and in effect in relations between China and the Czech Republic on the date of the entry into effect of this Agreement.

Article 28 TERMINATION

This Agreement shall remain in force until terminated by a
Contracting State. Either Contracting State may terminate the Agreement, through the diplomatic
channels, by giving notice of termination at least six months before the end of any calendar year following after the period of five years from the date on which the Agreement enters into force. In such event, the Agreement shall cease to have effect:

a) in respect of taxes withheld at source, to income paid or credited on or after 1st January in the calendar year next following that in which the notice is given;

b) in respect of other taxes on income, to income in any taxable year beginning on or after 1st January in the calendar year next following that in which the notice is given.

IN WITNESS WHEREOF the undersigned, duly authorised thereto, have
signed this Agreement.

DONE in duplicate at this day
of 2009 in the Chinese, Czech and English languages, all texts being equally
authentic. In case of any divergence of interpretation, the English text shall prevail.

FOR THE GOVERNMENT OF

THE PEOPLE’S REPUBLIC OF CHINA

FOR THE GOVERNMENT OF THE CZECH REPUBLIC

China - Czech Republic Tax Treaty

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