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China - Ecuador Tax Treaty

AGREEMENT BETWEEN THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE REPUBLIC OF ECUADOR 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 Republic of Ecuador,

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

  1. 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.

  2. 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, and taxes on the total amount of wages or
    salaries paid by enterprises.

  3. 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 “Chinese tax”);

b) in Ecuador:

(i) the income tax of individuals;

(ii) the income tax of societies and other similar entities; (hereinafter referred as “Ecuadorian tax”).

  1. 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 which have been made in their taxation laws.

Article 3 GENERAL DEFINITIONS

  1. 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 geographical sense, means all the territory of the People’s Republic
of China, including its territorial sea, in which the Chinese laws relating to taxation apply, and any area beyond its territorial sea, within which the People’s
Republic of China has sovereign rights or jurisdiction of exploration for and
exploitation of resources of the sea-bed and its subsoil and superjacent water
resources in accordance with international law and its internal law;

b) the term “Ecuador” means the national territories of the Republic
of Ecuador, including the territorial sea thereof, subsoil and other territories
over which Ecuador exercises sovereignty, sovereign rights or jurisdiction in accordance with its internal and international laws;

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

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 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;

g) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

h) the term “competent authority” means:

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

(ii) in the case of Ecuador, the General Director of the Internal Revenue Service;

i) the term “national”, in relation to a Contracting State, means:

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

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

  1. 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

  1. 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.

  2. 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.

  1. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the Contracting States shall endeavor to settle the question by mutual agreement.

Article 5 PERMANENT ESTABLISHMENT

  1. 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.

  2. 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.

  1. The term “permanent establishment” likewise encompasses:

a) a building site, or construction, assembly or installation project
or supervisory activities in connection therewith, but only if such site, project or
activities last more than 12 months;

b) the furnishing of services, including technical, management and
consultancy services, by an enterprise through employees or other personnel engaged for such purposes, but only if activities of that nature continue, for the same or connected projects, within a Contracting State for a period or periods aggregating more than 183 days in the fiscal year concerned.

  1. 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 sub-paragraphs 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.

  1. 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 in a Contracting State on behalf of an enterprise of the other Contracting State, and has, and habitually exercises, in that 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 Contracting 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.

  2. 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.

  3. 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

  1. 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.

  2. The term “immovable property” shall have the meaning which it has under the laws 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 aircrafts shall not
    be regarded as immovable property.

  3. The provisions of paragraph 1 shall apply to income derived from
    the direct use, letting or use in any other form of immovable property.

  4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property
    used for the performance of independent personal services.

Article 7 BUSINESS PROFITS

  1. The business 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, buy only so much of them as is attributable to that permanent establishment.

  2. 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.

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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

  1. Profits from the operation of ships or aircraft in international traffic by an enterprise of a Contracting State shall be taxable only in that Contracting State.

  2. 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

  1. Where:

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.

  1. 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, provided that it agrees to do so. 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.

Article 10 DIVIDENDS

  1. 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.

  2. 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. However, if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 5 per cent of the gross amount of the dividends. The competent authorities of the Contracting States
    shall by mutual agreement settle the mode of application of these limitations.

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

  1. 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
    income from other corporate rights 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.

  2. 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, or performs in that other
    Contracting State independent personal services from a fixed base situated therein, and
    the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

  3. 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 or a fixed base
    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

  1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

  2. 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 10 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.

  3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State if it is paid:

a) to any financial institution which is a resident of the other Contracting State;

b) to the Government, a political subdivision or a local authority, the Central Bank or any institution wholly owned by the Government of the other Contracting State;

c) on loans guaranteed or insured by the Government, a political
subdivision or a local authority, the Central Bank or any institution wholly owned by the Government of the other Contracting State, in relation to
exportation or investment financing programs.

  1. 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 and 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.

  2. The provisions of paragraphs 1 and 2 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, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

  3. 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 or a fixed base in connection with which the indebtedness on which the interest
    is paid was incurred, and such interest is borne by such a permanent establishment or fixed base,

then such interest shall be deemed to arise in the State in which
the permanent establishment or fixed base is situated.

  1. 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

  1. Royalties arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other State.

  2. 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.

  3. The term “royalties” as used in this Article means amounts 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 cinematography films, or films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

  4. The provisions of paragraphs 1 and 2 of this Article 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, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

  5. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that Contracting 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 or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent
    establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

  6. 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

  1. 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.

  2. 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 or of movable property pertaining to a fixed base
    available to a resident of a Contracting State in the other Contracting State for
    the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base may be taxed in that other State.

  3. Gains from the alienation of ships or aircraft operated in international
    traffic by an enterprise of a Contracting State, or movable property pertaining to
    the operation of such ships or aircraft, shall be taxable only in that Contracting State.

  4. Gains derived by a resident of a Contracting State from the
    alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State.

  5. Gains from the alienation of any property, other than that referred to in paragraphs 1 to 4, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14 INDEPENDENT PERSONAL SERVICES

  1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State except in the following circumstances, when such income may also be taxed
    in the other Contracting State:

a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; or

b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

  1. The term “professional services” includes especially independent
    scientific, literary, artistic, educational or teaching activities as well as the
    independent activities of physicians, lawyers, engineers, architects, dentists, accountants and auditors.

Article 15

INCOME FROM EMPLOYMENT

  1. Subject to the provisions of Articles 16, 18 and 19, 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.

  2. 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 or a fixed base which the employer has in the other State.

  1. Notwithstanding the preceding provisions of this Article,
    remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State, may be taxed in that Contracting State.

Article 16 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 of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17 ARTISTES AND SPORTSMEN

  1. Notwithstanding the provisions of Articles 7, 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theater, motion
    picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

  2. Where income in respect of personal activities exercised by an
    entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and

15, be taxed in the Contracting State in which the activities of
the entertainer or sportsman are exercised.

  1. Notwithstanding the provisions of paragraphs 1 and 2, income
    derived from such activities as are referred to in paragraph 1 performed under a
    cultural agreement or arrangement between the Contracting States shall be exempt from tax in the Contracting State in which the activities are exercised if the visit to that State is wholly supported by public or government funds of either Contracting State.

Article 18 PENSIONS

  1. Subject to the provisions of paragraph 2 of Article 19, 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.

  2. Notwithstanding the provisions of paragraph 1, pensions paid and
    other similar payments made by the Government of a Contracting State or a political subdivision or a local authority thereof under a public welfare scheme of the social
    security system of that State shall be taxable only in that State.

Article 19 GOVERNMENT SERVICE

  1. a) Salaries, wages and other similar remuneration, other than a pension, paid by the Government of a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to the Government of 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.

  1. a) 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 the Government of 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.

  1. The provisions of Articles 15, 16, 17 and 18 shall apply to salaries, wages, pensions, and other similar remuneration in respect of services rendered in
    connection with a

business carried on by the Government of a Contracting State or a political subdivision or a local authority thereof.

Article 20 STUDENTS

Payments which a student 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 receives for the purpose of his
maintenance or education shall not be taxed in that State, provided that such
payments arise from sources outside that State.

Article 21 OTHER INCOME

  1. 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.

  2. 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,
    or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

Article 22

METHODS FOR ELIMINATION OF DOUBLE TAXATION

  1. In China, in accordance with the provisions of the law of China, double taxation shall be eliminated as follows:

a) Where a resident of China derives income from Ecuador, the amount of tax on that income payable in Ecuador 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 Ecuador is dividend paid by a company which is a resident of Ecuador 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 Ecuador by the company paying the dividend in respect of its income.

  1. In Ecuador, in accordance with the provisions of the law of Ecuador, double taxation shall be eliminated as follows:

a) Where a resident of Ecuador derives income which, in accordance
with the provisions of this Agreement, may be taxed in China, Ecuador shall, subject to the provisions of sub-paragraphs b) and c), exempt such income from tax.

b) Where a resident of Ecuador derives items of income which, in accordance with the provisions of Articles 10, 11 and 12, may be taxed in China,
Ecuador shall allow as a deduction from the tax on the income of that resident an amount equal to the tax paid in China. Such deduction shall not, however, exceed that part of the tax, as computed before the deduction is given, which is attributable to such items of income derived from China.

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

d) The provisions of sub-paragraph a) shall not apply to income derived by a resident of Ecuador where China applies the provisions of this Agreement to exempt such income from tax or applies the provisions of paragraph 2 of Article 10, paragraph 2 of Article 11 or paragraph 2 of Article 12 to such income.

Article 23 LIMITATION OF BENEFITS

  1. Except as otherwise provided in this Article, a resident of a
    Contracting State who derives income from the other Contracting State shall be entitled to all the benefits of this Agreement otherwise accorded to residents of a Contracting State
    only if such resident is a “qualified person” as defined in paragraph 2 and meets the other conditions of this Agreement for the obtaining of such benefits.

  2. A resident of a Contracting State is a qualified person for a fiscal year only if such resident is either:

a) an individual;

b) a qualified governmental entity;

c) a company, if

(i) the principal class of its shares is listed on a recognized stock exchange specified in subparagraph a) or b) of paragraph 6 and is regularly traded on one or more recognized stock exchanges, or

(ii) at least 50 per cent of the aggregate vote and value of the shares in the company is owned directly or indirectly by five or fewer companies entitled to benefits under subdivision (i) of this subparagraph, provided that, in the case of indirect ownership, each intermediate owner is a resident of either Contracting State;

d) a charity or other tax-exempt entity, provided that, in the case of a pension trust or any other organization that is established exclusively to provide pension or other similar benefits, more than 50 per cent of the person’s beneficiaries, members or participants are individuals resident in either Contracting State; or

e) a person other than an individual, if:

(i) on at least half the days of the fiscal year persons that are qualified persons by reason of subparagraph a), b) or d) or subdivision c) (i) of this paragraph own, directly or indirectly, at least 50 per cent of the aggregate vote and value of the shares or other beneficial interests in the person, and

(ii) less than 50 per cent of the person’s gross income for the taxable year is paid or accrued, directly or indirectly, to persons who are not residents
of either Contracting State in the form of payments that are deductible for purposes of the taxes covered by this Agreement in the person’s State of residence (but not including arm’s length payments in the ordinary course of business
for services or tangible property and payments in respect of financial obligations to a bank, provided that where such a bank is not a resident of a Contracting State such payment is attributable to a permanent establishment of that
bank located in one of the Contracting States).

  1. a) A resident of a Contracting State will be entitled to benefits of the Agreement with respect to an item of income, derived from the other State, regardless of whether the resident is a qualified person, if the resident is actively carrying on business in the first-mentioned State (other than the business of making or managing investments for the resident’s own account, unless these activities
    are banking, insurance or securities activities carried on by a bank, insurance
    company or registered securities dealer), the income derived from the other Contracting State is derived in connection with, or is incidental to, that business and
    that resident satisfies the other conditions of this Agreement for the obtaining of such benefits.

b) If the resident or any of its associated enterprises carries on a business activity in the other Contracting State which gives rise to an item of income, subparagraph a) shall apply to such item only if the business activity in the first-mentioned State is substantial in relation to business carried on in the other State. Whether a business activity is substantial for purposes of this paragraph will be determined based on all the facts and circumstances.

c) In determining whether a person is actively carrying on business in a Contracting State under subparagraph a), activities conducted by a partnership in
which that person is a partner and activities conducted by persons connected to such person shall be deemed to be conducted by such person. A person shall be connected to another if one possesses at least 50 per cent of the beneficial interest in the other (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the company’s shares) or another person possesses, directly or indirectly, at
least 50 per cent of the beneficial interest (or, in the case of a company, at least 50 per cent of the aggregate vote and value of the company’s shares) in each person. In any case, a person shall be considered to be connected to another if, based on all the facts and circumstances, one has control of the other or both
are under the control of the same person or persons.

  1. Notwithstanding the preceding provisions of this Article, if a
    company that is a resident of a Contracting State, or a company that controls such a
    company, has outstanding a class of shares

a) which is subject to terms or other arrangements which entitle its holders to a portion of the income of the company derived from the other Contracting State that is larger than the portion such holders would receive absent such
terms or arrangements (“the disproportionate part of the income”); and

b) 50 per cent or more of the voting power and value of which is owned by persons who are not qualified persons

the benefits of this Agreement shall not apply to the disproportionate part of the income.

  1. A resident of a Contracting State that is neither a qualified person pursuant to the provisions of paragraph 2 or entitled to benefits under paragraph
    3 or 4 shall, nevertheless, be granted benefits of the Agreement if the competent
    authority of that other Contracting State determines that the establishment, acquisition or maintenance of such person and the conduct of its operations did not have as one
    of its principal purposes the obtaining of benefits under the Agreement.

  2. For the purposes of this Article the term “recognized stock exchange” means:

a) in China, Shanghai Stock Exchange and Shenzhen Stock Exchange;

b) in Ecuador, Quito Stock Exchange and Guayaquil Stock Exchange; and

c) any other stock exchange which the competent authorities agree to recognize for the purposes of this Article.

Article 24

NON-DISCRIMINATION

  1. 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.

  2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably 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.

  3. Except where the provisions of paragraph 1 of Article 9, paragraph 7 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.

  1. 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.

  2. The provisions of the Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

Article 25

MUTUAL AGREEMENT PROCEDURE

  1. 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 24, 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.

  2. The competent authority shall endeavor, if the objection appears 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.

  3. The competent authorities of the Contracting States shall endeavor
    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.

  4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of paragraphs 2 and

  5. When it seems advisable for reaching an agreement, representatives of the competent authorities of the Contracting States may meet together for an oral exchange of opinions.

Article 26 EXCHANGE OF INFORMATION

  1. 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.

  1. 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.

  2. 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).

  1. 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.

  2. 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 27

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 28 ENTRY INTO FORCE

Both Contracting States shall notify each other through diplomatic
channels that they have completed the internal legal procedures necessary for the entry into force of this

Agreement. This Agreement shall enter into force on the thirtieth day upon the receipt of the latter notification. This Agreement shall be applicable in
respect of income derived during the taxable years beginning on or after the first day of January next following that in which this Agreement enters into force.

Article 29 TERMINATION

This Agreement shall continue in effect indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year
beginning after the expiration of a period of five years from the date of its entry into force, give written notice of termination to the other Contracting State through
diplomatic channels. In such event this Agreement shall cease to have effect as respects income derived during the taxable years beginning on or after the first day of January in the calendar year next following that in which the notice of termination is given.

IN WITNESS whereof the undersigned, duly authorized thereto, have
signed this Agreement.

Done at Quito on the 21ˢᵗ day of January, 2013, in duplicate in the Chinese, Spanish and English languages, all texts being equally authentic. In case
of divergence in interpretation, the English text shall prevail.

For the Government of For the Government of The People’s Republic of China The Republic of Ecuador

Xiao Jie
Pablo Villagomez

PROTOCOL

At the signing of the Agreement between the Government of the People’s Republic of China and the Government of the Republic of Ecuador for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes
on Income (hereinafter referred to as “the Agreement”), both sides have agreed upon the following provisions, which shall form an integral part of the Agreement:

  1. With reference to paragraph 4 of Article 2:

The competent authorities of the Contracting States shall notify each
other of any significant changes in their taxation laws by the end of the calendar year in which such changes have been made.

  1. With reference to sub-paragraph e) of paragraph 1 of Article 3:

In the case of Ecuador, the term “company” includes any society or legal entity which is considered as such by the Ecuadorian law.

  1. With reference to the tax rates established in paragraph 2 of Article 10, paragraph 2 of Article 11 and paragraph 2 of Article 12, in case that the Foreign Exchange Control Tax (Impuesto a la Salida de Divisas) in Ecuador is applicable to dividends, interest or royalties paid from Ecuador to China, those tax rates shall be reduced to 3
    per cent, 8 per cent and 8 per cent respectively.

  2. With reference to paragraph 3 of Article 11:

The phrase “the Central Bank or any institution wholly owned by the
Government of the other Contracting State” means:

a) in China:

(i) the People’s Bank of China;

(ii) the China Development Bank;

(iii) the Agricultural Development Bank of China;

(iv) the Export-Import Bank of China;

(v) the National Council for Social Security Fund;

(vi) the China Export & Credit Insurance Corporation;

(vii) China Investment Corporation; and

(viii) any institution wholly owned by the Government of China as may be agreed from time to time between the competent authorities of the Contracting States;

b) in Ecuador:

(i) the Central Bank of the Republic of Ecuador; and

(ii) any institution wholly owned by the Government of Ecuador as may be agreed from time to time between the competent authorities of the Contracting States.

  1. With reference to paragraph 4 of Article 11:

It is understood that the term “interest” also includes other income
treated as income

from money lent by the taxation law of the Contracting State in which the income arises, provided the income is from debt-claim of some kind. In case of
divergence of interpretation, the Contracting States shall resort to the mutual agreement procedure.

  1. With reference to Article 26:

a) the competent authority of a Contracting State shall provide
information upon request, understanding that its provisions shall not prevent the Contracting States from exchanging information automatically or spontaneously;

b) The competent authority of the requested Contracting State shall
forward the requested information as promptly as possible to the competent authority of the requesting Contracting State. To ensure a prompt response, the
competent authority of the requested Contracting State shall:

(i) immediately confirm receipt of a request in writing to the
competent authority of the requesting Contracting State and shall notify the competent authority of the requesting Contracting State of deficiencies in the request, if any, within 60 running days of receipt of the request;

(ii) provide the requested information to the competent authority of the requesting Contracting State within a maximum period of 90 running days as of receipt of the request; and

(iii)immediately inform the competent authority of the requesting
Contracting State, explaining the reason for its inability, the nature of the obstacles or the reasons for its refusal, if the competent authority of the
requested Contracting State has been unable to obtain and provide the
information within 90 running days of receipt of the request, including if it encounters obstacles in furnishing the information or it refuses to
furnish the information;

c) to make possible a timely exchange of information, the competent authorities of the Contracting States may exchange information in a manner agreed by competent authorities of both Contracting States;

d) requests for information made during the term of the Agreement
shall be processed in line with the Agreement, notwithstanding the fact
that the Agreement has been terminated.

IN WITNESS whereof the undersigned, duly authorized thereto, have
signed this Protocol.

Done at Quito on the 21ˢᵗ day of January, 2013, in duplicate in the Chinese, Spanish and English languages, all texts being equally authentic. In case
of divergence in interpretation, the English text shall prevail.

For the Government of For the Government of The People’s Republic of China The Republic of Ecuador

Xiao Jie
Pablo Villagomez

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