The Interpretation of the Agreement between the Government of
the PRC and the Government of the Republic of Singapore for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with Respect to Taxes on Income and the Protocol of the Agreement
was promulgated by the State Administration of Taxation on 1
September 2010 ("Circular 75"). Although
merely an interpretation of the PRC-Singapore tax treaty, it
applies to all similar double tax treaty provisions and supersedes
all previous treaty interpretations that are inconsistent with its
Notably, concerning determination of a permanent establishment
("PE") of a nonresident enterprise based
on a secondment arrangement for services provided in the PRC,
Circular 75 formally outlines the criteria for determining a
"real employer". The real employer is the entity
has the right to direct the work of the personnel and
undertakes responsibilities and risks related to the work;
decides the number and qualifications of the assigned
bears the salary of the personnel; or
earns profit from the secondment.
These criteria should also be considered when determining the PE
constitution of an overseas parent company that seconds personnel
to its Chinese subsidiaries. If the parent company is the real
employer and other PE factors are satisfied (e.g., regarding length
of stay), such secondment would lead to the constitution of a PE of
the parent company in China. If the Chinese subsidiary is the real
employer, there is no PE risk for the parent company.
Circular 75 provides additional guidance for implementing
current tax treaties. For instance, it defines the PE as a
relatively fixed place of business through which the business of an
enterprise is wholly or partly carried on, and explains in detail
how to determine a construction PE or a service PE. Similar to
other newly issued regulations, PRC tax authorities at different
locations may assess the applicability of Circular 75 very
differently. Therefore, confirmation with competent tax authorities
on a case-by-case basis is necessary.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As per the terms of the SPA the said parent company had various rights and responsibilities as a sponsor.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).