Agreement with BVI on exchange of tax information published

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中国与BVI税收情报交换协议 | 《商法》

The State Administration of Taxation recently published the Tax Information Exchange Agreement between the PRC government and the government of the British Virgin Islands and the Notice on the Implementation of the Protocol. The agreement and the protocol were signed on 7 December 2009 in London. The two signatory parties informed each other on 11 February 2010 and 1 December 2010 respectively that they had completed their respective legal procedures necessary for bringing the agreement and the protocol into force. The agreement and the protocol come into effect on 30 December 2010 and govern the derivation of income on or after 1 January 2011. The agreement is the second signed by China with an offshore financial centre. China entered into the first intelligence exchange agreement with the Bahamas on 1 December 2009.

Under the agreement, the authorities of both signatory parties should assist in the exchange of tax intelligence with each other. Foreseeable relevant information in various areas such as determination, verification, investigation and collection of relevant taxes as well as recovery and enforcement of tax claims and tax investigation or prosecution should be included in the intelligence. For any person who is connected with or in possession of intelligence, whether a resident, a national or a citizen of either signatory party, as long as the required intelligence is located within the territory of a signatory party or under the possession or control of a person under the jurisdiction of a signatory party, the authorities of the signatory party concerned must provide such intelligence according to the agreement. The exchangeable intelligence covered by the agreement includes various types of tax including personal and corporate income tax in China as well as income tax, payroll tax and property tax in the British Virgin Islands.

The signatory parties must ensure that their respective authorities have the right to obtain and provide the following intelligence: intelligence possessed by banks or other financial institutions and any other persons acting as an agent or a trustee; intelligence on the legal and beneficial ownership of relevant companies, partnerships, trusts, funds and other people, including all intelligence on the ownership interests of all the people in the same ownership chain; intelligence on settlors, trustees, beneficiaries and custodians of trust companies; and intelligence on the fund founders, members of fund councils, beneficiaries and directors or other senior management staff of fund companies. When the authorities of a signatory party makes a request for intelligence under the agreement, they should provide the authorities of the other signatory party with relevant information to prove that there is relevance between the intelligence and the request. Apart from the above, the signatory parties are under no obligation to provide the following three types of intelligence: (1) intelligence in connection with the ownership of listed companies and open-ended collective investment funds or schemes, unless the obtaining of such intelligence does not cause undue difficulties; (2) intelligence for which the request, when made, has exceeded the six-year tax period time limit; and (3) intelligence which is not related to any taxpayer and is in the possession or control of other persons. Moreover, when a request is not in compliance with the agreement, or when the requesting party has not exhausted all the means within its territory, other than the means that may give rise to undue difficulties, to obtain intelligence, or when the disclosure of intelligence would be contrary to the public policy (public order) of the requested party, the authorities of the requested party may refuse to provide assistance.

The agreement will remain in force until terminated by either signatory party. Either signatory party may terminate the agreement by giving written notice. The agreement will terminate on the first day of the following month after three months of a signatory party receiving notice of termination from the other signatory party. Upon termination of the agreement, the signatory parties will remain under a confidentiality obligation towards any intelligence obtained pursuant to the agreement. All requests received before termination of the agreement will continue to be handled in accordance with the agreement. The protocol also provides further explanations of some of the clauses of the agreement. The protocol takes effect together with the agreement and remains effective during the term of the agreement.

Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.

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