Agreement between the Kingdom of the Netherlands and the Hong Kong Special Administrative Region of the People's Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income:Protocol to the Agreement between the Kingdom of the Netherlands and the Hong Kong Special Administrative Region of the People's Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Agreement between the Kingdom of the Netherlands and the Hong Kong Special Administrative Region of the People's Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Protocol to the Agreement between the Kingdom of the Netherlands and the Hong Kong Special Administrative Region of the People's Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Geldend

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At the time of signing the Agreement between the Kingdom of the Netherlands and the Hong Kong Special Administrative Region of the People's Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (the ‘Agreement’), the Governments of the Contracting Parties have agreed upon the following provisions which shall form an integral part of this Agreement.

I. General

1

It is understood that the OECD Commentary is an important guideline when interpreting the provisions of this Agreement that are the same or substantially the same as the corresponding provisions of the OECD Model Convention on income and on capital at the time of signing as well as subsequent clarifying modifications of the OECD Commentary on these provisions. The understanding in the preceding sentence shall not apply with respect to any contrary interpretation agreed to in this Protocol, to contrary interpretation agreed to by the competent authorities after the entry into force of the Agreement or to reservations or observations to the OECD Model Tax Convention or OECD Commentary by either Contracting Party.

2

For the purposes of applying this Agreement an item of income, profit or gain derived through a person that is fiscally transparent under the laws of either Contracting Party, shall be considered to be derived by a resident of a Contracting Party to the extent that the item is treated for the purposes of the taxation law of such Contracting Party as the income, profit or gain of that resident.

II. Ad Article 2

In this Agreement, the terms ‘Hong Kong Special Administrative Region tax’ and ‘Netherlands tax’ do not include any penalty or interest (including, in the case of the Hong Kong Special Administrative Region, any sum added to the Hong Kong Special Administrative Region tax by reason of default and recovered therewith and ‘additional tax’ under Section 82A of the Inland Revenue Ordinance) imposed under the laws of either Contracting Party relating to the taxes to which this Agreement applies by virtue of Article 2.

III. Ad Article 4

1

An individual living aboard a ship without any real domicile in either of the Contracting Parties shall be deemed to be a resident of the Contracting in which the ship has its home harbour.

2

In considering cases which fall within paragraph 4 of Article 4 of the Agreement the competent authorities shall have regard to:

a)

where the senior management of the person is carried on;

b)

where the meetings of the board of directors or equivalent body are held;

c)

where the person's headquarters are located;

d)

the extent and nature of the economic nexus of the person to each Contracting Party;

e)

whether determining that the person is a resident of one of the Contracting Parties but not of the other Contracting Party for the purposes of the Agreement would carry the risk of an improper use of the Agreement or inappropriate application of the domestic law of either Contracting Party.

IV. Ad Articles 5, 6, 7, 13 and 22

It is understood that rights to the exploration and exploitation of natural resources shall be regarded as a permanent establishment in the Contracting Party to whose seabed and subsoil thereof these rights apply. Furthermore, it is understood that the aforementioned rights include interests in such rights.

V. Ad Article 7

1

In respect of paragraphs 1 and 2 of Article 7:

a)

where an enterprise of a Contracting Party sells goods or merchandise or carries on business in the other Contracting Party through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the basis of the total amount received by the enterprise, but shall be determined only on the basis of that portion of the income of the enterprise that is attributable to the actual activity of the permanent establishment in respect of such sales or business;

b)

specifically, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits attributable to such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract that is effectively carried out by the permanent establishment in the Contracting Party in which the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the Contracting Party of which the enterprise is a resident.

2

Payments received as a consideration for technical services, including studies or surveys of a scientific, geological or technical nature, or for consultancy or supervisory services shall be deemed to be payments to which the provisions of Article 7 apply.

VI. Ad Articles 8 and 29

1

The Agreement between the Kingdom of the Netherlands and the Hong Kong Special Administrative Region of the People's Republic of China for the Avoidance of Double Taxation on Income, Profits, Gains or Capital of an Enterprise Operating Ships in International Traffic signed at Hong Kong on 2 November 2000 (hereinafter referred to as ‘the Shipping Agreement’) shall terminate upon the entry into force of this Agreement. However, the provisions of the Shipping Agreement shall continue to have effect for taxable years and periods which are expired before the time at which the provisions of this Agreement shall be effective.

2

It is understood that Article 8A of the Agreement between the Government of the Kingdom of the Netherlands and the Government of Hong Kong concerning air services signed at The Hague on 17 September 1986 (hereinafter referred to as ‘the Air Services Agreement’) shall not have effect as long as this Agreement is in force. However, the provisions of the Air Services Agreement shall continue to have effect for taxable years and periods which are expired before the time at which the provisions of this Agreement shall be effective.

VII. Ad Articles 10 and 13

1

A person shall be considered a headquarters company for the purposes of paragraph 3, subparagraph (a) (iv) of Article 10 only if:

a)

the corporate group consists of corporations resident in, and engaged in an active business in, at least five countries and the business activities carried on in each of the five countries generate at least 10 per cent of the gross income of the group; and

b)

no more than 50 per cent of its gross income is derived from the Contracting Party of which the company paying the dividend is a resident.

2

The determination for the purposes of paragraph 3, subparagraph (e) of Article 10 shall be based on all facts and circumstances including:

a)

the nature and volume of the activities of the company in its country of residence in relation to the nature and volume of the dividends;

b)

both the historical and the current ownership of the company; and

c)

the business reasons for the company residing in its country of residence.

The competent authority which has to grant the benefit will consult with the competent authority of the other Contracting Party before denying the benefit.

3

For the purposes of paragraph 3 of Article 10 and paragraph 4 of Article 13 the term ‘recognised stock exchange’ means:

a)

any of the stock exchanges in the member states of the European Union (EU);

b)

The Stock Exchange of Hong Kong Limited;

c)

any other stock exchange agreed upon by the competent authorities of the Contracting Parties,

provided that the purchase or sale of shares on the stock exchange is not implicitly or explicitly restricted to a limited group of investors.

4

For the purposes of Article 10, paragraph 3, subparagraph (c), in the case of the Hong Kong Special Administrative Region, institution means in any case:

a)

the Hong Kong Monetary Authority;

b)

a financial establishment appointed by the Government of the Hong Kong Special Administrative Region and mutually agreed upon by the competent authorities of the two Contracting Parties.

Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the Contracting Party having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.

IX. Ad Articles 10 and 13

It is understood that income received in connection with the (partial) liquidation of a company or a purchase of own shares by a company is treated as income from shares and not as capital gains.

X. Ad Article 15

It is understood that where a company is a resident of the Netherlands, the term ‘member of the board of directors’ includes both a ‘bestuurder’ and a ‘commissaris’. It is understood that ‘bestuurder’ or ‘commissaris’ of a Netherlands company means persons who are nominated as such by the general meeting of shareholders or by any other competent body of such company and are charged with the general management of the company and the supervision thereof, respectively.

XI. Ad Article 25

It is understood that Article 25 does not require the Contracting Parties to exchange information on an automatic or spontaneous basis.

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

DONE in duplicate at Hong Kong this 22nd day of March 2010, in the English language.

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