Laws of the People's Republic of China

State Administration of Taxation

Notice of SAT on Printing and Issuing the Agreement Text between the Government of the People's Republic of China and the Government of the Kingdom of Saudi Arabia on the Avoidance of Double Taxation and Getting Prepared for Its Implementation

No 138 [2006] of the State Administration of Taxation

The state taxation bureau and the local taxation bureau of all provinces, autonomous regions, municipalities directly under the Central Government, cities directly under State planning, Yangzhou Taxation Refresher Institute, and all the departments under the State Administration of Taxation,

The Agreement on the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income and Property between the Governments of the People's Republic of China and the Kingdom of Saudi Arabia was formally signed by Xie Xuren, Director of the State Administration of Taxation of China, and Ibrahim Bin Abdul-Aziz Asaf, Minister of Finance of the Kingdom of Saudi Arabia, in Beijing on January 23, 2006. The Agreement shall be effective after both contracting states have completed their respective legal procedures. The text of the Agreement is hereby printed and distributed to you, please make good preparations prior to the implementation of the Agreement.

Annex: The Agreement between the Government of the People's Republic of China and the Government of the Kingdom of Saudi Arabia on the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income and Property

State Administration of Taxation

February 8, 2006 AnnexThe Agreement between the Government of the People's Republic of China and the Government of the Kingdom of Saudi Arabia on the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income and Property

The Government of the People's Republic of China and the Government of the Kingdom of Saudi Arabia, desiring to conclude an agreement on the avoidance of double taxation and the prevention of tax evasion on income and property , and having agreed to the following:

Article 1

Persons Covered This

Agreement shall apply to the persons who are residents of one or both of the contracting states.

Article 2

Taxes Covered

1.

The present Agreement shall apply to all the taxes imposed by either of the contracting states, its administrative regions or local authorities on the incomes and properties, disregarding the way of tax collection.

2.

The taxes on all incomes, all properties, or a certain income or a certain property, including the taxes on the proceeds arising from the transfer of movable property or immovable property, taxes on the total amount of wages or salaries paid by enterprises as well as the taxes on capital appreciation shall be deemed as taxes on incomes and properties.

3.

The current tax categories to which this Agreement shall apply are:

(a)

in the case of the people¡¯s republic of China:

(1) the individual income tax; and

(2) the foreign-funded enterprises and foreign enterprise income tax.

(hereinafter referred to as "Chinese taxes")

(b)

in the case of the Kingdom of Saudi Arabia :

(1) zakat tax; and

(2) income tax, including the natural gas investment tax.

(hereinafter referred to as "Saudi taxes")

4.

This Agreement shall also apply to the identical or substantially similar taxes that are levied after the date of signature of this Agreement as an addition or replacement to the current tax categories. The competent authorities of both contracting states shall notify each other of any substantial changes made in their respective taxation laws within a reasonable time limit after such changes are made.

Article 3

General Definitions

1.

For the purpose of present Agreement, unless the context otherwise requires:

(a)

The term "China" refers to 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 seas, and any area beyond its territorial seas, within which the People's Republic of China has sovereign rights of exploration for and exploitation of the resources on the sea-bed and its sub-soil and superjacent water resources in accordance with the international law;

(b)

The term "the Kingdom of Saudi Arabia" refers to the territory of the Kingdom of Saudi Arabia sense, including any area beyond its territorial seas, within which the Kingdom of Saudi Arabia has sovereign rights of exploration for and exploitation of resources on the water area, sea-bed and its sub-soil and natural resources in accordance with its domestic law and the international law;

(c)

The terms "a contracting state" and "the other contracting state" refer to either China or the Kingdom of Saudi Arabia, as the context requires;

(d)

The term "person" refers to an individual, a company or any other body;

(e)

The term "company" refers to any legal person entity or any entity which is treated as a legal person entity for taxation purposes;

(f)

The terms "enterprise of a contracting state" and "enterprise of the other contracting state" refer to, respectively, an enterprise operated by a resident of a contracting state and an enterprise operated by a resident of the other contracting state;

(g)

The term "national" refers to:

(1) any individual possessing the nationality of a contracting state;

(2) any legal person, partnership or association deriving its status as such from the laws of a contracting state;

(h)

The term "international traffic" refers to any transport by a ship or aircraft operated by an enterprise with an actual management institution or head office in a contracting state, excluding the transport by a ship or aircraft which is operated solely between places in the other contracting state;

(i)

the term "competent authority" refers

(1) in the case of China, to the State Administration of Taxation or its authorized representatives;

(2) in the case of the Kingdom of Saudi Arabia, to the Ministry of Finance, represented by the Minister of Finance or by his authorized representatives.

2.

With regard to the application of the agreement by a contracting state, any term not defined herein shall, unless the context otherwise requires, have the meaning in which it has under the law of that contracting state concerning the taxes to which the agreement applies. However, the definitions of the relevant terms in the tax laws that a contracting state applies shall prevail over the definition of the same terms in other laws.

Article 4

Residents

1.

For the purposes of this Agreement, the term "resident of a contracting state" means any person who, under the law of that state, is obligatory to pay tax therein by reason of his domicile, residence, place of management institution, or place of head office or any other criterion of a similar nature, simultaneously including this contracting state, its administrative regions and local authorities. But this term does not include the persons who are obligatory to pay tax only because of the income sourced from or situated in this contracting state.

2.

Where, by reason of the provisions of Paragraph 1, an individual is a resident of both contracting states, his status shall be determined as follows:

(a)

he shall be deemed as a resident of the contracting state in which he has a permanent domicile available to him; if he has a permanent domicile available to him in each of the contracting states, he shall be deemed as a resident of the contracting state with which his personal and economic relations are closer (center of gravity);

(b)

if the state in which his center of gravity lies cannot be determined, or if he does not have a permanent home available to him in either contracting state, he shall be deemed as a resident of the state in which he has a habitual abode;

(c)

if he has a habitual abode in each of the contracting states or in neither of them, he shall be deemed as a resident of the contracting state of which he is a national;

(d)

if he is a national in each of the contracting states or in neither of them, the competent authorities of the contracting states shall settle the issue by mutual agreement.

3.

Where, by reason of the provisions of Paragraph 1 of the present Article, a person other than an individual is a resident of both contracting states, his identity of resident shall be deemed as a resident of the contracting state where its actual management institution or head office is located.

Article 5

Permanent Establishment

1.

For the purposes of this Agreement, the term "permanent establishment" refers to a fixed place of business through which the business of an enterprise is wholly or partly carried out.

2.

The term "permanent establishment", in particular, includes:

(a)

a place of management;

(b)

a branch organization;

(c)

a representative office;

(d)

a factory;

(e)

a workshop, and

(f)

a mine, quarry or any other place of exploitation of natural resources.

3.

The term "permanent establishment", likewise, encompasses:

(a)

A building site, construction, assembly or installation project, or the supervisory activities in connection therewith, but only where such site, project or activities continue for a period of not less than 6 months;

(b)

the provision of services, including consultancy services, by an enterprise of a contracting state through employees or other engaged personnel for the aforementioned purpose, provided that the period for such activities (for the same project or relevant project) is continually or aggregately more than 6 months within any 12-month period.

4.

Notwithstanding the aforesaid provisions of this article, the term "permanent establishment" shall not 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 inventory of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

(c)

the inventory of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

(d)

the fixed business place established solely for the purpose of purchasing goods or merchandise or of collecting information for the enterprise;

(e)

the fixed business place established solely for the purpose of carrying out, for the enterprise, any other activity of a preparatory or auxiliary nature; and

(f)

the fixed business place established solely for the purpose of combining the activities listed in Items (a) through (e) of the present Paragraph if such combination can be attributed to all the activities of the fixed business place with a preparatory or auxiliary nature.

5.

Notwithstanding the provisions of Paragraphs 1 and 2, where a person (other than an agent with independent status to whom the provisions of Paragraph 6 apply) who is acting in a contracting state on behalf of an enterprise of the other contracting state, has and habitually exercises the authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in the first-mentioned 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 would not make this fixed place of business a permanent establishment.

6.

An enterprise of a contracting state shall not be deemed to have a permanent establishment in the other contracting state merely because it operates its business in that other state through a broker, agent on a commissioned basis, or any other agent with independent status in the ordinary course of their business. However, if all or nearly all of the activities of the agent are on behalf of the enterprise, he shall not be deemed as an agent with independent status as mentioned in this Paragraph.

7.

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 operates business in that other contracting state (whether through a permanent establishment or not), shall not itself render 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 contracting state.

2.

The term "immovable property" shall have the meaning it has under the law of the contracting state in which the property in question is situated. The term shall, in any case, include the property accessory to the immovable property, livestock and equipment used in agriculture and forestry. The rights to which the provisions of general law respecting real property apply, the usufruct of immovable property and the rights to variable or fixed payments as consideration for the exploiting of, or the right to exploit, the mineral resources, water sources and other natural resources, but ships and aircrafts shall not be regarded as immovable property.

3.

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

4.

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

Article 7

Business Profits

1.

The profits of an enterprise of a contracting state shall be taxable only in that state unless the enterprise carries on its business in the other contracting state through a permanent establishment situated therein. If the enterprise carries out its business in the other contracting state through a permanent establishment situated therein, the profits of the enterprise may be taxed in the other state, but only limited to those attributable to that permanent establishment.

2.

In addition to applying the provisions of Paragraph 3, where an enterprise of a contracting state carries out its business in the other contracting state through a permanent establishment situated therein, the permanent establishment shall be regarded as an independent affiliated enterprise engaging in the same or similar activities under the same or similar conditions. It shall be treated differently and separately as an independent establishment from the enterprise. The profits of this permanent establishment that may be obtained shall belong to the permanent establishment itself in each contracting state.

3.

When determining the profits of a permanent establishment, it is allowed to deduct the expenses incurred in the business of the permanent establishment, including the executive and general administrative expenses, no matter whether they are incurred in the state in which the permanent establishment is situated or elsewhere. However, no such deduction shall be allowed in respect of the amounts, if any, paid (otherwise than the reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, remunerations or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of income from credit against the permanent establishment. Likewise, no consideration may be taken, in the determination of the profits of a permanent establishment, for the amounts charged (otherwise than the reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, remunerations or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise, by way of income from credit against the head office of the enterprise or any of its other offices.

4.

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 distribution of the total profits of the enterprise to its various parts, the provisions in Paragraph 2 shall not preclude that contracting state from determining the profits to be taxed by this method of profit distribution. However, the result of adopting the method of profit distribution shall be in line with the principles provided for in the present Article.

5.

No profits may be attributed to a permanent establishment by reason of mere purchase by that permanent establishment of goods or merchandise for the enterprise.

6.

For the purposes of the aforesaid Paragraphs, the profits belonging to the permanent establishment shall be determined by the same method each year unless there is good and sufficient reason to change.

7.

If the profits include the income items that are dealt with separately in other Articles of this Agreement, the provisions of those Articles shall not be affected by the provisions of the present article.

Article 8

Shipping and Air Transport

1.

The profits from the operations of ships or aircrafts in international transport by an enterprise of a contracting state shall be taxable only in that contracting state where the actual management institution or head office of this enterprise is located.

2.

If the actual management institution or head office of an enterprise is established on a ship, the profits from the operations of ships shall be taxable only in that contracting state where the parent port of the ship is located; if there is no parent port, the profits from the operations of the ship shall be taxable only in that contracting state of which the operator of the ship is a resident;

3.

The provisions of Paragraph 1 shall also apply to the profits from the operations under partnership, joint operations or participation in 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)

a same person participates 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 of the above cases, the commercial and financial relations between the two enterprises are different from those between two independent enterprises, so the profits which would, but for those conditions, have been obtained by either enterprises, may be included in the profits of that enterprise and be taxed accordingly.

2.

Where a contracting state includes in the profits of an enterprise of that contracting state (and taxes accordingly) the profits on which an enterprise of the other contracting state has paid taxes in that other contracting state and the profits so included are profits which should have been obtained by an enterprise within the contracting state, then that other contracting state shall make appropriate adjustment to the amount of the tax charged therein on those profits, where that other contracting state considers such adjustment justifiable. In determining such adjustment, the other provisions of this Agreement shall be taken into consideration, and the competent authorities of the contracting states shall consult each other, if necessary.

Article 10

Dividends

1.

Dividends paid by a company that 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, but if the recipient is the beneficial owner of the dividends, the tax so levied shall not exceed 5 percent of the total amount of the dividends. The competent authorities of both contracting states shall determine the method to execute this limited tax rate through negotiation.

3.

Notwithstanding the provisions of Paragraphs 1 and 2, if the beneficial owner of the dividends is the government of the other contracting state, department under it, or any other entity directly or indirectly owned by it, the dividends paid by a resident company of a contracting state to a resident of the other contracting state shall only be taxable in the other contracting state.

4.

The term "dividends" as used in the present Article refers to the income from shares, mining shares, promoters' shares or other rights of participating in the profits not of credit relationship, as well as the income from other corporate rights that are subject to the same taxation treatment as the income from the shares by the laws of the state of which the company making the profit distribution is a resident.

5.

The provisions of Paragraphs 1 through 3 shall not apply if the beneficial owner of the dividends, being a resident of a contracting state, carries out business in the other contracting state of which the company paying the dividends is a resident, through a permanent establishment situated therein, or provides in that other state independent personal services through a fixed base situated therein, and the shares for which the dividends are paid are effectively connected with such permanent establishment or fixed base. In such cases, the application of the provisions of Article 7 or Article 14 shall depend on the concrete circumstances.

6.

Where a company that is a resident of a contracting state derives profits or income from the other contracting state, that other contracting state may not impose any tax on the dividends paid by or undistributed profits of the company, except insofar as such dividends are paid to a resident of that other contracting 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 contracting state, even if the dividends paid or the undistributed profits consist wholly or partly of the profits or income arising in such other state.

Article 11

Credit Income

1.

The credit income arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other contracting state.

2.

However, such credit income may also be taxed in the contracting state where it arises according to the laws of that contracting state, but if the recipient is the beneficial owner of the credit income, the tax so collected shall not exceed 10 percent of the total amount of the income. The competent authorities of both contracting states shall determine the method to execute the limited tax rate through negotiation.

3.

Notwithstanding the provisions of Paragraph 2 of the present Article, the credit income arising in a contracting state and paid to the government, local authority or central bank of the other contracting state, or to any financial institution wholly owned by the government of the other contracting state shall be exempted from taxation in the first-mentioned contracting state; or the debt, from which a resident of the other contracting state obtains income, is indirectly funded by the government, local authority or central bank of the other contracting state, or to any financial institution wholly owned by the government of the other contracting state, such credit income shall be exempted from tax in the contracting state.

4.

The term "credit income" as used in the present Article refers to the income derived from various creditor's rights, whether or not secured by mortgage and whether or not carrying a right to share the debtor's profits, and in particular, the income derived from public debts, bonds or debentures, including premiums and bonuses. The penalties for late payment shall not be regarded as a credit income provided in the present Article.

5.

The provisions of Paragraphs 1, 2 and 3 shall not apply, if the beneficial owner of the credit income, being a resident of a contracting state, carries out business in the other contracting state in which the interest arises through a permanent establishment situated therein, or provides in that other contracting state independent personal services through a fixed base situated therein, and the creditor's right in respect of which the proceeds is paid is effectively connected with such permanent establishment or fixed base. In such cases, the provisions of Article 7 or Article 14 shall apply according to the actual circumstances.

6.

The credit income shall be deemed as arising in a contracting state when the payer is the government, a local authority or a resident of that contracting state. Where, however, the person paying the proceeds of debt, whether he is a resident of the contracting state or not, has, in that contracting state a permanent establishment or a fixed base, and the debts on which the proceeds of debt are paid is connected with the permanent establishment or a fixed base, and such credit income is borne by such permanent establishment or fixed base, then such credit income shall be deemed as arising in the state where the permanent establishment or fixed base is situated.

7.

Where, due to any special relationship between the payer and the beneficial owner or between both of them and any other person, if the amount of the credit income, regarding the credit for which it is paid, exceeds the amount which 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 excessive part of the payments shall remain taxable according to the laws of each contracting state, but the other provisions of this Agreement shall be taken into consideration.

Article 12

Royalties

1.

Royalties arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other contracting state.

2.

However, such royalties may also be taxed in the contracting state in which they arise according to the laws of that state, but if the recipient is the beneficial owner of the royalties, the tax so collected shall not exceed 10 percent of the total amount of the royalties. The competent authorities of both contracting states shall determine the method for the execution of the limited tax rate by mutual agreement.

3.

The term "royalties" as mentioned in this Article refers to the 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 cinematographic films, or films or tapes for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for the use of or the right to use any industrial, commercial, or scientific equipment, or for any information concerning industrial, commercial or scientific experience.

4.

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 out business in the other contracting state in which the royalties arise through a permanent establishment situated therein, or provides 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 cases, the provisions of Article 7 or Article 14 shall, as the case may be, apply.

5.

The royalties shall be deemed as arising in a contracting state when the payer is the government, a local authority or 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 that contracting state a permanent establishment or a fixed base in connection with the liability to pay the royalties, and such royalties are borne by the permanent establishment or fixed base, then such royalties shall be deemed as arising in the contracting state in which the permanent establishment or fixed base is situated.

6.

Where, due to any special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, regarding 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 excessive part of the payments shall remain taxable according to the law of each contracting state, but the other provisions of this Agreement shall be taken into consideration.

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 that other contracting state may be taxed in that other contracting state.

2.

Gains from the alienation of movable property forming the part of the business property of a permanent establishment which an enterprise of a contracting state has in the other contracting state or of the movable property pertaining to a fixed base available to a resident of a contracting state in the other contracting state for the purpose of providing independent personal services, including the gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other state.

3.

Gains of a resident enterprise of a contracting state from the alienation of ships or aircraft operated in international transport or movable property pertaining to the operation of such ships or aircrafts shall be taxable only in that contracting state where the actual management institution or head office is located.

4.

For the gains from the alienation of stocks as property shares of a company, if the main property of this company is directly or indirectly formed by immovable properties situated in a contracting state, such gains may be taxed in that contracting state.

5.

For the gains from the alienation of stocks held by a company of a contracting state, if the stocks are not stocks as mentioned in Paragraph 4, and if these stocks are equivalent to at least 25% of the stock right of the resident company of the contracting state, such gains may be taxed in that contracting state.

6.

Gains from the alienation of any property other than those as mentioned in Paragraphs 1 through 5 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 due to his professional services or other activities of an independent nature shall be taxable only in that contracting state, except that, under any of the following circumstances, 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, and under this circumstance, only the income attributable to that fixed base may be taxed in that other state;

(b)

if his stay in the other contracting state for a period or periods amounting to or exceeding 183 days continuously or accumulatively in any taxable year, under this circumstance, only the income derived from his activities performed in that other state may be taxed in that other state; or

(c)

if the remuneration for his activities in the other Contracting State which is paid by a resident of that other Contracting State or which is borne by a permanent establishment or a fixed base situated in that other Contracting State, exceeds US $ 30, 000 or its equivalent in Chinese or Saudi currency within a taxable year.

2.

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 and accountants.

Article 15

Non-independent Personal Services

1.

In addition to the provisions of Articles 16 through 21, the salaries, wages and other similar remunerations derived by a resident of a contracting state in respect of employment shall be taxable only in that state unless the employment is exercised in the other state. If the employment is so exercised, such remuneration derived may be taxed in that other state.

2.

Notwithstanding the provisions of Paragraph 1, the remuneration derived by a resident of a contracting state in respect of employment exercised in the other contracting state shall be taxable only in the first-mentioned state if the following requirements are met simultaneously:

(a)

the recipient is present in the other contracting state for a period or periods not exceeding 183 days continuously or accumulatively in any taxable year;

(b)

the remuneration is paid by, or on behalf of, an employer who is not a resident of the other contracting state; and

(c)

the remuneration is not paid by a permanent establishment or a fixed base which the employer has in the other contracting state.

3.

Notwithstanding the preceding provisions of this Article, the remunerations derived in respect of an employment exercised aboard a ship or aircraft operated in international transport may be taxed in the contracting state where the actual management institution or head office of the enterprise is located.

Article 16

Director's Fees

Director's 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 contracting state.

Article 17

Artists and Athletes

1.

Notwithstanding the provisions of Articles 14 and 15, the income derived by a resident of a contracting state as an entertainer, such as a theatre, film, radio or television artist, or a musician, or as an athlete, from his personal activities exercised in the other contracting state, may be taxed in that other contracting state.

2.

Where the income obtained through personal activities exercised by an entertainer or athlete in his capacity will not belong to the entertainer or athlete 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.

3.

Notwithstanding the preceding provisions of the present Article, the income derived by a resident of a contracting state as an entertainer or athlete from the activities under a program of cultural exchange of both contracting states exercised in the other contracting state, shall be exempted from taxation in that other contracting state.

Article 18

Pensions

1.

In addition to the provisions of Article 19 , the pensions, other similar remunerations and any annuity paid to a resident of a contracting state in consideration of past employment shall be taxable only in that contracting state.

2.

Notwithstanding the provisions of Paragraph 1, the pensions and other similar payments paid by the government of a contracting state or a local authority thereof according to a program of public welfare under the social insurance system shall be taxable only in that contracting state.

Article 19

Government Services

1.

(a)

The salaries, wages and other similar remunerations other than pensions, which are paid by the government of a contracting state, administrative region or local authority to an individual for the services rendered thereto in performing government duties shall be taxable only in that contracting state.

(b)

However, such service shall be taxable only if the service is rendered in that other contracting state and the individual is a resident of that other contracting state who:

(1) is a national of that contracting state; or

(2) did not become a resident of that contracting state solely for the reason of rendering the service.

These salaries, wages or other similar remunerations shall only be taxable in that other contracting state.

2.

(a)

Any pension paid by, or paid out of the funds created by the government of a contracting state, administrative region, or local authority thereof to an individual in respect of the services rendered thereto shall be taxable only in that contracting state.

(b)

However, such pension shall be taxable only in the other contracting state if the individual is a resident and a national of that other contracting state.

3.

The provisions of Articles 15 through 18 shall apply to the salaries, wages, or other similar remunerations and pensions in respect of the services rendered in connection with a business carried out by the government of a contracting state, administrative region, or local authority thereof.

Article 20

Teachers and Researchers

An individual who is, or immediately before visiting a contracting state, was a resident of the other contracting state and who is present in the first-mentioned state solely for the purpose of teaching, giving lectures or conducting research at a university, college, school or other similar educational institution or scientific research institution accredited by the government of the first-mentioned contracting state shall be exempted from paying taxes in the first-mentioned contracting state, for a period of 3 years from the date of his first arrival in the first-mentioned contracting state, in respect of the remunerations for such teaching, lectures or research.

Article 21

Students

1.

A student, business apprentice or intern who is or was a resident of the other contracting state immediately before visiting a contracting state, and who is present in the first-mentioned contracting state solely for the purpose of his education or training shall be exempted from paying taxes in that first-mentioned state on the payments derived from sources outside that contracting state for the purpose of making a living, accepting education or training.

2.

In respect of grants, scholarships and remuneration from labor services not covered by Paragraph 1, a student, business apprentice or intern described in Paragraph 1 shall, in addition, be entitled, during such education or training, to the same exemptions, preferential treatments or reductions in respect of taxes, available to the residents of the state he is visiting.

Article 22

Other Incomes

1.

Any income of a resident of a contracting state not covered by the above-mentioned Articles of this Agreement, wherever it arises, may only be taxed in that contracting state.

2.

The provisions of Paragraph 1 shall not apply to the income other than the 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 out business in the other contracting state through a permanent establishment situated therein, or provides in that other state independent personal services through 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 cases the provisions of Article 7 or Article 14 shall apply in light of the actual circumstances

Article 23

Property

1.

Property represented by immovable property referred to in Article 6 , owned by a resident of a contracting state and situated in the other contracting state, may be taxed in that other contracting state.

2.

Movable property forming part of the operational property of a permanent establishment which an enterprise of a contracting state has in the other contracting state, or property represented by the movable property of the fixed base established by a resident of a contracting state in the other contracting state for engaging in independent personal service may be taxed in that other contracting state.

3.

Property represented by ships and aircrafts operated in international traffic and by movable property pertaining to the operation of such ships and aircrafts, shall be taxable only in the contracting state in which the actual management institution or head office of the enterprise is situated.

4.

All other elements of property of a resident of a contracting state shall be taxable only in that contracting state.

Article 24

Methods for the Elimination of Double Taxation

1.

(a)

in China, double taxation shall be eliminated in the following way:

Where a resident of China derives any income from the Kingdom of Saudi Arabia, the payable amount of tax in Saudi Arabia may, under this Agreement, be credited against the Chinese tax imposed on that resident. The to-be-credited amount, however, shall not exceed the amount of the Chinese tax on that income calculated in accordance with the tax laws and regulations of China.

(b)

in the Kingdom of Saudi Arabia, double taxation shall be eliminated in the following way:

Where a resident of the Kingdom of Saudi Arabia derives any income or property from China, the payable amount of tax in China may, under this Agreement, be credited against the Saudi tax imposed on that resident. The to-be-credited amount, however, shall not exceed the amount of the Saudi tax on that income calculated in accordance with the tax laws and regulations of the Kingdom of Saudi Arabia.

2.

When executing the provisions of this Article, the taxes, which shall be exempt under the law of a contracting state for the purpose of promoting investment, shall be deemed as having already been paid. The provisions of this Article shall be valid for 10 years after this Agreement comes into effect.

Article 25

Procedure for Mutual Agreement

1.

Where a person considers that the measures taken by one or both of the contracting states lead or will lead to the taxation not based on 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. The case must be presented within three years from the first notification of the taxation measures not based on the provisions of this Agreement.

2.

If the competent authority as mentioned above believes that the objection is justified and no satisfactory solution could be made, it shall try to resolve the case by mutual agreement with the competent authority of the other contracting state, with a view to the avoidance of taxation that is not based on this Agreement. Any agreement concluded by them shall be executed, irrespective the of the time limits as prescribed in the domestic laws of the contracting states.

3.

The competent authorities of both contracting states shall try to resolve by agreement any difficulties or doubts arising as to the interpretation or application of this Agreement, or may solve any issue relating to the elimination of double taxation not covered by this Agreement by negotiation.

4.

The competent authorities of both contracting states may directly contact with each other for the purpose of reaching an agreement on the preceding paragraphs.

Article 26

Exchange of Information

1.

The competent authorities of the contracting states shall exchange such information as is necessary for carrying out the provisions of this Agreement, or the information as required by the domestic laws of the contracting states concerning taxes covered by this Agreement (insofar as the taxation thereunder is not contrary to this Agreement). The exchange of information is not restricted by Article 1 . Any information received by a contracting state shall be treated as secret in the same manner as information obtained under the domestic laws of that contracting state and shall be disclosed only to the persons or authorities (including courts and administrative bodies) in relation to the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use the information only for such purposes, but may disclose the information in public court proceedings or in judicial decisions.

2.

The provisions of Paragraph 1 shall not be understood as imposing the following obligations on a contracting state under any of the following circumstances:

(a)

taking administrative measures in violation of the laws and administrative practice of that or of the other contracting state;

(b)

providing information that is not available under the laws or through the normal administrative course of that or of the other contracting state;

(c)

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

Article 27

Members of Diplomatic Missions and Consular Posts

This Agreement shall not affect the tax privileges enjoyed by the members of diplomatic missions and consular posts under the general rules of international law or under the provisions of special agreements.

Article 28

Entry into Force

1.

Contracting States shall make a notification to each other that the internal legal procedures necessary in each country for the entry into force of this Agreement have been complied with. The Agreement shall enter into force on the first date of the next month after the later of the notifications referred to in Paragraph 1 is issued: 2. This Agreement shall apply:

(a)

in respect of taxes withheld at source, to the payments made on or after the first day of January in the calendar year next following that in which the Agreement enters into force; and

(b)

in respect of other taxes on income and property, to taxes chargeable for any taxable year beginning on or after the first day of January following the year in which this Agreement takes place.

Article 29

Termination

1.

This Agreement shall remain in force for a long term. Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination on or prior to June 30 of any calendar year as of the expiration of a period of 5 years from the date on which the Agreement enters into force.

2.

In such event, the Agreement shall cease to have effect:

(a)

in respect of taxes withheld at source, on the income derived on or after January 1 in the calendar year following the year after the notice of termination is given;

(b)

in respect of the other taxes on income, on taxes chargeable for any taxable year beginning on or after January 1 in the calendar year following the year after the notice of termination is given.

In witness whereof the undersigned, duly authorized thereto, have signed this Agreement.

Done in Beijing on January 23, 2006 in duplicate in the Chinese, Arabic and English languages, all three texts shall be equally authentic. In case of any divergence of interpretation, the English text shall prevail.

Xie Xuren Ibrahim Bin Abdul-Aziz Asaf

Director of the State Administration Minister of Finance

of Taxation

For the Government For the Government of the Kingdom of

of the People's Republic of China Saudi Arabia

Protocol

At the signing of the Agreement between the Government of the People's Republic of China and the Government of Kingdom of Saudi Arabia on the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income and Property (hereinafter referred to "this Agreement"), the undersigned have agreed to the following provisions which form a integral party of this Agreement:

1.

In respect of Article 7

First, the term "business profit" includes, but not limited to, the income from engaging in the production, trade, banking, insurance and providing services. But the income from engaging in independent personal service shall be handled in accordance with Article 14 .

Second, for the insurance activities, they shall be governed by the domestic laws of the contracting states, respectively.

2.

In respect of Article 24

In the Kingdom of Saudi Arabia, the methods for the elimination of double taxation shall not affect the relevant provisions on the collection of zakat tax on Saudi nationals.

In witness whereof the undersigned, duly authorized thereto, have signed this Agreement.

Done in the Beijing on January 23, 2006 in duplicate in the Chinese, Arabic and English languages, all three texts shall be equally authentic. In case of any divergence of interpretation, the English text shall prevail.

Xie Xuren Ibrahim Bin Abdul-Aziz Asaf

Director of the State Administration Minister of Finance

of Taxation

For the Government For the Government of the Kingdom of

of the People's Republic of China Saudi Arabia