Last Friday SAT declared a new announcement on its website, which allows more foreign companies taking advantage of the 5% WHT rate.
State Administration of Taxation
Public Notice on Identification of “Beneficial Owner” in Tax Treaty
SAT Public Notice 2012 No.30
According to the Notice of the State Administration of Taxation on How to Understand and Identify “Beneficial Owner” in Tax Treaty (SAT Letter  No.601), it is hereby announced with respect to the identification of beneficial owner status:
1. When determining the beneficial owner status of a resident from a contracting state, a comprehensive analysis and judgment shall be made based on the various factors as provided in Article 2 of the SAT Letter  No.601 document; no negative or affirmative determination shall be made only based on the existence of an adverse factor or the absence of “such purposes as tax avoidance or reduction, transfer or accumulation of profits”.
2. When understanding and confirming each factor as provided in Article 2 of the SAT Letter  No.601 document, an analysis and determination may be made based on the different types of income and taking into consideration of the company’s articles of association, financial statements, cash flow records, board meeting minutes, board
resolutions, HR and material resources status, relevant expense expenditure, function and risk assumption status, loan contracts, franchising contracts or transfer contracts, patent registration certificates, copyright ownership certificates, agency contracts,
entrusted collection contracts and other materials.
3. Where the income that a resident from a contracting state who applies for the treatment under tax treaty (hereinafter “Applicant”) derives in China is dividend, if such resident is a company listed in such contracting state or is wholly (100%) owned directly or
indirectly (excluding indirectly holding of equity interests through an enterprise which is a resident of a third party state other than the PRC or such contracting state) by a company which is also a resident of, and listed in, such contracting state, and such dividend is derived from the equity interest held by the listed company, the Applicant may directly be identified as a beneficial owner.
4. Where an Applicant collects its income through an agent or entrusted receiver (hereinafter collectively “Agent”), no matter the Agent is a resident of a contracting state or not, the identification of the Applicant’s beneficial owner status shall not be affected, but the Agent shall represent to the tax authority that it does not have a beneficial owner status. See the Appendix for the form of Agent Representation.
5. Where a tax authority has identified a beneficial owner in accordance with Article 4 hereof and approved the relevant treatment under tax treaty, if the state or region where the Agent resides has entered into a tax treaty or information exchange agreement with
the PRC, the information about the Agent may be obtained through information exchange as necessary. Where the Agent may be identified as a beneficial owner through the information exchange, the tax authority may change the previous approval result, levy the
exempted tax on the original beneficial owner and impose an overduefine in accordance with the relevant provisions.
6. Where a competent tax authority, when handling the relevant approval matters, is unable to make a decision due to any difficulty in determining the beneficial owner status, it may, in accordance with Article 17 of the Notice of the State Administration of Taxation
on Promulgating the Trial Measures for the Administration of Grant of Treatment under Tax Treaty to Non-residents (SAT  No.124), make a disposal of not granting the treatment under tax treaty for the time being. Where the Applicant is granted the treatment under tax treaty after examination and approval, the tax authority shall refund the relevant tax amount to the Applicant.
7. In accordance with the provisions of the SAT  No.124 document, a competent tax authority, when handling the relevant approval matters, shall report any case regarding denial of beneficial owner status to the provincial tax authority for approval before implementation, and the provincial tax authority shall report the disposal result of such case to the SAT International Taxation Department for the record.
8. Where a tax payer needs to apply for identification of beneficial owner status and grant of the treatment under tax treaty with different tax authorities under similar circumstances, it may inform the relevant tax authorities of the same, and the relevant tax authorities shall make a decision upon consensus is reached after consultation; where the relevant tax authorities fail to reach a consensus, they shall report to their common superior tax
authority for disposal and explain the consultation status.
9. This Public Notice shall take effect as of the date of promulgation.
For furthur information, please see http://www.hwuason.com/