Ruling on permanent establishments and profit allocation

The State Administration of Taxation (SAT) issued a ruling on 19 July 2006 (Guo Shui Han [2006] No.694) that interprets when services performed by employees of foreign enterprises give rise to a permanent establishment (PE) in China (People's Rep.). The notice applies from the date of publication. The content of the notice is summarized below.

With regard to the relevant articles concerning PEs in tax treaties, a foreign enterprise is considered to ha…