On 14 September 2009, the State Administration of Taxation (SAT) issued Guoshuihan (2009) No. 07 (the Circular) to clarify the tax treaty treatment of royalties (including under the China-Hong Kong and China-Macau tax arrangements). The Circular, which takes effect on 1 October 2009, summarizes the tax treaty treatment of royalties as follows: -   "Payment received for the use of industrial, commercial or scientific equipment" defined under the royalty article of the applicable tax treaty will be treated as royalties and tax treaty rate will be applicable if it is lower than domestic tax rate. Income derived from use of...