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1 Taipei Airlines Association and Air Macau Company Limited, Noting that the responsible authorities in Taiwan and in Macauintend to provide reciprocal relief from taxation to airlines r-esident in Taiwan and in Macau, consistent with the principle ofreciprocal benefit, confirm the following understanding on howthe responsible authorities in Taiwan and in Macau will impleme-nt the above noted intention: I.DEFINITIONS For the purpose of this Memorandum of Understanding, unless thecontext otherwise requires: 1.The term ”traffic” or ”air traffic”means any transport byaircraft operated by a nominated airline, but in respect of anominated airline resident in Taiwan excludes any voyage forwhich the principle purpose is to transport passengers, cargoor mail between places within Macau, and in respect of a nomi-nated airline resident in Macau excludes any voyage for whichthe main purpose is to transport passengers, cargo or mail be-tween places within Taiwan; 2.The term”airline”means a nominated enterprise carrying on t-he business of transporting passengers, cargo or mail by airc-raft; and 3.The term”income, profits or revenue derived from air traffic”means all income, profits or revenue from the operation ofaircraft in air traffic, including income, profits or revenuethat are incidental to the operation of aircraft in air traff-ic, from the charter or rental of aircraft, the rental of aircargo containers and related equipment and the maintenance ofair cargo containers. II.COVERAGE 1.The existing taxes to which this Memorandum of Understandingwill apply are: (a) in Taiwan, the profit seeking enterprise income tax and thebusiness tax; (b) in Macau, the complementary tax (Imposto Complementar) andthe stamp tax (Imposto De Selo) . 2.This Memorandum of Understanding will be revised if any ident-ical or substantially similar taxes which are imposed after t-he date of signature of this Memorandum of Understanding in a-ddition to, or in place of, the existing taxes. 3.In Taiwan, the airlines resident in Macau will be exempt fromtax on the income, profits or revenue derived from air trafficearned in Taiwan. If an airline resident in Macau, is registe-red for business tax, the air transportation services suppliedby the registered airline will be subject to a zero-rating bu-siness tax (taxed at the rate of zero per cent), and a creditis available for business tax paid on goods and services purc-hased for business use. However, goods and services may be pu-rchased by the registered airline on a zero-rated basis, prov-ided the requirements of Article 7 to the Business Tax Law aremet. If the airline is not registered for business tax, the a-cquisition of goods and services by the airline may still beon a zero-rated basis, provided the requirements of the abovementioned Article are met; 4.In Macau, the airlines resident in Taiwan will be exempt fromtax on the income,profits or revenue derived from air traff-ic earned in Macau; 5.The provisions of the proceeding paragraphs will also apply toincome, profits or revenue from the participation in an airli-ne pool or a joint airline business. III.NOTIFICATION AND CONSULTATIONS 1.At the end of each calendar year, Taipei Airlines Associationand Air Macau Company Limited will notify each other of any s-ignificant changes in the relevant tax laws which might affectreciprocal exemptions and the principle reciprocal benefits.2.Consultation may be requested in writing at any time by TaipeiAirlines Association or Air Macau Company Limited for the pur-pose of amendment to the present Memorandum of Understandingor for its application or its interpretation. Such consultati-on will begin within 60 days from the date of receipt of anysuch request and decisions will be by mutual consent. IV.ENTRY INTO FORCE 1.This Memorandum of Understanding (MOU) will enter into forceon the later of the dates on which the respective contractingparties may notify each other in writing that this MOU has be-en approved by their respective authorities and will have eff-ect with respect to taxable income, profits or revenue derivedfrom air traffic on or after 1 January 1996. 2.This Memorandum of Understanding shall continue in effect unt-il 30 November 2000 unless sooner terminated as next Article.V.TERMINATION Taipei Airlines Association or Air Macau Company Limited may te-rminate this Memorandum of Understanding by giving written noti-ce of termination to the other on or before 30 June in any yearfor this Memorandum of Understanding to cease to have effect asof 1 January of the following calendar year. IN WITNESS THEREOF the undersigned, being duly authorized, havesigned this Memorandum of Understanding in duplicate in the Eng-lish language at Macau this eighteenth day of December, 1998.TAIPEI AIRLINES ASSOCIATION AIR MACAU COMPANY LIMITED [Signed][Signed] FRANK HSU WANG GUIXIANG CHAIRMAN OF THE BOARD CHAIRMAN OF THE BOARD OF DIRECTORS |