Communication from the Ministry of Foreign Affairs No. 124 / 1995 Coll.

Q: Is Communication from the Ministry of Foreign Affairs No. 124 / 1995 Coll. still valid?

Yes, Communication from the Ministry of Foreign Affairs No. 124 / 1995 Coll. is still valid and effective.

124

COMMUNICATION

Ministry of Foreign Affairs

The Ministry of Foreign Affairs announces that on 27 April 1992, a Treaty was signed in Seoul between the Czech and Slovak Federal Republic and the Republic of Korea to avoid double taxation and prevent tax evasion in the field of income tax.

In exchange for the notes of the Ministry of Foreign Affairs of the Czech Republic of 18 March 1994 and the Embassy of the Republic of Korea in Prague of 11 April 1994, it was agreed that the Treaty between the Czech and Slovak Federal Republic and the Republic of Korea on the avoidance of double taxation and the prevention of tax evasion in the field of income taxes of 27 April 1992 would be considered to be concluded between the Czech Republic and the Republic of Korea.

The Parliament of the Czech Republic gave its assent to the Treaty and the President of the Republic ratified it. The instruments of ratification were exchanged in Prague on 3 March 1995.

The Treaty entered into force on 3 March 1995 pursuant to Article 28 (1) thereof.

The Czech version of the Treaty is hereby published at the same time. The English version, which is decisive for its interpretation, can be consulted by the Ministry of Foreign Affairs and the Ministry of Finance.

TREATY

between

Czech and Slovak Federal Republic

and

Republic of Korea

on the avoidance of double taxation and avoidance of tax evasion

in the field of income taxes

Government of the Czech and Slovak Federal Republic and Government of the Republic of Korea

Desiring to conclude a double taxation agreement and prevent tax evasion in the field of income tax

agree as follows:

Persons to whom the Treaty applies

This contract shall apply to persons resident in one or both Contracting States (residents).

Taxes to which the Treaty applies

1. This Agreement shall apply to income taxes levied on behalf of a Contracting State, its lower administrative departments or local authorities, whatever the method of collection.

2. All taxes levied on total income or on individual parts of income, including taxes on profits arising from the disposal of movable or immovable property, taxes on the total amount of wages paid by undertakings and taxes on the increase in value, shall be regarded as income taxes.

3. The current taxes to which the Treaty applies are:

(a) in the case of Czechoslovakia:

(i) profit taxes;

(ii) payroll tax;

(iii) income tax on literary and artistic activities;

(iv) agricultural tax;

(v) population income tax; and

(vi) domestic tax;

(hereinafter referred to as "Czechoslovak Tax ');

(b) for Korea:

(i) income tax;

(ii) company tax; and

(iii) population tax;

(hereinafter referred to as "Korean tax ').

3. This Treaty will also apply to any tax of the same or similar kind which will be imposed upon signature of this Treaty in addition to or in place of the present tax. The competent authorities of the Contracting States shall communicate to each other significant changes to be made to their respective tax laws.

General definitions

1. For the purposes of this Treaty, unless the link requires a different interpretation:

(a) the term "Czechoslovakia" refers to the Czech and Slovak Federal Republic;

(b) the term "Korea" refers to the territory of the Republic of Korea, including any area adjacent to the sovereign waters of the Republic of Korea, which, in accordance with international law, has been or will in the future be designated under the laws of the Republic of Korea as the territory in which the sovereign rights of the Republic of Korea, relating to the seabed and subsoil and their natural resources may be exercised;

(c) the terms "one Contracting State" and "the other Contracting State" refer to Czechoslovakia or Korea as appropriate;

(d) the term "person" refers to a natural person, company and any other association of persons;

(e) the term "company" refers to any legal person or right-holder considered to be legal person for the purposes of taxation;

(f) the terms "undertaking of one Contracting State" and "undertaking of the other Contracting State" shall indicate, as appropriate, an undertaking operated by a resident of one Contracting State or an undertaking operated by a resident of the other Contracting State;

(g) the term "national" means:

(i) any natural person who is a national citizen of a Contracting State;

(ii) any legal person, company or association established under the law in force in a Contracting State;

(h) the term "international transport" shall mean any transport carried out by a ship, boat or aircraft operated by an undertaking of a Contracting State where the ship, boat or aircraft is not operated only between places situated in the other Contracting State;

(i) the term "competent authority" shall mean:

(i) in the case of Czechoslovakia, the Minister of Finance of the Czech and Slovak Federal Republic or its authorised representative;

(ii) in the case of Korea, the Minister for Finance or his authorised representative.

2. Any term which is not otherwise defined shall have a Contracting State's meaning for the application of this Treaty under the law of that State which regulates the taxes covered by this Treaty, unless the link requires a different interpretation.

Tax domicile

1. The term "resident of one Contracting State" shall, within the meaning of this Treaty, refer to any person who, under the law of that State, is subject to taxation in that State on account of his residence, permanent residence, place of main office, place of administration or any other similar criterion. However, this term does not include a person subject to taxation in that Contracting State solely for reasons of income from resources located in that State.

2. If, pursuant to paragraph 1, a natural person is resident in both Contracting States, its status shall be determined as follows:

(a) it is assumed that this person is resident in the Contracting State in which he has a permanent residence. If it has a permanent residence in both Contracting States, it is assumed to be resident in the Contracting State to which it has closer personal and economic relations (centre of life interests);

(b) if it cannot be determined in which Contracting State the person has a centre of his life interests or if he does not have a permanent residence in any Contracting State, he shall be presumed to be resident in the Contracting State in which he normally resides;

(c) where that person normally resides in both Contracting States or in none of them, he shall be presumed to be resident in the Contracting State of which he is a national citizen;

(d) where that person is a national of both Contracting States or of any of them, the competent authorities of the Contracting States shall amend the matter by mutual agreement.

3. Where a person other than a natural person is resident in both Contracting States in accordance with paragraph 1, he shall be presumed to be resident in the State in which the place of his actual management is situated. In case of doubt, the competent authorities of the Contracting States shall resolve the matter by mutual agreement.

Permanent establishment

1. The term "permanent establishment" shall refer, within the meaning of this Treaty, to a permanent establishment for the business in which the undertaking carries out its activities in whole or in part.

2. the term "permanent establishment" includes in particular:

(a) the place of management;

(b) the plant;

(c) an office;

(d) the factory;

(e) workshop; and

(f) mine, oil or gas site, quarry or other place where natural resources are extracted.

3. The construction site or construction or assembly shall be considered as a permanent establishment only if it lasts more than nine months.

4. Notwithstanding the previous provisions of this Article, the term "permanent establishment 'shall not include:

(a) an establishment which is used only for the storage, display or supply of goods belonging to the undertaking;

(b) the supply of goods belonging to an undertaking which is maintained only for storage, display or delivery;

(c) a stock of goods belonging to an undertaking which is maintained only for the purpose of processing by another undertaking;

(d) permanent business equipment used only for the purpose of purchasing goods or collecting information for the undertaking;

(e) permanent business facilities which are maintained solely for the purpose of advertising, the provision of information, scientific research or similar activities which are of a preparatory or ancillary nature to the undertaking;

(f) a permanent establishment for business which shall be maintained only for the exercise of any combination of the activities referred to in points (a) to (e) of this paragraph, provided that the total activity of the permanent establishment resulting from that link is of a preparatory or ancillary nature.

5. Where, notwithstanding the provisions of paragraphs 1 and 2, a person - other than an independent representative to whom paragraph 6 applies - acts on the behalf of an undertaking in a Contracting State and has at its disposal and normally uses the power of attorney enabling it to conclude contracts on behalf of an undertaking, the undertaking shall be deemed to have a permanent establishment in that State in respect of all activities undertaken by that person for the undertaking, unless the activity of that person is limited to the activities referred to in paragraph 4 which, if carried out through a permanent establishment, would not constitute the existence of a permanent establishment in accordance with the provisions of this paragraph.

6. An undertaking shall not be deemed to have a permanent establishment in a Contracting State only because it carries out its activities there through a broker, a general agent or any other independent agent, where such persons act in the course of their proper activities.

7. The fact that a company that is resident in one Contracting State controls a company or is controlled by a company that is resident in the other Contracting State or that carries out its activities there (whether through a permanent establishment or otherwise) does not in itself make it a permanent establishment of any other company.

Revenue from immovable property

1. Revenue accruing from the resident of one Contracting State from immovable property (including agricultural and forestry income) located in the other Contracting State may be taxed in that other State.

2. The term "immovable property" shall have the meaning of the law of the Contracting State in which the property is located. The term "immovable property 'includes, in any case, accessories for immovable property, live and dead inventory used in agriculture and forestry, rights to which the provisions of civil law applicable to land, the right to consume immovable property and the right to variable or fixed salaries for mining or for the admission to mining mineral deposits, springs and other natural resources apply; ships, boats and aircraft shall not be considered property.

3. Paragraph 1 shall apply to income from direct use, rental or any other use of immovable property.

(4) Paragraphs 1 and 3 shall also apply to income from the property of the undertaking and to income from immovable property used for the exercise of the profession.

Profits of enterprises

1. The profits of an undertaking of one Contracting State shall be taxed only in that State if the undertaking does not carry out its business in the other Contracting State through a permanent establishment located there. Where an undertaking carries out its activities in this way, the profits of the undertaking may be taxed in that other State, but only to the extent that they can be attributed to that permanent establishment.

2. Where an undertaking of a Contracting State carries on its activities in the other Contracting State through a permanent establishment situated there, it shall be attributed, subject to the provisions of paragraph 3, in each Contracting State of that permanent establishment, to profits which could have been achieved if it had been engaged in the same or similar activities as a separate undertaking under the same or similar conditions and was wholly independent in contact with the undertaking of which it is a permanent establishment.

3. In calculating the profits of a permanent establishment, it is permitted to deduct the costs incurred by an undertaking for the objectives pursued by that permanent establishment, including management expenses and general administrative expenses thus incurred, whether they arise in the State in which that permanent establishment is located or elsewhere.

4. Where, in a Contracting State, it is customary to determine the profits to be added to a permanent establishment on the basis of the distribution of the company's total profits by its various parts, the provisions of paragraph 2 of this Article shall not preclude that Contracting State from determining the profits to be taxed by this normal distribution. However, the method used to distribute profits shall be such that the result is consistent with the principles set out in this Article.

5. A permanent establishment shall not make any profits on the basis that it only purchased goods for the undertaking.

(6) For the purposes of the preceding paragraphs, the profits to be attributed to a permanent establishment shall be determined in the same way each year, unless there are sufficient grounds for otherwise.

7. Where profits include revenue which is dealt with separately in other Articles of this Treaty, the provisions of those Articles shall not be affected by the provisions of this Article.

Transport by ship and air

1. The profits of an undertaking of a Contracting State from the operation of ships, boats or aircraft in international transport shall be taxed only in that Contracting State.

2. Paragraph 1 shall also apply to profits arising from participation in a pool, joint operation or an international operational organisation.

Associate undertakings

If

(a) the undertaking of one Contracting State participates, directly or indirectly, in the management, control or capital of the undertaking of the other Contracting State; or

(b) the same persons are directly or indirectly involved in the management, control or capital of an undertaking of one Contracting State as well as of an undertaking of the other Contracting State and, in such cases, if both undertakings are bound in their commercial or financial relations by conditions which have been agreed or imposed on them and which differ from those which would be negotiated between independent undertakings, any profits which, if not for those conditions, would have been achieved by one of the undertakings but have not been achieved, may be included in the profits of that undertaking and subsequently taxed.

Dividends

1. Dividends paid by a company resident in one Contracting State may be taxed in that other Contracting State.

2. However, such dividends may also be taxed in the Contracting State in which the company which pays them is resident under the legislation of that State, but where the beneficiary is the beneficial owner of dividends, the tax shall not exceed:

(a) 5% of the gross amount of dividends where the beneficial owner is a company (but not a personal company that does not have legal personality) which owns directly at least 25% of the capital of the dividend-paying company;

(b) 10% of the gross amount of dividends in all other cases.

This paragraph shall not affect the taxation of the profits of the company on which dividends are paid.

3. The term "dividends," used in this Article, refers to income from shares or other rights - with the exception of receivables - with a share in profits as well as income from other rights to companies which are subject to the same taxation as income from shares under the tax legislation of the State in which the company which differentiates profits is resident.

4. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of dividends resident in one Contracting State carries out an industrial or commercial activity through a permanent establishment located there or an independent profession through a permanent establishment situated there in the other Contracting State in which the dividend is resident, and where the participation for which the dividends are paid is actually linked to that permanent establishment or to that permanent establishment. In that case, the provisions of Article 7 or Article 14 shall apply depending on the case.

5. Where a company which is resident in one Contracting State achieves profits or income from the other Contracting State, that other State may not tax dividends paid by the company, unless such dividends are paid to the resident of that other Contracting State, or that the participation for which dividends are paid actually belongs to a permanent establishment or permanent base located in that other State, nor may it subject the company's undistributed profits to tax on the company's undistributed profits, even if the dividends or earnings paid are wholly or partly derived from profits or income obtained in that other State.

Interest

1. Interest having a source in one Contracting State which is received by a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which they have the source, under the legislation of that State, but where the beneficiary is the beneficial owner of the interest, the tax thus imposed shall not exceed 10% of the gross amount of interest.

3. notwithstanding the provisions of paragraph 2:

(a) interest, the source of which is in one contracting State and which is received by the government of the other contracting State, including its lower administrative departments or local authorities, the central bank of that other State or any other government financial institution or any resident of that other contracting State with regard to claims guaranteed or indirectly financed by the government of that other contracting State, including its lower administrative departments or local authorities, the central bank of that other contracting State or other government financial institution, shall be exempt from tax in the former Contracting State;

(b) interest paid in connection with the sale of an industrial, commercial or scientific credit or in connection with the sale of a credit of any kind by one undertaking to another undertaking shall be subject to taxation only in the Contracting State in which the beneficial owner is resident.

4. For the purposes of paragraph 3, the terms "central bank 'and" government financial institutions' shall mean:

(a) for Korea:

(i) Bank of Korea;

(ii) the Korean Export and Import Bank;

(iii) the Korean Development Bank;

(iv) another financial institution the capital of which is owned by the Government of the Republic of Korea, which has been so occasionally agreed upon by the Governments of both Contracting States;

(b) in the case of Czechoslovakia:

(i) Czechoslovak State Bank;

(ii) another financial institution, the capital of which is owned by the Government of the Czech and Slovak Federal Republic, which has been so occasionally agreed by the governments of both Contracting States.

5. The term "interest" used in this Article shall refer to income on claims of any kind, secured or not secured by a lien on immovable property, or having or not a right to participate in the debtor's profit, and in particular, income from government securities and income from bonds or bonds, including premiums and rewards associated with such securities, bonds and bonds.

6. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of interest resident in a Contracting State is engaged in an industrial or commercial activity in the other Contracting State in which the interest is received through a permanent establishment situated there or through an independent profession located there, and where the claim on which the interest is paid actually relates to that permanent establishment or to that permanent establishment. In that case, the provisions of Article 7 or Article 14 shall apply depending on the case.

7. Interest is assumed to have a source in one Contracting State, if the payer is the latter himself, its lower administrative department, the local office or resident of that State. However, if the person paying interest, whether resident in a Contracting State or not, has a permanent establishment or a permanent base in the Contracting State in respect of which the debt on which the interest is paid has been incurred and such interest is chargeable to such a permanent establishment or permanent base, the State in which the permanent establishment or permanent base is located shall be deemed to be the source of such interest.

8. Where the amount of interest relating to the claim on which it is paid exceeds, for whatever reason, the amount which the payer would have agreed with the beneficial owner if it had not been for such a relationship, the provisions of this Article shall apply only to that last amount. In this case, the amount of the salary exceeding it shall be taxed under the legislation of each Contracting State, taking into account the other provisions of this Treaty.

Licence fees

1. Licensing fees, having a source in one Contracting State, received by a resident of the other Contracting State, may be taxed in that other State.

However, the royalties referred to in paragraph 3 (a) may be taxed in the Contracting State in which their source is located and in accordance with the legislation of that State, but where the beneficiary is the beneficial owner of the royalties, the amount of tax thus determined shall not exceed 10% of the gross amount of the royalties. The licence fees referred to in paragraph 3 (b) shall be exempt from taxation in the Contracting State in which their source is located.

3. The term "licence fees' used in this Article refers to payments of any kind received as compensation for use or the right to use:

(a) a patent, trade mark, design or model, plan, secret formula or manufacturing process or industrial, commercial or scientific establishment, or for information relating to experience acquired in the field of industrial, commercial or scientific;

(b) copyright for the work of literary, artistic or scientific, including cinematographic films and films or recordings for radio or television broadcasting.

4. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of royalties resident in one Contracting State is engaged in a source, industrial or commercial activity through a permanent establishment situated there, or an independent profession through a permanent base situated there, and where the right or property giving rise to royalties is actually linked to that permanent establishment or permanent base. In this case, the provisions of Article 7 or Article 14 shall apply depending on the case.

5. Licensing fees are assumed to have a source in a Contracting State, if the payer is that Contracting State itself, its administrative department, local authority or resident of that State. However, where a licence fee payer, whether or not resident in a Contracting State, has a permanent establishment or permanent base in a Contracting State, in conjunction with which a licence fee has been charged to a permanent establishment, it is assumed that such licence fees have a source in the Contracting State in which the permanent establishment or permanent base is located.

6. Where the amount of royalties relating to the use, right or information for which they are paid exceeds, for any reason, the amount of the royalties which the payer would have agreed with the beneficial owner if it were not for such relationships, the provisions of this Article shall apply only to that latter amount. In this case, the amount of the salary exceeding it shall be taxed under the legislation of each Contracting State, taking into account the other provisions of this Treaty.

Profit from disposal

1. The profits of a resident of one Contracting State from the disposal of immovable property referred to in Article 6 and located in the other Contracting State may be taxed in that other Contracting State.

(2) Profit from the disposal of movable property which is part of the assets of a permanent establishment held by an undertaking of a Contracting State in the other Contracting State, or of movable property belonging to a permanent base which a resident of one Contracting State has in the other Contracting State to pursue an independent occupation, including such profits obtained from the disposal of such permanent establishment (on its own or together with the whole undertaking) or such permanent base may be taxed in that other State.

3. Profit from the disposal of ships and aircraft operating in international transport and of movable property serving the operation of such ships and aircraft shall be taxed only in the State of residence of the undertaking.

(4) Profit from the disposal of assets other than those referred to in paragraphs 1, 2 and 3 shall be subject to taxation only in the Contracting State in which the transferee is resident.

Independent professions

1. Revenue received by a resident of a Contracting State from a professional or other independent activity shall be taxed only in that State, unless the beneficiary normally has a permanent basis in the other Contracting State to carry out his activity. If such a permanent base is available, income may be taxed in the other Contracting State, but only to the extent that it can be attributed to that permanent base.

2. The term "free profession" includes the particularly independent activities of scientific, literary, artistic, educational or teaching and the separate activities of doctors, lawyers, engineers, architects, dentists and accountants.

Employment

1. Salaries, wages and other similar remuneration received by a resident of a Contracting State on account of paid employment shall be subject, subject to the provisions of Articles 16, 18, 19, 20 and 21, to taxation in that State only if the employment is not carried out in the other Contracting State. If there is employment there, the remuneration received for them may be taxed in that other State.

2. The remuneration received by a resident of a Contracting State on the grounds of employment in the other Contracting State shall, notwithstanding the provisions of paragraph 1, be taxed only in the former State if all the following conditions are met:

(a) the beneficiary shall stay in the other State for one or more periods not exceeding 183 days in total in any 12-month period; and

(b) remuneration is paid by an employer or an employer who is not resident in the other State; and

(c) the remuneration shall not be borne by a permanent establishment or permanent base held by an employer in the other State.

3. Notwithstanding the previous provisions of this Article, remuneration received on account of employment carried on board a ship or aircraft operated in international transport by an undertaking of a Contracting State shall be subject to taxation in that State.

Tantiems

Tantiémes and other similar remuneration received by a resident of one Contracting State as a member of the board of directors of a company or another similar body of a company resident in the other Contracting State may be taxed in that other State.

Artists and athletes

1. Revenue received by a resident of a Contracting State acting as an artist acting in public, such as a theatre, film, radio or television artist or musician or as an athlete from such personal activities in the other Contracting State, may be taxed in that other Contracting State regardless of the provisions of Articles 14 and 15.

2. Where the income from artistic or sporting activities carried out personally by an artist or an athlete does not result from such an artist or an athlete alone, but from another person, such income may be taxed, irrespective of the provisions of Articles 7, 14 and 15, in the Contracting State in which the artist or athlete carries out his activity.

3. Revenue received by artists or athletes resident in one Contracting State from activities carried out in the other Contracting State on the basis of a special cultural exchange programme agreed between the Governments of the two Contracting States shall be exempt from taxation in that other Contracting State, notwithstanding the provisions of paragraphs 1 and 2.

Pension

Pensions and other similar salaries paid on account of former employment of a resident of a Contracting State shall be taxed only in that State, subject to the provisions of paragraph 1 of Article 19 of this Treaty.

Public functions

1. (a) Rewards, other than pensions, paid by one Contracting State or by a lower administrative department or local authority of that State to a natural person for services rendered to that State or administrative department or local authority shall be subject to taxation only in that State.

(b) Such remuneration shall, however, be taxed only in the second Contracting State where the services are demonstrated in that State and the natural person resident in that State:

(i) is a national of that State; or

(ii) has not become resident in that State solely because of the provision of such services.

2. (a) Pensions paid by a Contracting State, a lower administrative department or a local authority of that State, either directly or from the funds which they have set up, to a natural person for services demonstrated to that State, administrative department or local authority, shall be subject to taxation only in that State.

(b) However, such pensions shall be taxed only in the second Contracting State if the natural person is resident and a national of that State.

3. The provisions of Articles 15, 16 and 18 shall apply to the remuneration and pensions of services shown in connection with an industrial or commercial activity carried out by a Contracting State, a lower administrative department or a local authority of that State.

4. The provisions of paragraphs 1 and 2 of this Article shall also apply to remuneration or pensions paid, in the case of Korea, the Bank of Korea and the Korean Trade Promotion Company, and in the case of Czechoslovakia, the Czechoslovak State Bank and the Czechoslovak Business Centre.

Students

1. Salaries received by a student or apprentice who is, or was, resident in the other Contracting State immediately prior to his or her arrival in one Contracting State and who is resident in the former State for the sole purpose of study or training, shall not be taxed in that State for the cost of nutrition, study or training, provided that such salaries are paid to him from sources outside that State.

2. A student of a university or other higher education institution in one Contracting State or an apprentice who is present in the other Contracting State for one or more periods not exceeding 183 days in any 12-month period and who is, or was, a resident of the former State immediately prior to his arrival, shall not be taxed on remuneration for services provided in that other State provided that such services are linked to his studies or training and generate the necessary income for his nutrition.

Citation	Communication from the Ministry of Foreign Affairs No. 124 / 1995 Coll., on the Agreement between the Czech and Slovak Federal Republic and the Republic of Korea on the avoidance of double taxation and the prevention of tax evasion in the field of income tax
Regulation Type	-
Author	-
Collection	Code of Laws

Date of Promulgation	14.07.1995
Effective from	03.03.1995
Effective until	-
Status	Valid

Communication from the Ministry of Foreign Affairs on the Treaty between the Czech and Slovak Federal Republic and the Republic of Korea on the avoidance of double taxation and the prevention of tax evasion in the field of income taxes

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