Communication from the Ministry of Foreign Affairs No. 206 / 2024 Coll.

Q: Is Communication from the Ministry of Foreign Affairs No. 206 / 2024 Coll. still valid?

Yes, Communication from the Ministry of Foreign Affairs No. 206 / 2024 Coll. is still valid and effective.

206

COMMUNICATION

Ministry of Foreign Affairs

on the negotiation of the Treaty between the Czech Republic and the United Arab Emirates on the avoidance of double taxation in the field of income taxes and on the prevention of tax evasion and avoidance

The Ministry of Foreign Affairs announces that on 24 May 2023 a Treaty was signed in Prague between the Czech Republic and the United Arab Emirates on the avoidance of double taxation in the field of income taxes and on the prevention of tax evasion and avoidance.

The Parliament of the Czech Republic agreed to the Treaty and the President of the Republic ratified the Treaty.

The Agreement entered into force on 29 May 2024 on the basis of Article 28 (1) thereof and its provisions shall be implemented in accordance with paragraph 1 (a) and (b) of that Article.

The date on which this Treaty will be implemented will cease to be valid and the provisions of the Treaty between the Czech Republic and the United Arab Emirates on the avoidance of double taxation and the avoidance of tax evasion in the field of income and property taxes signed in Washington on 30 September 19961).

The Czech version of the Treaty and the English text which is relevant for its interpretation are hereby published simultaneously.

Minister:

z. JUDr. Smolek, Ph.D., LL.M., v. r.

Head of Legal and Consular Section

TREATY

INTERI

CZECH REPUBLIC

A

UNITED ARAB EMIRATES

ON THE TERMINATION OF DOUGH REVENUE

_

AND THE IMPLEMENTATION OF THE TAX EFFORT AND EXTENSION OF TAXATION OBLIGATIONS

THE CZECH REPUBLIC AND THE UNITED ARAB EMIRATES,

DESIRING to avoid double taxation in the field of income tax, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through arrangements called "treaty-shopping 'which are aimed at obtaining the concessions provided for in this Treaty, in the indirect benefit of residents of third jurisdictions) and wishing to further develop their economic relations and strengthen their cooperation in tax matters,

agree as follows:

PERSONS CONCERNING THE TREATY

This Agreement shall apply to persons resident in one or both Contracting States.

TAXES TO WHICH THE TREATY IS RELATING

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

2. All taxes levied on total income or on parts of income, including taxes on profits from the disposal of movable or immovable property, taxes on the total amount of wages or salaries paid by undertakings, as well as taxes on the increase of assets, shall be treated as income taxes.

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

(a) in the Czech Republic:

(i) income tax on natural persons;

(ii) corporation tax;

(b) in the United Arab Emirates:

(i) income tax;

(ii) company income tax.

4. The Treaty will also apply to any tax of the same or essentially similar kind which will be imposed after the date of signature of the Treaty in addition to or instead of the current taxes. The competent authorities of the Contracting States shall communicate to each other any substantial changes made to their tax laws.

GENERAL DEFINITIONS

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

(a) the term "Czech Republic" refers to the territory of the Czech Republic in which, under Czech law and in accordance with international law, the sovereign rights of the Czech Republic are exercised;

(b) the term "United Arab Emirates," when used in geographical importance, refers to the territory of the United Arab Emirates which is under their sovereignty, as well as to an area outside the territorial waters, airspace and subsea areas where the United Arab Emirates exercises sovereign and jurisdictional rights in respect of any activity carried out in connection with the exploration or extraction of natural resources in their waters, seabed, subsoil, on the basis of their legislation and international law;

(c) the terms "One Contracting State" and "the other Contracting State" denote, according to the context, the Czech Republic or the United Arab Emirates;

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

(e) the term "company" refers to any legal person or any rightholder regarded as a legal person for taxation purposes;

(f) the term "undertaking" refers to the pursuit of any activity;

(g) the terms "undertaking of one Contracting State" and "undertaking of the other Contracting State" indicate, according to the context, an undertaking operated by a resident of one Contracting State and an undertaking operated by a resident of a dear Contracting State;

(h) the term "national" means:

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

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

(i) the term "activity" shall also include the pursuit of a professional profession and other independent activities;

(j) the term "international transport" shall mean any transport by ship or aircraft operated by an undertaking of one Contracting State, except where the ship is operated or the aircraft is operated only between points in the other Contracting State;

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

(i) in the case of the Czech Republic, the Minister of Finance or his authorised representative;

(ii) in the case of the United Arab Emirates, the Minister of Finance or his authorised representative.

2. With regard to the implementation of the Treaty at any time by any of the Contracting States, any expression which is not defined therein, unless the link requires a different interpretation, shall have the meaning which it has at that time under the legislation of that State for the purposes of the taxes to which the Treaty applies, and any meaning under the tax laws of that State shall prevail over the meaning of that State's other legislation.

RESIDENT

1. for the purposes of this Treaty, the term "resident of a Contracting State" shall mean:

(a) in the case of United Arab Emirates:

any person who, under the legislation of the United Arab Emirates, is considered to be resident of the United Arab Emirates unless such person is resident of a third State. This term also includes the United Arab Emirates and any lower administrative department or local authority thereof and any entity wholly owned, directly or indirectly, by the Government of the United Arab Emirates or by one or more of the above mentioned departments or offices;

(b) for the Czech Republic:

any person who is subject to taxation under the legislation of the Czech Republic because of his residence, permanent residence, head office or any other similar criterion, and also includes the Czech Republic and any lower administrative department or local authority. This term does not, however, include any person subject to taxation in the Czech Republic solely because of income from sources in the Czech Republic.

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

(a) that person shall be deemed to be resident only in the State in which he has a permanent flat; if it has a permanent apartment in both States, it shall be considered as resident only to the State for which it has closer personal and economic relations (centre of life interests);

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

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

(d) where that person is a national of both States or none 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 pursuant to paragraph 1, the competent authorities of the Contracting States shall endeavour, by common accord, to designate a Contracting State which, for the purposes of the Treaty, is deemed to be resident, taking into account the place of its principal management, the place where it was established or otherwise legally established and any other relevant factors. If such an agreement is not found, that person shall not be entitled to any tax relief or exemption provided for or provided for by the Treaty.

STANDING OPERATIONS

(1) For the purposes of this Treaty, the term "permanent establishment" shall mean a permanent place of business through which the business of the undertaking is to be carried out 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) a workshop; and

(f) mine, oil or gas site, quarry or any other site of extraction of natural resources.

3. the term "permanent establishment" also covers:

(a) a construction site or construction, assembly or installation project or supervision associated with it, but only if such construction site, project or supervision lasts for more than six months;

(b) the provision of services, including consultancy or management services, by an undertaking of one contracting State or through staff or other personnel hired by the undertaking for that purpose, but only if the activities of that nature persist in the territory of the other contracting State for one or more periods exceeding six months in total in any 12-month period.

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

(a) an establishment which is used only for the purpose of storing or issuing goods belonging to an undertaking;

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

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

(d) a permanent place of activity which shall be maintained only for the purpose of purchasing goods or collecting information for the undertaking;

(e) a permanent place of activity which shall be maintained only for the purpose of carrying out any other activity for the undertaking;

(f) a permanent place of activity which shall be maintained only for the pursuit of any combination of the activities referred to in (a) to (e);

where such an activity or, in the case of point (f), the overall activity of a permanent place of activity is of a preparatory or auxiliary 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 and normally exercises the right to conclude contracts on behalf of an undertaking, that undertaking shall be deemed to have a permanent establishment in that State in respect of all activities carried out by that person for the undertaking, provided that the activities of that person are not limited to the activities referred to in paragraph 4, which, if carried out through a permanent place of business, would not be based on that permanent establishment in accordance with the provisions of this paragraph.

6. An undertaking shall not be considered to have a permanent establishment in a Contracting State only because it carries out its business in that State through a broker, a general agent or any other independent agent, where such persons act in the course of their proper activities. However, where the activities of such a representative are wholly or almost entirely devoted to the interests of that undertaking and other undertakings which are controlled by it or which have an interest in its control, that representative shall not be considered as independent within the meaning of this paragraph.

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

REVENUE FROM IMMOVABLE PROPERTY

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

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

3. Paragraph 1 shall apply to revenue received from direct use, hire or any other use of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to income from the company's immovable property.

PROFIT OF UNDERTAKINGS

1. The profits of an undertaking of one Contracting State shall be subject to taxation only in that State if the undertaking does not carry out its activities in the other Contracting State through a permanent establishment situated there. If an undertaking carries out its activities in this way, the profits of the undertaking may be taxed in the other State, but only to the extent that they can be attributed to this 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 paragraph 3, to each Contracting State of that permanent establishment, the profits which it could have achieved had it been engaged as a separate undertaking in the same or similar activities under the same or similar conditions and been wholly independent in contact with the undertaking of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, it is permitted to deduct costs incurred for the purposes of a permanent establishment, including management expenses and general administrative expenses thus incurred, whether they arise in the State where the 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 different parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by this normal division; However, the method of division used shall be such that the result complies 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 added to a permanent establishment shall be determined in the same way each year, unless there are sufficient grounds for otherwise.

7. Where profits include parts of income which are dealt with separately in other Articles of this Treaty, the provisions of those Articles shall be without prejudice to the provisions of this Article.

ACTIVITIES RELATING TO NATURAL RESOURCES

Nothing in this Treaty shall affect the right of the contracting State or its lower administrative department or local authority to implement its own legislation and rules on taxation of income and profits derived from the exploration, disclosure or extraction of hydrocarbons or other natural resources located in that State.

AQUATIC AND AVIATION TRANSPORT

1. The profits received by the undertaking of a Contracting State from the operation of ships or aircraft in international transport shall be subject to taxation only in that State.

2. The profits covered by this Article shall remain on the profits earned by the undertaking from the carriage of passengers or the cost of ships or aircraft (whether owned, leased or otherwise made available to the undertaking) operated by the undertaking in international transport. This Article shall also apply, irrespective of any other provisions of this Treaty, to profits from activities directly related to the operation of ships or aircraft in international transport, as well as to profits (e.g. profits from the hire of ships or aircraft without crew, profits from the use, maintenance or hire of containers used for the carriage of costs, profits from the sale of tickets or tickets on behalf of another undertaking operating ships or aircraft in international transport) where such profits are incidental or incidental in relation to profits from the operation of ships or aircraft in international transport.

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

ASSOCIATED 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 participate, directly or indirectly, in the management, control or capital of an undertaking of one Contracting State and of an undertaking of the other Contracting State;

and if, in such cases, both undertakings are bound in their commercial or financial relations by the conditions which they have negotiated or imposed on them and which differ from those which would have been 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, resident in the other Contracting State, may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company which pays them is resident under the law of that State, but where the beneficial owner of dividends is resident in the other Contracting State, the tax thus imposed shall not exceed 5 per cent of the gross amount of dividends.

The competent authorities of the Contracting States shall, by mutual agreement, adapt the method of application of this restriction.

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

3. Dividends paid by a company resident in a Contracting State shall be exempt from taxation in that State, notwithstanding the provisions of paragraph 2, where dividends are actually owned by:

(a) by the other Contracting State or its Government or by any lower administrative department or local authority of that State; or

(b) the central bank of that other State; or

(c) any entity, directly or indirectly, wholly owned by or by one of the entities referred to in points (a) and (b) of this paragraph.

4. 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 other income which is subject to the same tax regime as income from shares under the legislation of the State of which the company making the payment is resident.

(5) Paragraphs 1, 2 and 3 shall not apply where the beneficial owner of dividends resident in one Contracting State carries out his activity in the other Contracting State of which the dividend company is resident through the permanent establishment that is located there and where the participation for which the dividends are paid is actually linked to that permanent establishment. In that case, the provisions of Article 7 shall apply.

6. 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 those dividends are paid to the resident of that other State or that the holding for which dividends are paid actually relates to a permanent establishment located in that other State, or to subject the company's undistributed profits to tax on the company's undistributed profits, even if the dividends paid or earnings distributed are wholly or partly derived from profits or income having a source in that other State.

INTEREST

1. Interest having a source in one Contracting State and actually owned by a resident of the other Contracting State shall be subject to taxation only in that other State.

2. The term "interest 'used in this Article refers to income on claims of any kind, whether secured or not, or not secured by a lien on immovable property and having or not having the right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or bonds, including premiums and winnings related to such securities, bonds or bonds. Penalties imposed for late payment shall not be considered as interest for the purposes of this Article. The term" interest' does not include any part of income which is considered a dividend under the provisions of Article 11 (4).

3. The provisions of paragraph 1 shall not apply where the beneficial owner of interest resident in one Contracting State carries out his activity in the second Contracting State in which the interest is received through the permanent establishment which is located there and where the claim on which the interest is paid actually relates to that permanent establishment. In that case, the provisions of Article 7 shall apply.

4. Interest shall have a source in a Contracting State if the payer is a resident of that State. However, if the interest payer, whether or not he is a resident of a Contracting State, has a permanent establishment in the Contracting State, in conjunction with the debt on which the interest is paid, and that interest is payable on such a permanent establishment, that interest shall have a source in the State in which the permanent establishment is situated.

5. If the amount of interest relating to the claim on which it is paid exceeds, due to the special relationship between the payer and the beneficial owner or between both of them and any other person, 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 latter amount. In this case, the amount of payments exceeding it shall be taxed in accordance with the laws of each Contracting State, taking into account the other provisions of this Treaty.

LICENCES

1. Licensing fees having a source in one Contracting State and paid to the resident of the other Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which they have a source under the legislation of that State, but if the beneficial owner of the royalties is resident in the other Contracting State, the tax thus imposed shall not exceed 10 per cent of the gross amount of royalties.

The competent authorities of the Contracting States shall, by mutual agreement, adapt the method of application of this restriction.

3. The term "licence fees' used in this Article refers to payments of any kind received as compensation for use or as a right to use any copyright for the work of literary, artistic or scientific, including cinematographic films, any patent, trade mark, design or model, plan, secret formula or procedure, or any industrial, commercial or scientific establishment, or to information relating to experience acquired in the field of industrial, commercial or scientific.

4. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of a licence fee which is resident in a Contracting State, in the other Contracting State in which the licence fee is provided, carries out his activity through a permanent establishment which is located there and where the right or property which gives rise to the licence fee is actually linked to that permanent establishment. In that case, the provisions of Article 7 shall apply.

5. Licensing fees shall have a source in the Contracting State where the payer is a resident of that State. However, where a licence fee payer, whether or not resident in a Contracting State, has a permanent establishment in a Contracting State in conjunction with which a licence fee has been paid and such licence fees are payable by such a permanent establishment, such licence fees shall have a source in the State in which the permanent establishment is located.

6. Where the amount of royalties relating to the use, right or information for which they are paid exceeds, as a result of the special relationship between the payer and the beneficial owner or between both of them and any other person, the amount which the payer would have agreed with the beneficial owner if it had not been for such relations, the provisions of this Article shall apply only to that latter amount. In this case, the amount of payments exceeding it shall be taxed in accordance with the laws of each Contracting State, taking into account the other provisions of this Treaty.

OWN FUNDS PROFIT

(1) Profit received by 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 State.

(2) Profit from the disposal of movable property which is part of the operating property of a permanent establishment held by an undertaking of one Contracting State in the other Contracting State, including the proceeds from the disposal of such permanent establishment (alone or together with the whole undertaking), may be taxed in that other State.

3. Profit from the disposal of assets which are part of the operating assets of an undertaking of a Contracting State and which remains from ships or aircraft operated by that undertaking in international transport or from movable assets used to operate such ships or aircraft shall be subject to taxation only in that State.

(4) The profits received by a resident of one Contracting State from the disposal of shares or other shares in a company resident in the other Contracting State may be taxed in that other State. However, where such profits are received:

(a) by a Contracting State or its Government or by any lower administrative department or local authority of that State; or

(b) the central bank of a Contracting State; or

(c) any entity, directly or indirectly, wholly owned by or by one of the entities referred to in points (a) and (b) of this paragraph;

the profits are subject to taxation only in the Contracting State of which the transferee is resident.

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

REVENUE FROM EMPLOYMENT

1. Salaries, wages and other similar remuneration received by a resident of a Contracting State on account of employment shall be subject, subject to the provisions of Articles 16, 18 and 19, 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 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 subject to taxation only in the former State if all the following conditions are met:

(a) the beneficiary shall be employed in the other State for one or more periods not exceeding 183 days in total in any 12-month period beginning or ending in the relevant tax year; and

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

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

3. The following days shall be included in the calculation of the period referred to in paragraph 2 (a):

(a) all days of physical presence, including days of arrival and departure; and

(b) days spent outside the State of activities such as Saturdays and Sundays, public holidays, holidays and business trips directly linked to the employment of the beneficiary in that State, after which the activity in that State continued.

4. The term "employer" referred to in paragraph 2 (b) shall refer to a person who has the right to work done and who bears responsibility and the risk associated with carrying out the work.

5. Notwithstanding the previous provisions of this Article, remuneration received on account of employment carried on board a ship or aircraft operated or operated in international transport by an undertaking of a Contracting State may be taxed in that State.

TANTIES

Tantiéms and other similar remuneration received by a resident of one Contracting State as a member of the Management Board or any other similar body of a company resident of the other Contracting State may be taxed in that other State.

Artists and SPORTS

1. Revenue received by a resident of a Contracting State as an artist acting in public, such as a theatre, film, radio or television artist or musician or as an athlete from such personally performed activities in the other Contracting State may be taxed in that other State, irrespective of the provisions of Articles 7 and 15.

2. Where the income from activities personally carried out by an artist or an athlete does not originate from artists or athletes themselves but from other persons, that income may be taxed, irrespective of the provisions of Articles 7 and 15, in the Contracting State in which the activities of an artist or athlete are carried out.

PENZE

Pensions and other similar salaries paid by a resident of a Contracting State on account of former employment shall be subject to taxation only in that State, subject to the provisions of Article 19 (2).

PUBLIC FUNCTIONS

1. (a) Salaries, wages and other similar remuneration 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 branch or office shall be subject to taxation only in that State.

(b) However, such salaries, wages and other similar remuneration shall be subject to taxation 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) it did not become a resident of that State solely for the purpose of proving these services.

2. (a) Pensions and other similar salaries paid by one Contracting State or a lower administrative department or local authority of that State or paid from the funds they have set up to a natural person for services demonstrated to that State or department or office shall be subject, notwithstanding the provisions of paragraph 1, to taxation in that State alone.

(b) Such pensions and other similar salaries shall, however, be subject to taxation only in the second Contracting State if the natural person is resident and a national of that State.

Citation	Communication from the Ministry of Foreign Affairs No. 206 / 2024 Coll., on the Agreement between the Czech Republic and the United Arab Emirates on the avoidance of double taxation in the field of income taxes and on the prevention of tax evasion and avoidance
Regulation Type	International Treaty
Author	-
Collection	Code of Laws

Date of Promulgation	01.07.2024
Effective from	29.05.2024
Effective until	-
Status	Valid

Communication from the Ministry of Foreign Affairs on the Treaty between the Czech Republic and the United Arab Emirates on the avoidance of double taxation in the field of income tax and on the prevention of tax evasion and avoidance

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