Communication from the Ministry of Foreign Affairs No. 21 / 1995 Coll.

Q: Is Communication from the Ministry of Foreign Affairs No. 21 / 1995 Coll. still valid?

Yes, Communication from the Ministry of Foreign Affairs No. 21 / 1995 Coll. is still valid and effective.

21

COMMUNICATION

Ministry of Foreign Affairs

The Ministry of Foreign Affairs states that on 12 December 1993 the Treaty between the Czech Republic and the State of Israel was signed in Jerusalem to prevent double taxation and prevent tax evasion in the field of income tax.

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 23 December 1994.

The Treaty entered into force on 23 December 1994 pursuant to Article 29 (2) thereof.

The Czech translation of the Treaty is announced simultaneously. 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 Republic

and

State of Israel

on the avoidance of double taxation and avoidance of tax evasion

in the field of income taxes

Government of the Czech Republic and Government of the State of Israel

Desiring to conclude a Double Taxation Treaty and prevent tax evasion in the field of income taxes

and assist in the further development of mutual relations,

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 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 part 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:

(a) in the Czech Republic:

(i) income tax on natural persons;

(ii) corporation tax;

(hereinafter referred to as the "Czech tax ');

(b) Israel

(i) taxes levied under the Income Tax Ordinance and related laws;

(ii) profit tax and wage tax on financial institutions and insurance companies;

(hereinafter referred to as the "Israeli tax ').

4. This Treaty shall also apply to taxes of the same or similar kind to be imposed after the signature of this Treaty in addition to or instead of the current taxes. 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 "Czech Republic" shall mean the territory in which the tax laws of the Czech Republic apply;

(b) the term "Israel" shall mean the State of Israel in accordance with its laws and, where it is used in its geographical sense, includes, but is not limited to, the Sovereign waters of Israel and any area outside the Sovereign waters which, in accordance with the laws of Israel, is the territory in which the rights of Israel in the exploration and exploitation of natural, biological and mineral resources situated in, and under the seabed of, marine waters may be exercised;

(c) the terms "one Contracting State" and "the other Contracting State" refer to the Czech Republic or Israel as appropriate;

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

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

(f) the terms "undertaking of one Contracting State" and "undertaking of the other Contracting State" refer to 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, personal 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, road vehicle or aircraft operated by an undertaking whose place of effective management is situated in one Contracting State, provided that such transport is not carried out only between points in the other Contracting State;

(i) 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 Israel, the Minister of 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. For the purposes of this Treaty, the term "resident of one Contracting State" shall mean 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 administration, place of establishment or any other similar criterion. However, this term does not include a person who is subject to taxation in that Contracting State solely for reasons of income from resources in that State or property situated in that State.

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

(a) that person is presumed to be resident in the State in which he has a permanent residence; if he has a permanent residence in both States, he is presumed to be resident in the State to which he 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 / she shall be presumed to be resident in the State in which he / she normally resides;

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

(d) where that person is a national of both States or of any of them, the competent authorities of the Contracting States shall adjust that question by means of a first-name 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. If the State in which the actual management site is located cannot be determined, the competent authorities of the Contracting States shall adjust the matter by mutual agreement.

Permanent establishment

1. For the purposes of this Treaty, the term "permanent establishment 'shall refer 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 term "permanent establishment" also covers:

(a) construction site or construction, installation or assembly project, but only if such construction site or project lasts for more than 12 months;

(b) the provision of services, including consultancy and management services, provided by the undertaking through employees or other staff employed by the undertaking for such purposes, but only if the activities of that nature (for the same or related project) persist in the territory of the State for one or more periods exceeding a total of more than six months 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 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 which is maintained only for the purpose of purchasing goods or collecting information for the undertaking;

(e) permanent business equipment which is maintained only for the purpose of advertising, the provision of information, scientific research or similar activities which have a preparatory or ancillary character for 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 subparagraphs (a) - (e) where the total activity of the permanent establishment resulting from that concentration 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, it 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 they were 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 on 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.

7. The fact that a company which is resident in one Contracting State controls a company or is controlled by a company which is resident in the other Contracting State or which 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 received by a 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 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 salaries for mining or to be allocated to 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 company's immovable property and to income from immovable property used for the pursuit of an independent profession.

Profits of enterprises

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. 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 out 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 State, to profits which could have been achieved if, as a separate undertaking, it had been engaged in the same or similar activities 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 necessary 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 shall not preclude that Contracting State from determining the profits to be taxed by this normal distribution; However, the method of distribution of profits 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 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.

International transport

1. Profit from the operation of ships, road vehicles or aircraft in international transport shall be subject to taxation only in the Contracting State in which the head office of the undertaking's actual management is located. For the purposes of this Article, the term "profits' shall include revenue from the occasional hire of ships, road vehicles or aircraft, provided that such lease is incidental to the operation of international transport.

2. Where the head office of a shipping undertaking is on board a ship, it shall be deemed to be located in the Contracting State in which the home port of that ship is situated or, in the absence of such a home port, in the Contracting State in which the operator of the ship is resident.

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

Associate undertakings

1.

(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 the undertaking of one Contracting State and of the undertaking of the other Contracting State;

and if, in such cases, 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 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.

2. If one contracting State includes in the profits of that State's undertaking and subsequently tax-exempt profits on which the undertaking of the other contracting State has been taxed in that other State and the profits thus included are profits which would have been realised by the undertaking of the first State if the conditions negotiated between undertakings had been such as would have been agreed between independent undertakings, the other State shall adjust the amount of tax levied on those profits in that State accordingly. When establishing such an adjustment, due account shall be taken of other provisions of this Treaty and, if necessary, the competent authorities of the Contracting States shall consult each other for that purpose.

3. Paragraph 2 shall not apply in the case of fraud or conscious negligence.

Dividends

1. Dividends paid by a company which is resident in one Contracting State may be taxed in that other 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 beneficiary is a company (other than a personal company) which directly owns at least 15% of the assets of the company paying dividends;

(b) 15% 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, profit or loss shares, coupons, founding shares or other rights with a profit participation, with the exception of receivables, as well as income from rights to companies which, under the tax rules of the State in which the company which divides profits is resident, are equal to income from shares.

4. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of dividends resident in one Contracting State is engaged in an industrial or commercial activity in the second Contracting State in which the dividend company is resident through a permanent establishment situated there or is engaged in an independent occupation in that other State through a permanent base situated there, and where the participation for which dividends are 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.

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 State, or that the participation for which dividends are paid actually belongs to a permanent establishment or a permanent base located in that other State, or subject the company's undistributed profits to the tax on undistributed profits, even if the dividends paid or retained earnings 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 and 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, interest having a source in one Contracting State and paid by a resident of the other Contracting State shall be subject to taxation only in that other State if such interest is paid on:

(a) bonds, bonds or similar obligations of the Government of the former Contracting State; or

(b) loans granted, refinanced, guaranteed or secured or loans granted, refinanced, guaranteed or secured

(i) in the case of the Czech Republic, the Czech National Bank;

(ii) in the case of Israel, the Bank of Israel.

4. The term "interest" used in this Article shall refer to income from claims of any kind secured or not secured by a lien on immovable property or having or not having the 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 or bonds. Penalties for late payment shall not be considered interest for the purposes of this Article.

5. 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 second Contracting State in which the interest is received through a permanent establishment situated there or through an independent profession through a permanent base situated 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.

6. 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.

7. Where the amount of interest relating to the claim on which it is paid exceeds the amount which the payer would have agreed with the beneficial owner if it were not for such a relationship, 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.

Licence fees

1. Licensing fees, having a source in one Contracting State, paid by a 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 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 5% of the gross amount of the royalties.

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 copyright for the work of literary, artistic or scientific (including cinematographic films, videos and films or recordings for television or radio broadcasting), patent, trade mark, design or model, plan, software, secret formula or production process, or for use or use of industrial, commercial or scientific equipment, or for 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 royalties resident in one Contracting State is engaged in a source, industrial or commercial activity through a permanent establishment located there, or an independent profession through a permanent base located 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 the Contracting State, if the payer is the State itself, its lower 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 a permanent base in a Contracting State, in conjunction with which a licence fee has been charged to a permanent establishment or a permanent base, 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 the amount 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 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.

Profit from disposal

1. Profit accruing from the disposal of immovable property referred to in paragraph 2 of Article 6 by a resident of a Contracting State may be taxed in the Contracting State in which such property is located.

(2) Profit from the disposal of movable property which is part of the operating property 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 for the pursuit of an independent occupation, including such profits obtained from the disposal of such permanent establishment (alone or together with the whole undertaking) or such permanent base, may be taxed in that other State.

3. Profit from the disposal of ships, aircraft or road vehicles operating in international transport or movable property serving the operation of such ships, aircraft or road vehicles shall be subject to taxation only in the Contracting State in which the head office of the undertaking is situated.

4. Profit from the disposal of shares in a company resident in one of the Contracting States may be taxed in that State.

(5) Profit from the disposal of assets other than those referred to in paragraphs 1, 2, 3 and 4 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 subject to taxation only in that State, except where, under the following conditions, such revenue may also be taxed in the other Contracting State:

(a) if it has a permanent base at its regular disposal in the second Contracting State for the purpose of carrying out its activities; in that case, only such revenue attributable to that permanent base may be taxed in that other State; or

(b) if he stays in the other State for one or more periods exceeding 183 days in total in any 12-month period; in that case, only such revenue resulting from its activities in that other State may be taxed in that other State.

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

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, 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. Rewards received by a resident of a Contracting State for employment in the other Contracting State shall be subject, notwithstanding the provisions of paragraph 1, to taxation only in the former State where:

(a) the consignee shall stay in the other State for one or more periods which shall not exceed 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 out on board a ship, aircraft or road vehicle in international transport may be taxed in the Contracting State in which the head office of the undertaking's management is located.

Tantiems

Tantiéms and other similar remuneration received by a resident of one Contracting State as a member of the Management Board 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 as a public performer, 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 regardless of the provisions of Articles 14 and 15.

2. Where the income from activities personally carried out by an artist or an athlete does not result from such an artist or athlete alone but from another person, that 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 accruing from artists or sportsmen resident in one Contracting State from activities which they personally carry out in the other Contracting State shall be subject to taxation, irrespective of the provisions of paragraphs 1 and 2, only in the former State where the activities in the latter State are wholly or principally covered by public funds of the former State, including its lower administrative departments or local authorities, and those activities shall be carried out on the basis of a bilateral cultural agreement between those Contracting States.

Pension

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

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

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

(b) Such pensions shall, however, be subject to taxation only in the second Contracting State where 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.

Students and apprentices

Salaries received by a student or apprentice who is, or was, resident in a Contracting State immediately prior to his or her arrival in the other Contracting State and who resides 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.

Teachers and researchers

The remuneration received for teaching or research by a natural person who, or immediately before visiting one Contracting State, was resident in the other Contracting State and who resides in the former State for the purpose of carrying out research or teaching in an educational institution shall be exempt from taxation in the former State. This exemption shall be granted for a period not exceeding two years from the date of the first arrival of that teacher or researcher in the country. This Article shall not apply to research revenue where such research is carried out not for the public interest but primarily for the private benefit of a person or persons.

Other revenue

1. The income of a person resident in a Contracting State, wherever a source is not covered by the preceding Articles of this Treaty, shall be subject to taxation only in that State.

2. The provisions of paragraph 1 shall not apply to income other than income from immovable property as defined in paragraph 2 of Article 6, where the recipient of such income resident in one Contracting State carries on industrial or commercial activity in the other Contracting State through a permanent establishment situated there or engaged in an independent occupation in that other State from a permanent base situated there, and where the right or property for which income is paid is actually linked to such permanent establishment or permanent base. In that case, the provisions of Article 7 or Article 14 shall apply, depending on the case.

Citation	Communication from the Ministry of Foreign Affairs No. 21 / 1995 Coll., on the Agreement between the Czech Republic and the State of Israel on the avoidance of double taxation and the prevention of tax evasion in the field of income taxes
Regulation Type	-
Author	-
Collection	Code of Laws

Date of Promulgation	22.02.1995
Effective from	23.12.1994
Effective until	-
Status	Valid

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

Contents

Contents

Comments 0

Regulation Information

Partner Websites

Favorites

Browsing History