Communication from the Ministry of Foreign Affairs No 32 / 1994 Coll.
Communication from the Ministry of Foreign Affairs on the Treaty between the Czech Republic and the United States of America on the avoidance of double taxation and the prevention of tax evasion in the field of income and property taxes
Valid
Effective from 23.12.1993
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32
COMMUNICATION
Ministry of Foreign Affairs
The Ministry of Foreign Affairs announces that on 16 September 1993 a Treaty was signed in Prague between the Czech Republic and the United States of America to avoid double taxation and prevent tax evasion in the field of income and property taxes.
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 Washington on 23 December 1993.
The Treaty entered into force on 23 December 1993 pursuant to Article 29 (2) thereof.
The Czech version of the Treaty is hereby published at the same time.
TREATY
between
Czech Republic
and
United States
on the avoidance of double taxation and avoidance of tax evasion
in the field of income and property taxes
The Czech Republic and the United States of America wish to further expand and facilitate economic relations have decided to conclude a Double Taxation Treaty and prevent tax evasion in the field of income and property taxes, and have agreed as follows:
PERSONS CONCERNING THE TREATY
1. This Treaty shall apply to persons residing or having their registered office in one or both Contracting States (residents), unless otherwise provided for in the Treaty.
2. The contract shall in no way restrict any exemption, exemption, deduction, credit or other relief granted now or later:
(a) according to the laws of one or the other Contracting State; or
(b) under any other contract between the Contracting States.
3. The Contracting State may tax its residents [as defined in Article 4 (Resident)] and its citizens, including former citizens under the laws of that State, as if the Treaty had not been effective.
4. The provisions of paragraph 3 shall not apply to:
(a) benefits granted by a Contracting State pursuant to paragraph 2 of Article 9 (Joint Undertakings), paragraphs 1 (b) and 4 of Article 19 (Pensions, rents, alimony and child allowances) and Articles 24 (Exclusion of double taxation), 25 (Prohibition of discrimination) and 26 (Solving cases by agreement); and
(b) benefits granted by a Contracting State under Articles 20 (Public functions), 21 (Students, trainees, teachers and researchers) and 28 (Diplomats and consular officers) for natural persons who are neither citizens nor legal permanent residents in that State.
TAXES TO WHICH THE TREATY IS RELATING
1. The current taxes covered by this contract are:
(a) in the United States: federal income taxes levied on the basis of the Internal Revenue Code (but excluding taxes on accumulated profits, taxes on a personal holding company and social security taxes) and excise duties levied on the investment income of private foundations (hereinafter referred to as "United States tax");
(b) in the Czech Republic: income taxes levied under the Income Tax Act and real estate tax (hereinafter referred to as "Czech tax").
2. This Treaty shall also apply to any same or similar taxes which will be imposed upon signature of this Treaty in addition to or in place of the present taxes. The competent authorities of the Contracting States shall inform each other of any material changes to be made to their respective tax laws and of the officially published material relating to the application of the Treaty, including explanatory notes, implementing regulations, tax or judicial decisions.
GENERAL DEFINITIONS
1. For the purposes of this Treaty, unless the link requires a different interpretation:
(a) the term "Contracting State" refers to the United States or the Czech Republic, depending on the case;
(b) the term "United States" refers to the United States of America, but does not include Puerto Rico, the Virgin Islands, Guam or any other American property or territory. In the geographical sense, the term "United States' includes the territorial waters and seabed and the subsoil of adjacent areas on which the rights of the United States may be exercised in accordance with international law and on which the laws relating to US taxes are in force;
(c) the term "person" refers to the natural person, the estate, the assets entrusted, the personal company, the company and all other associations of persons;
(d) the term "company" refers to any legal person or rightholder treated as a legal person for taxation purposes;
(e) the terms "undertaking of one Contracting State" and "undertaking of the other Contracting State" refer, as appropriate, to an undertaking operated by a resident of one Contracting State and an undertaking operated by a resident of the other Contracting State;
(f) the term "international transport" shall mean any transport by ship or aircraft, except where such transport is carried out only between places situated in the second Contracting State;
(g) the term "competent authority" shall mean:
(i) in the United States, the Secretary of State of Finance or his authorised representative;
(ii) in the Czech Republic, the Minister of Finance of the Czech Republic or his authorised representative.
2. Any expression which is not defined in the Treaty will have meaning for its application by a Contracting State, which falls under the law of that Contracting State governing the taxes which are the subject of that Treaty, unless the link requires a different interpretation or the competent authorities agree on a common interpretation in accordance with Article 26 (Solving cases by agreement).
RESIDENT
1. The term "resident of one Contracting State" shall, within the meaning of this Treaty, indicate any person who, under the law of that State, is subject to taxation in that State on account of his residence, the permanent residence of the place of administration, the place of establishment or any other similar criterion.
2. (a) However, the term "resident of a Contracting State" shall not include a person who is subject to taxation in that State solely from income from resources in that State or property placed there;
(b) In the case of income received or paid by a personal company, an estate or a entrusted property, the term shall apply only to the extent that the income generated by such a personal company, estate or trust is subject to taxation in that State as resident's income either in its hands or in the hands of its partners or actual recipients; and
(c) The Czech Republic will consider a citizen of the United States or a foreigner holding a legal permanent residence permit (holder of the "green card") as resident of the United States, only if such person has a substantial presence, permanent residence or habitual residence in the United States.
3. the term "resident of a Contracting State" shall include:
(a) that State, lower administrative department or local authority of that State, or any agency or authority of that State, lower administrative department or office; and
(b) a pension trust or any other organisation which is established and operated solely for the purpose of providing pensions, or for religious, charitable, scientific, artistic, cultural or educational purposes and which is resident in that State in accordance with the laws of that State, irrespective of the fact that all or part of its income may be exempt from taxation under the domestic legislation of that State.
4. 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 the State in which the person has a centre of his life interests cannot be designated, or if he does not have a permanent residence in any State, he shall be presumed to be resident in the State in which he 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 none of them, the competent authorities of the Contracting States shall amend the matter by mutual agreement.
5. If a company is resident in both Contracting States under the provisions of paragraph 1, if it is established under the legislation of the Contracting State or its lower administrative department, it shall be assumed that it is resident in that Contracting State.
6. Where a person, other than a natural person or a company, is resident in both Contracting States in accordance with the provisions of paragraph 1, the competent authorities of the Contracting States shall amend this matter by mutual agreement and shall determine the method of applying the Treaty to that person.
STANDING OPERATIONS
1. The term "permanent establishment" means, within the meaning of this Treaty, a permanent establishment for a business through which an 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 or installation project, or installation or drilling set or ship used for the exploration or extraction of natural resources, but only if it lasts more than 12 months; and
(b) the provision of services, including advisory services, provided by the undertaking through staff or other staff, but only where activities of such a nature persist (for the same or related project) in the territory of the State for one or more periods exceeding a total of more than 9 months in any 12-month period.
A permanent establishment shall not be established in any tax year in which the activity described in subparagraphs (a) or (b) of this paragraph lasts for one or more periods not exceeding 30 days in total in that tax year.
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 equipment which is maintained only for the purpose of carrying out any other activity which is of a preparatory or ancillary nature for the undertaking;
(f) permanent business equipment which is maintained only for any combination of the activities referred to in subparagraphs (a) to (e).
5. Notwithstanding the provisions of paragraphs 1 and 2, where a person (other than an independent representative to whom paragraph 6 applies) acts on the behalf of an undertaking and has the power of attorney 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, and which, if they are carried out through a permanent place of business, would not render that permanent establishment a permanent establishment in accordance with the provisions of this paragraph.
6. An undertaking shall not be deemed to have a permanent establishment in one Contracting State only because it carries on its activities there through a broker, a general agent or another independent representative, 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 be defined in accordance with the law of the Contracting State in which the property is situated. This term includes, 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 consume immovable property and the right to variable or fixed salaries for mining or to be granted for mining mineral deposits, springs and other natural resources; 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.
5. A resident of a Contracting State subject to taxation in the other Contracting State on income from immovable property situated in that other State may calculate the tax on that income on a net basis as if such income had been attributed to a permanent establishment in that other State. In the case of United States tax, the choice of application of the preceding sentence will be binding on the tax year in which the choice was made and on all subsequent tax years if the competent authorities of the United States do not agree to the termination of the choice.
PROFIT OF UNDERTAKINGS
1. The profits of an undertaking of one Contracting State shall be subject to taxation only in that State, provided that the undertaking does not or did not exercise its activities in the other Contracting State through a permanent establishment situated there. If an undertaking carries out or 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 or carries out its business in the other Contracting State through a permanent establishment situated there, profits which it could have achieved if it had been engaged in the same or similar activities under the same or similar conditions, subject to the provisions of paragraph 3 in each Contracting State of that State.
3. In calculating the profits of a permanent establishment, the costs incurred by an undertaking for the objectives pursued by that permanent establishment, including a reasonable amount of the research and development costs, interest and other similar costs and management costs, and general and administrative expenses, whether incurred in the State in which that permanent establishment is located or not, shall be authorised.
4. The permanent establishment shall not be credited with any business profits on the basis that it only purchased goods for the undertaking.
5. For the purposes of this Treaty, the profits from the business to be attributed to a permanent establishment shall include only profits arising from the assets or activities of that permanent establishment and shall be determined annually by the same method, unless there are sufficient grounds for otherwise.
6. Nothing in this Article shall affect the application of the laws of each Contracting State relating to the determination of the tax liability of a person where the information available to the competent authorities of that State is not adequate to determine the profits attributable to a permanent establishment, provided that, on the basis of the available information, the determination of the profits of a permanent establishment is in accordance with the principles laid down in this Article.
7. For the purposes of this Treaty, the term "profits of undertakings" shall mean income arising from any commercial or industrial activity. It includes, for example, profits from production, trade, fisheries, transport, communication or mining activities and from the provision of services by another person, including where the company provides services to its employees. This term does not cover income generated by a natural person for the provision of services, whether as an employee or in an independent profession.
8. Where the profits of an undertaking include revenue which is dealt with separately in other articles of this Treaty, the provisions of those articles shall be without prejudice to the provisions of this Article.
SHIPS AND AIR TRANSPORT
1. The profits of an undertaking of one Contracting State from the operation of ships or aircraft in international transport shall be taxed only in that State.
2. For the purposes of this Article, the term "profits arising from the operation of ships or aircraft in international transport 'shall include profits arising from the hire of ships or aircraft, including crew, for a specified period or journey. It shall also include profits arising from the hire of ships or aircraft without crew carried out by an undertaking operating ships or aircraft in international transport where such leases are random in relation to the activities described in paragraph 1.
3. The profits of an undertaking of a Contracting State from the use, maintenance or lease of containers (including trailers, tugs and related container transport equipment) used in international transport shall be subject to taxation only in that State.
4. The provisions of paragraph 1 shall also apply to shares in the profits of the pool, the joint venture or the international operational agency.
ASSOCIATED 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 are different 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.
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, gross negligence 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 if the beneficiary who is the beneficial owner of the dividends is resident in the second Contracting State, the tax shall not exceed:
(a) 5% of the gross amount of dividends if the beneficial owner is a company which holds at least 10% of the voting rights of the companies 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) Paragraph (a) (2) shall not apply to dividends paid by the United State Regulated Investment Company or the Real Estate Investment Trust. (b) Paragraph 2 shall apply to dividends paid by Regulated Investment Company. In the case of dividends paid by Real Estate Investment Trust, subparagraph (b) of paragraph 2 shall apply where the beneficial owner of dividends is a natural person holding less than 10% of the real Estate Investment Trust; otherwise the withholding tax rate under national law shall apply.
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 income from other rights in companies 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. The term "dividend 'also includes income from liabilities, including debentures bearing the right to a share in profits, to the extent that this is provided for under the law of the Contracting State from which the income is derived.
5. The provisions of paragraph 2 shall not apply where the beneficial owner of dividends resident in one Contracting State carries out, or has exercised, in the other Contracting State in which the company paying dividends is resident, industrial or commercial activity through a permanent establishment situated there, or has engaged or pursued an independent profession in a permanent establishment situated there, and where dividends may be attributed to that permanent establishment or that permanent establishment. In such a case, the provisions of Article 7 (Company profits) or Article 14 (Independent professions) shall apply, depending on the case.
6. A company which is resident in one Contracting State may, in addition to taxation under the other provisions of this Treaty, be subject to an additional tax. However, that tax may not exceed 5% of the income of a company attributable to a permanent establishment in that other State or subject to taxation on a net basis in that other State pursuant to Article 6 (Revenue from immovable property) or Article 13 (Profit from disposal of property), after deduction of taxes on profits made on such income in that other State and after adjustment for increases or reductions in assets, after taking into account the company's obligations in relation to a permanent establishment or commercial or industrial activity. Such a tax may only be applied if such a tax is imposed under the legislation of that other State on the income of any permanent establishment which is maintained in that other State by a company which is not resident in that other State.
7. Where a company 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 participation for which dividends are paid constitutes part of the operating assets of a permanent establishment or permanent base located in that other State, even if the dividends paid are wholly or partly derived from profits or income obtained in that other State.
INTEREST
1. Interest which has a source in one Contracting State and which actually owns a resident of the other Contracting State shall be subject to taxation only in that other State.
2. Notwithstanding the provisions of paragraph 1, the United States may tax an amount in excess of the residual interest in Real Estate Mortgage Investment Conduit in accordance with national law.
3. 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, and subject to paragraph 4 of Article 10 (Dividends) providing or non-conferring 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 winnings relating to such securities, bonds or bonds, as well as any other income which, under the tax laws of the Contracting State in which the income arises, is regarded as income from borrowed money.
4. The provisions of paragraph 1 shall not apply where the beneficial owner of interest resident in one Contracting State carries out, or carries out, in the other Contracting State in which the interest is held by a source, an industrial or commercial activity through a permanent establishment situated there, or carries out or carries out an independent profession in that other State from a permanent base situated there, and where interest may be attributed to that permanent establishment or that permanent establishment. In that case, the provisions of Article 7 (Business profits) or Article 14 (Independent professions) shall apply, depending on the case.
5. Interest is assumed to have a source in one Contracting State if the payer is a resident of that State. However, if the person paying interest, whether or not resident in a Contracting State, has a permanent establishment or a permanent base in the Contracting State 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 regarded as the source of such interest.
6. 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.
LICENCES
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.
2. Licensing fees referred to in subparagraph (a) (3) which are actually owned by a resident of a Contracting State may be taxed only in that State. The licence fees referred to in subparagraph (b) (3) may also be taxed in the Contracting State in which their source is located and in accordance with the legislation of that State, but if the beneficiary who is the beneficial owner of the licence fee is resident in the second Contracting State, the amount of the tax thus determined shall not exceed 10% of the gross amount of the licence fee.
3. The term "licence fees" used in this Treaty refers to payments of any kind received as compensation for use or as a right to use:
(a) copyright for the work of literary, artistic or scientific, including cinematographic films or films or tapes or other means of visual or sound reproduction;
(b) a patent, trade mark, design or model, plan, secret formula or production process or other similar right or property, or industrial, commercial or scientific equipment or for information relating to experience acquired in the field of industrial, commercial or scientific.
The term "licence fees' also includes payments resulting from the sale of such rights or assets which are linked to productivity, exploitation or resale.
4. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of royalties resident in one Contracting State carries out, or has exercised, in the other Contracting State in which the royalties have a source, industrial or commercial activity through a permanent establishment which is located there, or has engaged or pursued an independent profession in that other State in a permanent establishment situated there, and where such royalties may be attributed to that permanent establishment or permanent establishment. In this case, the provisions of Article 7 (Business profits) or Article 14 (Independent professions) shall apply, depending on the case.
5. Where the amount of royalties relating to the use, right or information for which they are paid exceeds, for any reason, the amount which the payer would have agreed with the beneficial owner if it were not for such relations, 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.
6. For the purposes of this Article:
(a) Licensing fees shall be treated as having a source in a Contracting State where the payer is the latter himself or his lower administrative department or local authority of that State or the person resident for tax purposes. However, where a person paying royalties, whether or not resident in a Contracting State, has a permanent establishment or permanent base in a Contracting State, in conjunction with which an obligation to pay royalties has arisen to that permanent establishment or permanent base, such royalties shall be deemed to have a source in the State in which the permanent establishment or permanent base is located.
(b) Where, pursuant to subparagraph (a), licence fees cannot be treated as having a source in one Contracting State, the licence fees paid for use or the right to use in one Contracting State of any property or right described in paragraph 3 shall be treated as having a source in that State.
OWN FUNDS PROFIT
(1) The profits of a resident of one Contracting State from the disposal of immovable property situated in the other Contracting State may be taxed in that other State.
2. For the purposes of this Article, the term "immovable property situated in a second Contracting State 'shall include immovable property referred to in Article 6 which is located in that second State. It shall also include shares in a company whose assets consist of at least 50% of the immovable property situated in the other Contracting State, as well as participation in a personal company, trust or estate, provided that their assets consist of immovable property situated in that other State.
3. Profit from the disposal of movable property attributable to a permanent establishment which is owned or held by an undertaking of one Contracting State in the other Contracting State, or which is attributable to a permanent base which is owned or held by a resident of one Contracting State in the other Contracting State for the pursuit of an independent occupation, and profits from the disposal of such a permanent establishment (on its own or together with the whole undertaking) or a permanent base may be taxed in that other State.
4. The profits accruing to an undertaking in one Contracting State from the disposal of ships or aircraft used in international transport shall be taxed only in that State.
5. Payments described in paragraph 3 of Article 12 (Licensing fees) shall be subject to taxation only under the provisions of Article 12.
(6) Profit from the disposal of assets other than those referred to in paragraphs 1 to 5 shall be subject to taxation only in the Contracting State in which the transferee is resident.
_
1. Revenue received by a resident of a Contracting State from a separate independent profession shall be subject to taxation only in that State where such activity is not or has not been pursued in the other Contracting State and:
(a) income may not be attributed to a permanent basis which the natural person has regularly available in that other State for the purpose of carrying out the activity; in that case, the revenue attributable to this permanent base may be taxed in that other State; or
(b) a natural person shall not stay in the other Contracting State for one or more periods exceeding 183 days in total in any 12-month period.
2. The term "independent profession" shall include the particularly independent activities of scientific, literary, artistic, educational or teaching, as well as the independent activities of doctors, lawyers, engineers, architects, dentists and accountants.
OBLIGATIONS
1. Salaries, wages and other similar remuneration received by a resident of a Contracting State on account of employment shall be subject to taxation in that State only, subject to the provisions of Articles 16 (Tantiémy), 19 (Pensions, rents, alimony and child allowances), 20 (Public functions) and 21 (Students, trainees, teachers and researchers), if the employment is not carried out in the other Contracting State. If there is employment there, such remuneration received for them may be taxed in that other State.
(2) Rewards received by a resident of a Contracting State on account of employment in the other Contracting State shall be subject to taxation only in the former State, notwithstanding the provisions of paragraph 1;
(a) the beneficiary shall stay in the other State for one or more periods which shall not exceed 183 days in total in any 12-month period;
(b) the remuneration shall be paid by the employer or by 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 the grounds of employment carried out as a member of the proper crew of a ship or aircraft operated by an undertaking of one Contracting State in international transport may be taxed only in that Contracting State.
TANTIES
Tantiéms and other similar remuneration received by a resident of one Contracting State for services provided in the other 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.
LIMITATION OF EXPENSES
1. A person resident in one Contracting State receiving income from another Contracting State shall be entitled under this Treaty to tax relief in the other Contracting State only if such person is:
(a) a natural person;
(b) the Contracting State or the lower administrative department or local authority of that State;
(c) engaged in active business or industrial activities in the former State (other than the implementation or management of investments, in so far as they are not banking or insurance activities carried out by a bank or insurance institution) and income generated by the latter is obtained on the basis of or in connection with that commercial or industrial activity;
(d) a company whose principal type of shares is, to a substantial extent and regularly traded on the stock exchange of recognised securities, or which is wholly owned, directly or indirectly, by a resident of that Contracting State whose main type of shares is to a substantial extent and regularly traded on the stock exchange of recognised securities;
(e) an entity which is a non-profit organisation (including a pension fund or a private foundation) and which, on the basis of that status, is generally exempt from taxation of income in the Contracting State in which it is resident, provided that more than half of the actual beneficiaries, members or participants, if any, are authorised in such an organisation under this Article, to benefit from this Treaty; or
(f) a person who fulfils both of the following conditions:
(i) more than 50% of the actual share in such a person (or, in the case of a company, more than 50% of the number of shares of each type of company) is owned, directly or indirectly, by persons entitled to benefits under this contract under subparagraphs (a), (b), (d) or (e); and
(ii) not more than 50% of the gross income of such a person is used, directly or indirectly, to meet obligations (including interest or licence charges) to persons who are not entitled to benefits under this Treaty under subparagraphs (a), (b), (d) or (e).
2. However, a person who is not entitled to the benefits of this Treaty may be granted benefits under the provisions of paragraph 1, provided that the competent authority of the State in which the revenue is derived so determines.
3. For the purposes of subparagraph (d) of paragraph 1, the term "stock exchange of recognised securities' means:
(a) NASDAQ system owned by National Association of Securities Dealers Inc. (National Securities Trading Association, Inc.) and any stock exchange registered with Securities and Exchange Commission as a National Securities Exchange for the purposes of the 1934 Securities Exchange Act;
(b) the Czech Stock Exchange (Prague a.s.) and any other stock exchange recognised by the state authorities; and
(c) any other exchange agreed upon by the competent authorities.
4. For the purposes of subparagraph (f) (ii) (1), the term "gross income 'shall mean gross income or, where an undertaking is engaged in an industrial and commercial activity involving the processing or manufacture of goods, gross income less direct labour costs and material attributable to such processing or production and which are or may be paid for such income.
Artists and SPORTS
1. Revenue received by a resident of a Contracting State as a public performer, for example as a theatre, film, radio or television artist or musician, or as an athlete from his personally engaged activities in the other Contracting State, may be taxed in that other State, irrespective of the provisions of Articles 14 (Independent professions) and 15 (Dependent professions), except where the amount of gross income generated by such artists or athletes, including expenditure paid to him or on his behalf from such activities, does not exceed $20,000 (USD 20,000) or their equivalent in the Czech crowns for the relevant tax year. Such a tax may be imposed on the full amount of all gross income generated by such an artist or athlete during any period during the relevant tax year, provided that the artist or athlete is entitled to receive reimbursement of such taxes, unless the tax is incurred in the relevant tax year under the provisions of this Treaty.
2. Where the income from the activities carried out by an artist or an athlete in person does not relate to that artist or athlete but to another person, that income may be taxed in the Contracting State in which the activities of an artist or athlete are carried out, regardless of the provisions of Article 7 (Business Profit) and 14 (Independent Occupation), unless it is established that the artist or sportsman or other persons related to him or her do not participate directly or indirectly in the profits of that other person in any way, including receipt of deferred remuneration, premiums, fees, dividends, distribution of profits of personal companies or other distributed profits.
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Regulation Information
| Citation | Communication from the Ministry of Foreign Affairs No. 32 / 1994 Coll., on the Agreement between the Czech Republic and the United States of America on the avoidance of double taxation and the prevention of tax evasion in the field of income and property taxes |
|---|---|
| Regulation Type | - |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 15.02.1994 |
|---|---|
| Effective from | 23.12.1993 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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