Communication from the Ministry of Foreign Affairs No. 67 / 1996 Coll.

Q: Is Communication from the Ministry of Foreign Affairs No. 67 / 1996 Coll. still valid?

Yes, Communication from the Ministry of Foreign Affairs No. 67 / 1996 Coll. is still valid and effective.

67

COMMUNICATION

Ministry of Foreign Affairs

The Ministry of Foreign Affairs states that on 4 October 1994 the Treaty between the Government of the Czech Republic and the Government of the Republic of Indonesia was signed in Jakarta.

The Parliament of the Czech Republic gave its assent to the Treaty and the President of the Republic ratified it.

The Treaty entered into force on 26 January 1996 pursuant to Article 28 (2) thereof.

The Czech translation of the Treaty is announced simultaneously. The English version of the Treaty can be consulted at the Ministry of Foreign Affairs and the Ministry of Finance.

TREATY

between

Government of the Czech Republic and Government of the Republic of Indonesia

on the avoidance of double taxation and avoidance of tax evasion

in the field of income taxes

the Government of the Czech Republic and the Government of the Republic of Indonesia,

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

agree as follows:

Persons to whom the Treaty applies

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

Taxes to which the Treaty applies

1. This Agreement shall apply to income taxes levied on behalf of 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 total wages or salaries paid by undertakings, shall be regarded as income taxes.

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

(a) in Indonesia:

income tax, imposed under Undang- undang Pajak Penghasilan 1984 (Act No 7 of 1983), excluding income tax paid under contracts for share in production, employment contracts and other similar contracts in the oil and gas sectors and other mining sectors;

(hereinafter referred to as "Indonesian tax ');

(b) in the Czech Republic:

(i) income tax on natural persons;

(ii) corporation tax;

(iii) real estate tax;

(hereinafter referred to as the "Czech 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 the substantial changes made to their respective tax laws.

General definitions

1. In this Treaty, unless the link requires a different interpretation:

(a) the term "Czech Republic" means the Czech Republic;

(b) the term "Indonesia" refers to the territory of the Republic of Indonesia as defined in its laws and to the adjacent areas over which the Republic of Indonesia exercises sovereign rights or jurisdiction in accordance with the provisions of the United Nations Convention on the Law of the Sea, 1982;

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

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

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

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

(g) the term "national" means:

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

(ii) any legal person, 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 or aircraft operated by an undertaking of one Contracting State, except where the ship or aircraft is operated only between places situated in the other Contracting State;

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

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

(ii) in the case of the Czech Republic, the Minister of Finance of the Czech Republic 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.

Resident

1. For the purposes of this Treaty, the term "resident of a 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 or any other similar criterion.

2. Where, pursuant to paragraph 1, a natural person is resident in both Contracting States, its status shall be determined in accordance with the following rules:

(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 of the States, 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, the competent authorities of the Contracting States shall amend the matter by mutual agreement.

3. Where, pursuant to paragraph 1, a person other than a natural person is resident in both Contracting States, the competent authorities of the Contracting States shall amend 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;

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

3. the term "permanent establishment" also covers:

(a) construction sites, construction, assembly or installation projects, or supervisory activities related thereto, but only if such construction, project or activities last for more than 6 (6) months;

(b) the provision of services, including advisory services, by an undertaking through its staff or other staff employed by that undertaking for such purposes, but only if the activities of that type (related to the same or related project) persist within the territory of the other Contracting State for one or more periods exceeding, in a sum of more than 3 (three) months within 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 or display of goods belonging to the 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) permanent business equipment which is maintained only for the purpose of purchasing goods or collecting information for the undertaking;

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

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an independent representative to whom paragraph 7 applies - acts in one Contracting State on the behalf of an undertaking of the other Contracting State and has at its disposal and normally has the power of attorney enabling him 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 establishment, would not constitute the existence of a permanent establishment in accordance with the provisions of this paragraph.

6. An insurance undertaking of one Contracting State, except in the case of reinsurance, shall be deemed to have a permanent establishment in the other Contracting State if it collects insurance premiums in that other State or covers risks placed there through its employee or representative who is not an independent representative within the meaning of paragraph 7.

7. An undertaking of a Contracting State shall be deemed not to have a permanent establishment in a Contracting State if it carries on its business in that other State through a broker, a general agent or another independent representative, provided that such persons act in the course of their proper activities. However, where the activities of such a representative are carried out wholly or mainly for an undertaking, that representative shall not be considered as independent within the meaning of this paragraph.

8. The fact that a company that is resident in one Contracting State controls the 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 from immovable property, including income from agriculture and forestry, may be taxed in the Contracting State in which the property is located.

2. (a) Subject to points (b) and (c), the term "immovable property" shall be defined in accordance with the law of the Contracting State in which the property is located.

(b) In any case, the term "immovable property" shall include accessories for immovable property, a live and dead inventory used in agriculture and forestry, rights to which the provisions of civil law applicable to immovable property, benefits of immovable property and rights to variable or fixed salaries for mining or admission to mining mineral deposits, springs and other natural resources apply.

(c) Ships and aircraft shall not be considered immovable property.

3. The provisions of paragraph 1 shall apply to income from direct use, rental 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 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 are attributable to:

(a) this permanent establishment;

(b) the sale of goods in that other State of the same or similar type as goods sold through that permanent establishment; or

(c) other business activities carried out in that other State of the same or similar type as those carried out through 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 it had been engaged as a separate undertaking in the same or similar activities under the same or similar conditions and completely independent of the undertaking of which it is a permanent establishment.

3. In calculating the profits of a permanent establishment, the costs incurred by an undertaking for the objectives pursued by that permanent establishment, including management costs and general administrative expenses thus incurred, shall be deducted whether they arise in the State in which the permanent establishment is located or elsewhere. However, such a deduction shall not be allowed for amounts, if any, paid (other than against the reimbursement of actual expenditure) by the permanent head office of the undertaking or other of its offices in the form of royalties or other similar payments as compensation for the use of patents or other rights or in the form of commission for services provided separately or for management services or, except in the case of banking institutions, in the form of interest on money lent to a permanent establishment. Similarly, when determining the profits of a permanent establishment, the amounts charged (other than against the reimbursement of actual expenditure) by the permanent head office of an undertaking or another of its offices in the form of royalties or other similar payments shall not be taken into account in compensation for the use of patents or other rights or in the form of commission for services provided or management services provided or, except in the case of banking institutions, in the form of interest on the money lent to the head office of the undertaking or other offices.

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, 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 has only purchased goods for its head office.

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

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

Transport by ship and air

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

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

Associate undertakings

If

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

(b) the same persons are directly or indirectly involved in the management, control or capital of 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.

Dividends

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

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

(a) 10% of the gross amount of dividends where the beneficial owner is a company (other than a personal company) which directly owns at least 20% of the assets of the company paying dividends;

(b) 15% of the gross amount of dividends in all other cases.

The competent authorities of the Contracting States shall, by mutual agreement, determine the method of applying those restrictions.

3. The provisions of paragraph 2 shall not affect the taxation of companies on the profits on which dividends are paid.

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 rights to companies which, under the tax rules of the State in which the company which differentiates profits is resident, are equivalent to income from shares.

5. The provisions of paragraph 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 other Contracting State in which the dividend company is resident, through a permanent establishment situated there, or through an independent profession in that other State through a permanent base situated there, and where the participation for which dividends are paid is actually linked to that permanent establishment or to that permanent establishment. In that case, the provisions of Article 7 or Article 14 shall apply depending on the case.

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 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.

7. Where a company resident in one Contracting State has a permanent establishment in the other Contracting State, the profits of that permanent establishment may, notwithstanding any other provisions of this Treaty, be subject to additional tax in that other State in accordance with its law, but the additional tax thus imposed shall not exceed 12,5% of the amount of such profits after deduction of the income tax and other taxes on income levied on them in that other State.

8. The provisions of paragraph 7 of this Article shall not affect the provisions contained in any of the cooperative contracts (or any other similar contracts) relating to the oil and gas sectors or to any other extractive sectors.

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 a source, under the legislation of that State, but where the beneficiary is the beneficial owner of the interest, the tax thus imposed shall not exceed 12,5% of the gross amount of interest.

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

3. Notwithstanding paragraph 2, interest received by the Government of the other Contracting State, including the local authorities of that State, the central bank or any other financial institution controlled by that Government, shall be exempt from taxation in the former State.

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

(a) For Indonesia:

(i) the "Bank of Indonesia" (central bank of Indonesia);

(ii) another financial institution, the property of which is wholly owned by the Government of Indonesia, agreed occasionally by the Governments of the Contracting States.

(b) In the case of the Czech Republic:

(i) the Czech National Bank (central bank of the Czech Republic);

(ii) another financial institution whose assets are wholly owned by the Government of the Czech Republic, on which occasional governments of the Contracting States agree.

5. 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 profits of the debtor, and in particular, income from government securities and income from bonds or bonds including premiums and winnings related to such securities, bonds or bonds, as well as income, similar income from money lent under the tax legislation of the State in which the income is generated.

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

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

8. Where the amount of interest relating to the claim on which it is paid exceeds 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 if the beneficiary is the beneficial owner of the royalties, the amount of tax thus determined shall not exceed 12,5% of the gross amount of the 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 shall refer to payments of any kind received as compensation for use or as the right to use any copyright for a literary, artistic or scientific work, including cinematographic films or films and radio and television tapes, any patent, trade mark, model design, plan, secret formula or production process, or use or use of industrial, commercial or scientific equipment, or information which relates 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 situated there, or an independent profession through a permanent base situated there, and where the right or property giving rise to royalties is actually linked to (a) that permanent establishment or permanent base or (b) the business activities referred to in point (c) of paragraph 1 of Article 7.

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 permanent base in a Contracting State, in conjunction with which a licence fee has been charged to a permanent establishment or 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 from the disposal of immovable property referred to in paragraph 2 of Article 6 may be taxed in the Contracting State in which such immovable 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 accruing to a resident of a Contracting State from the disposal of aircraft or ships operating in international transport or movable property serving the operation of such aircraft or ships shall be subject to taxation only in that State.

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

Independent professions

1. Revenue which a resident of a Contracting State receives from an independent profession or other independent activity of a similar nature shall be subject to taxation only in that State, provided that he does not regularly have a permanent establishment in that other Contracting State for the purpose of carrying out his activities or is not held in that other State for one or more periods not exceeding the total of 91 days in each tax year. If it has such a permanent base or resides in that other State for one or more periods as mentioned above, the income may be taxed in that other State, but only that part which can be attributed to that permanent base or which results from that other State during one or more periods.

2. The term "independent profession" includes the particularly independent activities of scientific, literary, artistic, educational or teaching and the independent activities of doctors, engineers, lawyers, dentists, 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 and 20, 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 beneficiary shall stay in the other State for one or more periods not exceeding 183 days in total in any 12-month period; and

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

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

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

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 in public by performers such as theatrical, film, radio or television artists and musicians and received by sportsmen from activities carried out in person may be taxed in the Contracting State in which they are carried out, irrespective of the provisions of Articles 14 and 15.

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

3. Revenue from activities as defined in paragraph 1 carried out in the framework of a cultural agreement or exchange between the Contracting States shall be exempt from taxation in the Contracting State in which they are carried out, notwithstanding the provisions of paragraphs 1 and 2, if the visit of that State is wholly or partly covered by the funds of the second Contracting State, the local authority or the public institution of that State.

Public functions

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

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

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

Pension

1. Pensions and other similar salaries paid by a resident of a Contracting State from a source in the other Contracting State for previous employment or services in that other Contracting State and any rent paid by such resident from such source may be taxed in that other State subject to the provisions of paragraph 2 of Article 18.

2. The term "rent" shall mean the fixed amounts paid repeatedly over specified periods of life or during a specified or identifiable period on the basis of an obligation to make such payments by way of compensation for the corresponding and full value in money or money valued.

Students, professors and researchers

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

2. A student at a university or other higher education institution in one Contracting State or apprenticeship who is present in the other Contracting State for one or more periods not exceeding 183 days within any 12-month period and who is, or immediately before such a visit, resident in the former State, shall not be taxed in the other Contracting State on the remuneration for services provided in that other State, provided that these services are performed in connection with his studies or training and constitute the income necessary for his essential nutrition.

3. The remuneration received by a resident of a Contracting State for carrying out research or teaching during a period of temporary residence not exceeding two years at a university, research institute or other higher education institution recognised by the Government of that Contracting State shall not be subject to taxation in that Contracting State.

Citation	Communication from the Ministry of Foreign Affairs No. 67 / 1996 Coll., on the Agreement between the Government of the Czech Republic and the Government of the Republic of Indonesia on the avoidance of double taxation and the prevention of tax evasion in the field of income taxes
Regulation Type	International Treaty
Author	-
Collection	Code of Laws

Date of Promulgation	25.03.1996
Effective from	26.01.1996
Effective until	-
Status	Valid

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

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