Communication from the Ministry of Foreign Affairs No 79 / 1993 Coll.
Communication from the Ministry of Foreign Affairs on the Treaty between the Government of the Czech and Slovak Federal Republic and the Government of the Grand Duchy of Luxembourg on the avoidance of double taxation and the prevention of tax evasion in the field of income and property taxes
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Effective from 30.12.1992
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79
COMMUNICATION
Ministry of Foreign Affairs
The Ministry of Foreign Affairs announces that on 18 March 1991 a Treaty was signed in Luxembourg between the Government of the Czech and Slovak Federal Republic and the Government of the Grand Duchy of Luxembourg on the avoidance of double taxation and the prevention of tax evasion in the field of income and property taxes.
The Federal Assembly of the Czech and Slovak Federal Republic has agreed with the Treaty and has ratified it. The instruments of ratification were exchanged in Luxembourg on 30 December 1992.
The Treaty entered into force on 30 December 1992 pursuant to Article 29 (2) thereof.
The Czech version of the Treaty is hereby published at the same time.
TREATY
between the Government of the Czech and Slovak Federal Republic and the Government of the Grand Duchy of Luxembourg on the avoidance of double taxation and the prevention of tax evasion in the field of income and property taxes
Government of the Czech and Slovak Federal Republic and Government of the Grand Duchy of Luxembourg
Desiring to conclude a contract to avoid double taxation and prevent tax evasion in the field of income and property taxes,
agree as follows:
Persons covered by the contract
This contract applies to persons residing or having their registered office in one or both Contracting States (residents).
Taxes covered by the contract
1. This Treaty shall apply to income and property taxes levied on each Contracting State or its administrative departments or local authorities, whatever the method of collection.
2. Taxes levied on the total income and on the total assets or on the part of the income or assets, including taxes on the proceeds 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 in value, shall be regarded as income and property taxes.
3. The taxes to which this Treaty will apply shall in particular be:
(a) in Czechoslovakia:
income taxes;
payroll tax;
income tax on literary and artistic activities;
agricultural tax;
population income tax; and
home tax,
(hereinafter referred to as "Czechoslovak Tax ');
(b) in Luxembourg:
income tax on natural persons;
corporate tax;
tax on remuneration of directors of companies;
the tax on property;
local trade tax,
(hereinafter referred to as "Luxembourg tax ').
4. The contract will also apply to all identical or essentially similar taxes which will be imposed after the signature of the contract in addition to or in place of existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes made to their respective tax laws.
General definitions
1. In this Treaty, unless the link requires a different interpretation:
(a) the term "Czechoslovakia" refers to the Czech and Slovak Federal Republic;
(b) the term "Luxembourg" refers to the Grand Duchy of Luxembourg;
(c) the terms "one Contracting State" and "the other Contracting State" refer to Czechoslovakia or Luxembourg as required by the connection;
(d) the term "person" includes natural persons, companies and any other association of persons;
(e) the term "company" refers to legal persons or rightholders treated as legal persons for taxation purposes;
(f) the terms "undertaking of one Contracting State" and "undertaking of the other Contracting State" shall indicate, depending on the situation, 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) all natural persons who are nationals of a Contracting State;
(ii) any legal person, personal company or association of persons which has been established under the law applicable in a Contracting State;
(h) "international transport" means any transport carried out by a ship or aircraft operated by an undertaking which has its place of effective management in one Contracting State, unless the ship or aircraft is operated only between locations in the other Contracting State;
(i) the term "competent authority" shall mean:
(i) in the case of Czechoslovakia, the Minister of Finance of the Czech and Slovak Federal Republic or its authorised representative,
(ii) in the case of Luxembourg, the Minister of Finance of the Grand Duchy of Luxembourg or its authorised representative.
2. Any term which is not otherwise defined shall have the meaning of the Contracting State for the application of this Treaty, which falls under the legislation of that State, which regulates the taxes covered by this Treaty, unless the link requires a different interpretation.
Tax domicile
1. The term "resident of one Contracting State" shall, within the meaning of this Treaty, indicate 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. However, that term does not include any person who is subject to taxation in that State solely for reasons of income from resources in that State or from assets in that State.
2. Where, pursuant to paragraph 1, a natural person is resident in both Contracting States, the case shall be assessed in accordance with the following rules:
(a) It is assumed that this person is resident in the Contracting State in which he has a permanent flat. If it has a permanent flat in both Contracting States, it is assumed to be resident in the Contracting State to which it has the most close personal and economic relations (centre of life interests).
(b) If it cannot be determined in which Contracting State that person has a centre of his / her life interests or if he / she does not have a permanent residence in any Contracting State, he / she shall be presumed to be resident in the Contracting State in which he / she normally resides.
(c) Where that person normally resides in both Contracting States or in none of them, he shall be presumed to be resident in the Contracting State of which he is a national.
(d) Where that person is a national of both Contracting States or of any of them, the competent authorities of the Contracting States shall resolve the matter by mutual agreement.
3. Where a person other than a natural person is resident in both Contracting States pursuant to paragraph 1, he shall be presumed to be resident in the Contracting State in which the place of his actual management is situated.
Permanent establishment
1. The term "permanent establishment" shall refer, within the meaning of this Treaty, to a permanent establishment for the business in which the undertaking carries out its activities in whole or in part.
2. The term permanent establishment shall include in particular:
(a) the place of management;
(b) the plant;
(c) an office;
(d) the factory;
(e) workshop;
(f) mine, quarry or other place where natural resources are extracted;
(g) construction sites, construction or installation, if they last for more than 6 months.
3. the term "permanent establishment" shall not include:
(a) an establishment 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 solely 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.
4. A person, other than an independent representative, to whom paragraph 5 applies, acting in one Contracting State on behalf of an undertaking of the other Contracting State, shall be deemed to be a permanent establishment of an undertaking in the former State if it is equipped in that State with the full power normally exercised there and which allows it to conclude contracts on behalf of an undertaking where the activity of that person is not limited to the purchase of goods for an undertaking.
5. It is not assumed that an undertaking of one Contracting State has a permanent establishment in the other Contracting State only because it carries out its activities there through a broker, a general agent or another independent agent, where such persons act in the course of their proper activities.
6. 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 on its activities in that other State (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 agricultural and forestry undertakings, may be taxed in the Contracting State in which such property is located.
2. (a) The term "immovable property" shall, subject to the provisions of subparagraphs (b) and (c), be determined in accordance with the law of the Contracting State in which the property is situated.
(b) In any case, the term "immovable property" shall include accessories for immovable property, live and dead inventory used in agriculture and forestry, rights to which the provisions of general law relating to land, the right to consume immovable property and the right to variable or fixed salaries for mining or for the admission to mining mineral deposits, springs and other natural resources apply.
(c) Ships and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 of this Article shall apply to income arising from direct use, rental or any other use of immovable property.
4. The provisions of paragraphs 1 and 3 of this Article shall also apply to income from the immovable property of an undertaking and to income from immovable property used for the pursuit of an independent profession.
Profits of enterprises
1. The profits of undertakings of one Contracting State shall be taxed only in that State if the undertaking does not carry on business in the other Contracting State through a permanent establishment located there. Where an undertaking carries on business in this way, the profits of the undertaking may be taxed in that other State, but only to the extent that they can be attributed to that permanent establishment.
2. Where an undertaking of a Contracting State carries on an activity in the other Contracting State through a permanent establishment situated there, it shall be attributed in each Contracting State to that permanent establishment the profits which it would expect to achieve if, as a separate undertaking, it carried on the same or similar activities under the same or similar conditions and was fully independent in contact with the undertaking of which it is a permanent establishment.
3. In determining the profits of a permanent establishment, the costs incurred for the operation of that permanent establishment, including management costs and general administrative expenses thus incurred, shall be deducted whether they are incurred in the State where the permanent establishment is located or elsewhere.
4. Where, in a Contracting State, it is customary to determine the profits to be added to a permanent establishment on the basis of the distribution of the company's total profits, its different parts, the provisions of paragraph 2 shall not preclude that Contracting State from determining the profits to be taxed in this normal manner. However, the method used to distribute profits shall be such that the result is consistent with the principles set out in this Article.
5. A permanent establishment shall not make any profits on the basis that it only purchased goods for the undertaking.
(6) For the purposes of the preceding paragraphs, the profits to be attributed to a permanent establishment shall be determined in the same manner each year, unless there are proper and sufficient grounds for a different procedure.
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 from the operation of ships and aircraft in international transport shall be taxed only in the Contracting State in which the head office of the undertaking's actual management is located.
2. Where the head office of a shipping undertaking is on board a ship, that head office shall be deemed to be located in the Contracting State in which the home port of that ship is or is not 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 property of an undertaking of one Contracting State and of an undertaking of the other Contracting State, and where, in such cases, both undertakings are bound in their commercial or financial relations by conditions which have been agreed on or imposed on them and which differ from those which would have been negotiated between independent undertakings, profits of that undertaking may be incorporated into the profits of that undertaking and consequently taxed profits which, without such conditions, would have been achieved by one of the undertakings which, however, could not have been obtained in view of those conditions.
2. If one contracting State includes in the profits of the undertaking of that State - and subsequently of the tax - the profits 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 the two undertakings were such as would have been agreed between the independent undertakings, the other State shall adjust accordingly the amount of tax levied by it on those profits. 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.
Dividends
1. Dividends paid by a company which is resident in one Contracting State to a person resident in the other Contracting State may be taxed in that other State.
2. However, such dividends may be taxed in the Contracting State in which the company which pays them is resident, under the legislation of that State, but where the beneficiary is the beneficial owner of dividends, the tax shall not exceed:
(a) 5% of the gross amount of dividends where the beneficial owner is a company which directly owns at least 25% of the shares of the company paying dividends;
(b) 15% of the gross amount of dividends in all other cases.
The provisions of this paragraph shall not affect the taxation of the profits of the company serving to pay dividends.
3. The term "dividends," used in this Article, refers to income from shares, profit participation certificates or profit participation rights, coupons, founding shares or other rights, with the exception of claims, with a share in profits and income from other shares in companies with which resident is treated under the law of the State in which the company which pays dividends is treated as 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 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 as appropriate.
5. If 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 such dividends are paid to a person resident in that other State, or that the participation in which dividends are paid actually belongs to a permanent establishment or a permanent base located in that other State, or to 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 having a source in that other State.
Interest
1. Interest having a resource in one Contracting State and paid to a person resident in the other Contracting State shall be taxed only in that other State.
2. The term "interest 'used in this Article refers to income from claims of any kind, secured or not secured by a mortgage on immovable property or a clause relating to the participation in the debtor's profits and, in particular, income from government securities and income from bonds and bonds, including premiums and winnings related to bonds or bonds.
3. The provisions of paragraph 1 shall not apply where the beneficial owner of interest resident in one Contracting State is engaged in an industrial or commercial activity in the other Contracting State in which the interest is paid 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 claim on which the interest is paid actually relates to that permanent establishment or to that permanent base. In that case, the provisions of Article 7 or Article 14 shall apply as appropriate.
4. Where the amount of interest, in the light of the claim on which it is paid, is considered to exceed, by reason of the special relations existing between the payer and the beneficial owner of the interest, or which one or the other maintain with the third party, the amount which the payer would have agreed with the beneficial owner if it had not been for such relations, the provisions of this Article shall apply only to that last amount. In this case, the amount of the salary exceeding it may be taxed under the law of each Contracting State and taking into account the other provisions of this Treaty.
Licence fees
1. Licensing fees having a source in one Contracting State and paid to a person resident in the other Contracting State may be taxed in that other State.
2. However, the licence fees referred to in subparagraph (a) (3) may be taxed in the Contracting State in which their source is located, under the law of that State, but the tax thus determined shall not exceed 10% of the gross amount of the licence fee.
3. The term "licence fees" used in this Article refers to salaries of any kind paid for use or for the right to use
(a) a patent, trade mark, model or model, plan, secret formula or manufacturing process or any industrial, commercial or scientific establishment or information relating to industrial, commercial or scientific experience;
(b) copyright for the work of literary, artistic or scientific, including cinematographic films and films or recordings for television and radio broadcasting.
4. The provisions of paragraphs 2 and 3 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 located there in that other State, and where the right or property giving rise to royalties is actually linked to such a permanent establishment or permanent base. In this case, the provisions of Article 7 or Article 14 shall apply as appropriate.
5. Licensing fees shall be presumed to have a source in one Contracting State, if the payer is that Contracting State itself, its administrative department, local authority or resident of that Contracting State. However, where a person who pays royalties and is or is not resident in a Contracting State has a permanent establishment or permanent base in a Contracting State in conjunction with which the obligation under which the royalties are to be paid has arisen and who bears such royalties at his expense, such royalties shall be presumed to have a source in the State in which the permanent establishment or permanent base is located.
6. Where the amount of the licence fees, assessed in the light of the transactions for which they are paid, exceeds, by reason of the special relations existing between the payer and the beneficial owner, or which one or the other maintains with the third party, the amount which the debtor would have agreed with the beneficial owner if it had not been for such relations, the provisions of this Article shall apply only to that last amount. In such cases, the amount of remuneration exceeding it shall be taxed under the legislation of each Contracting State and taking into account the other provisions of this Treaty.
Profit on property
1. Profit from the disposal of immovable property as defined in paragraph 2 of Article 6 may be taxed in the Contracting State in which the property is located.
2. Proceeds from the disposal of movable property which is part of the assets of a permanent establishment which is held by an undertaking of one Contracting State in the other Contracting State, or of movable property which belongs to a permanent base which a resident of one Contracting State has in the other Contracting State to pursue an independent occupation, including such profits resulting 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. However, the proceeds from the disposal of assets referred to in paragraph 3 of Article 22 shall be taxed only in the Contracting State in which such movable property is taxable in accordance with that Article.
3. Proceeds from the disposal of assets other than those referred to in paragraphs 1 and 2 shall be taxed 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 liberal profession or other independent activities of a similar nature shall be taxed only in that State if the beneficiary does not regularly have a permanent basis in the other Contracting State to carry out his activities. If the beneficiary has such a permanent base, his income may be taxed in the second Contracting State, but only that part of it which can be attributed to that permanent base.
2. The term "free profession" includes the particularly independent activities of scientific, literary, artistic, educational or teaching and the separate activities of doctors, lawyers, engineers, architects, dentists and accountants.
Employment
1. The salaries, wages and other similar remuneration which a resident of a Contracting State receives on account of paid employment may, subject to the provisions of Articles 16, 18 and 19, be taxed only in that Contracting State 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 on account of paid employment in the other Contracting State may, notwithstanding the provisions of paragraph 1, be taxed only in the former State if:
(a) the consignee shall stay in the other Contracting State for one or more periods not exceeding 183 days in total in the relevant calendar year; and
(b) remuneration shall be paid by an employer or on behalf of 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 or an aircraft in international transport may be taxed in the Contracting State in which the head office of the undertaking is situated.
Tantiems
Tantiémes and similar remuneration received by a resident of one Contracting State as a member of the board of directors of a company or another similar body of a company resident in the other Contracting State may be taxed in that other State.
Artists and athletes
1. Revenue received by residents of one Contracting State, as public performers, such as theatrical, film, radio or television artists and musicians or as athletes, from their activities carried out personally in the other Contracting State, may be taxed, notwithstanding the provisions of Articles 14 and 15.
2. Where the income from an activity carried out personally by an athlete or artist does not result from that artist or athlete alone, but from another person, that income may be taxed, regardless of the provisions of Articles 7, 14 and 15, in the Contracting State in which the artist or athlete carries out his activity.
3. Notwithstanding the provisions of paragraphs 1 and 2, revenue arising from the activities referred to in paragraph 1 carried out in the framework of a cultural exchange between the Contracting States shall be exempt from taxation in the Contracting State in which those activities are carried out.
Public functions
1. Rewards, including pensions, paid by one Contracting State or its administrative department or local authority to a natural person for services demonstrated to that State or its administrative department or local authority in the performance of public functions may be taxed only in that State.
(2) However, Articles 15, 16 and 19 shall apply to remuneration or pensions for services shown in connection with any business carried out by a Contracting State or its administrative department or local authority.
Pension
Subject to the provisions of paragraph 1 of Article 18, pensions and other similar remuneration paid to a resident of a Contracting State in connection with a previous employment shall be taxed only in that State.
Students, professors and researchers
1. Salaries received by a student or apprentice who is present in a Contracting State for the sole purpose of teaching or training and who is, or was, a resident of that State in the other Contracting State immediately prior to its arrival, for the cost of nutrition, study or training, shall not be taxed in the former Contracting State provided that such salaries are paid to him from sources outside that State.
2. A student of a university or other higher education institution of a contract State or an apprentice who is present in the other Contracting State for a period or more not exceeding 183 days in the relevant calendar year and who is, or was, a resident of the former State immediately prior to arrival, shall not be subject to taxation in respect of his or her remuneration for services performed in that other State, provided that the services are performed in connection with his or her studies or practice and that the earnings necessary to cover the costs of his or her nutrition are made.
3. Remuneration received by a resident of one Contracting State for research or teaching at a university, research institute or other similar higher education establishment designated by the Government, for a temporary stay not exceeding two years in the other Contracting State, shall not be taxed in that Contracting State.
Other revenue
1. The income of a person resident in a Contracting State not specifically mentioned in the previous Articles of this Treaty shall be taxed only in that State.
2. The provisions of paragraph 1 shall not apply to income other than income from immovable property within the meaning of Article 6 (2), where the recipient of such income resident in one Contracting State carries out business in the other Contracting State through a permanent establishment situated there or an independent profession through a permanent base situated there, and the right or property for which the income is paid actually belongs to that permanent establishment or permanent base. In that case, the provisions of Article 7 or Article 14 shall apply as appropriate.
Property
1. Real estate as referred to in paragraph 2 of Article 6 may be taxed in the Contracting State in which the property is situated.
2. Moved property which is part of the operating property of a permanent establishment of an undertaking or movable property belonging to a permanent base used for the pursuit of an independent occupation may be taxed in the Contracting State in which the permanent establishment or permanent base is situated.
3. Ships and aircraft operating in international transport and movable property for the operation of such ships and aircraft shall be subject to taxation only in the Contracting State in which the head office of the undertaking's management is situated.
4. All other parts of a resident of one Contracting State will be taxed only in that State.
Exclusion of double taxation
1. In Czechoslovakia, double taxation will be excluded as follows:
(a) Where a person resident in Czechoslovakia receives income or own property which may be taxed under the provisions of this Treaty in Luxembourg, Czechoslovakia shall exempt, subject to subparagraph (b) of this paragraph, such income or property from taxation, but may, when calculating the amount of tax on other income and property of that person, apply the rate of tax which would have been applied if the income or property thus excluded had not been exempt from taxation.
(b) Czechoslovakia may include in the tax base on persons resident in Czechoslovakia income which may also be taxed in Luxembourg under the provisions of Articles 10, 12, 16 and 17 of this Treaty, but may be reduced by an amount equal to that paid in Luxembourg. However, the amount by which the tax is to be reduced shall not exceed that part of the Czechoslovak tax calculated before its reduction, which is attributable to revenue which, in accordance with the provisions of Articles 10, 12, 16 and 17 of this Treaty, may be taxed in Luxembourg.
2. In Luxembourg double taxation will be excluded as follows:
(a) Where a person resident in Luxembourg receives income or own property which may be taxed under the provisions of this Treaty in Czechoslovakia, Luxembourg shall, subject to the provisions of subparagraphs (b) and (c) of this paragraph, exempt such income or property from taxation, but may, when calculating the amount of tax on other income or property of that person, apply the same rate of tax that would apply if the income or property excluded had not been exempt from taxation.
(b) Where a resident in Luxembourg receives revenue which, in accordance with the provisions of Articles 10 and 12, may be taxed in Czechoslovakia, Luxembourg shall allow the deduction of the amount corresponding to the tax paid in Czechoslovakia from the income tax of such a person. However, the amount by which the tax is to be reduced shall not exceed that part of the tax calculated before its reduction, which is attributable to revenue having a source in Czechoslovakia.
(c) Where a company resident in Luxembourg receives dividends from sources in Czechoslovakia, Luxembourg shall exempt such dividends from taxation provided that the company resident in Luxembourg has directly owned, from the beginning of the financial year, at least 25% of the assets of the company paying dividends. Under the same conditions, the abovementioned shares in the Czechoslovak companies are exempt from Luxembourg property tax.
Prohibition of discrimination
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Regulation Information
| Citation | Communication from the Ministry of Foreign Affairs No. 79 / 1993 Coll., on the Agreement between the Government of the Czech and Slovak Federal Republic and the Government of the Grand Duchy of Luxembourg 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 | 25.02.1993 |
|---|---|
| Effective from | 30.12.1992 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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