The Double Taxation Relief (Taxes on Income) (Czechoslovakia) Order 1991

Made: 19th December 1991

At the Court at Buckingham Palace, the 19th day of December 1991 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Czechoslovakia) Order 1991.

2

It is hereby declared—

• (a) that the arrangements specified in the Convention set out in the Schedule to this Order have been made with the Government of the Czech and Slovak Federal Republic with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Czechoslovakia;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Czechoslovakia concerning taxes covered by the arrangements; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE — CONVENTION

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Czech and Slovak Federal Republic;

Confirming their desire to develop and strengthen their economic co-operation;

Desiring to conclude a Convention for the avoidance of double taxation with respect to taxes on income and capital gains;

Have agreed as follows:

ARTICLE I — Personal scope

This Convention shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2 — Taxes covered

ARTICLE 3 — General definitions

ARTICLE 4 — Residence

ARTICLE 5 — Permanent establishment

ARTICLE 6 — Income from immovable property

ARTICLE 7 — Business profits

ARTICLE 8 — Shipping and air transport

ARTICLE 9 — Associated enterprises

Where:

• (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or

• (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State;

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

ARTICLE 10 — Dividends

ARTICLE 11 — Interest

ARTICLE 12 — Royalties

ARTICLE 13 — Capital gains

ARTICLE 14 — Independent personal services

ARTICLE 15 — Dependent personal services

ARTICLE 16 — Directors' fees

Directors' fees and similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

ARTICLE 17 — Artistes and athletes

ARTICLE 18 — Pensions

ARTICLE 19 — Government service

ARTICLE 20 — Students

Payments which a student or business apprentice who is or was immediately before visiting a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in the first-mentioned State, provided that such payments are made to him from sources outside that State.

ARTICLE 21 — Other income

Items of income of a resident of a Contracting State, wherever arising, being income of a class or from sources not expressly mentioned in the foregoing Articles of this Convention, other than income paid out of trusts or the estates of deceased persons in the course of administration, shall be taxable only in that State.

ARTICLE 22 — Avoidance of double taxation

ARTICLE 23 — Non-discrimination

ARTICLE 24 — Mutual agreement procedure

ARTICLE 25 — Exchange of information

ARTICLE 26 — Members of diplomatic or permanent missions and consular posts

Nothing in this Convention shall affect any fiscal privileges accorded to members of diplomatic or permanent missions or consular posts under the general rules of international law or under the provisions of special agreements.

ARTICLE 27 — Entry into force

ARTICLE 28 — Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiration of five years from the date of entry into force of the Convention. In such event, the Convention shall cease to have effect:

• (a) in the United Kingdom:

• (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice is given;

• (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice is given;

• (b) in Czechoslovakia:

• (i) in respect of taxes withheld at source, to amounts declared or paid on or after 1st January in the calendar year next following that in which the notice is given;

• (ii) in respect of other taxes on income, and taxes on capital, to taxes chargeable for any taxable year beginning on or after 1st January in the calendar year next following that in which the notice is given.

In witness whereof the undersigned, duly authorised thereto, have signed this Convention.

Done in duplicate at LONDON this 5th day of November 1990.

in the English and Czech languages, both texts being equally authoritative.

Signed

G.I. de Deney — Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Convention with the Czech and Slovak Federal Republic is set out in the Schedule to this Order.

The Convention provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7). Profits arising from the operation of ships or aircraft in international traffic are to be taxed only in the country in which the place of effective management of the enterprise is situated (Article 8).

This Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country is normally not to exceed 5 per cent of the gross amount of the dividends where the dividend is paid to a company which controls at least 25 per cent of the voting power in the paying company, and 15 per cent of the gross amount of the dividends in all other cases (Article 10).

The country of source will exempt from tax interest and royalties paid to a resident of the other country (Articles 11 and 12).

Provision is made for income arising from immovable property and gains from the alienation of that property to be taxed in the country in which the property is situated (Articles 6 and 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 14 and 15).

Income derived in respect of the personal activities of entertainers and athletes may normally be taxed in the country in which those activities are exercised (Article 17). Certain payments made to visiting students or business apprentices are, subject to certain conditions, to be exempt from tax in the country visited (Article 20).

Government service salaries and pensions are normally to be taxed by the paying Government only (Article 19) while other pensions are to be taxed only in the country of the taxpayer’s residence (Article 18).

Where income continues to be taxable in both countries, relief from double taxation will be given, in effect, in accordance with the laws of each country. In the case of dividends, the United Kingdom will give credit for underlying tax paid in Czechoslovakia where the recipient of the dividend is a United Kingdom company which controls at least ten per cent of the voting power in the paying company (Article 22).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 23) and for consultation (Article 24) and exchange of information (Article 25) between the taxation authorities of the two countries.

The Convention will enter into force when the legislative procedures in both countries have been completed, and will have effect in the United Kingdom from April 1st (in respect of corporation tax) and April 6th (in respect of income tax and capital gains tax) in the following calendar year (Article 27). The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.

Footnotes

[^f00001]: 1988 c. 1; section 788 is extended by section 10 of the Capital Gains Tax Act 1979 (c. 14).