Czech News - May 96 - Ministry Of Finance Instructions

STATEMENT CONCERNING ADMISSION OF THE CZECH REPUBLIC INTO OECD AND DIRECT TAXES

The Ministry of Finance issued a statement in respect of admission of the Czech Republic into OECD in the Financial Reporter 4 as No. 41.

Under this statement, the Czech Republic accepts the recommendations of the OECD's Fiscal Committee concerning contents of double tax treaties, e.g. recommendation of the Committee concerning the prevention of double taxation from income and capital, inheritance and gift taxes. However, it reserves certain rights while concluding new double taxation treaties or amended versions of currently effective double taxation treaties, including the following:

RESERVATION ON ARTICLE 5 (PERMANENT ESTABLISHMENT):

Although the Czech Republic agrees with the definition of a permanent establishment, it reserves the right to propose the incorporation of a provision concerning the creation of a permanent establishment through the provision of services with certain duration.

This fact would appear to further support the view that double taxation treaties which do not contain this provision provide a protection against creation of a permanent establishment as a consequence of rendering such services.

RESERVATION ON ARTICLE 12 (ROYALTIES):

The Czech Republic reserves the right to tax royalties sourced in the Czech Republic. The Czech Republic further reserves the right that payments for the use, or the right to use, of software may be subject to a tax treatment different from the tax treatment of copyright.

RESERVATION ON ARTICLE 14 (INDEPENDENT PERSONAL SERVICES):

The Czech Republic reserves the right to tax individuals performing professional services or other activities of an independent character if they are present in the Czech Republic for a period, or periods, exceeding in the aggregate 183 days in any twelve months, even if they do not have a fixed place for the provision of such services or activities.

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