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Czech Rep-Taiwan

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Tax Treaty between the Czech Republic and Taiwan has Entered into Force

The Czech Republic and Taiwan have reportedly exchanged notifications on the ratification of the 2017 tax treaty between the two jurisdictions to bring the treaty into force. The treaty, signed 12 December 2017, is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Czech personal income tax and corporation tax and covers Taiwan profit-seeking enterprise income tax, individual consolidated income tax, and income basic tax.

Residence

The treaty includes the provision that if a company is considered resident in both Contracting Parties, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to any relief or exemption from tax provided by the treaty, except as may be agreed to by the competent authorities.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting Party through employees or other engaged personnel if the activities continue for a period or periods aggregating more than 9 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 10%
  • Interest - 10%, with an exemption where the interest is paid in connection with a sale on credit of goods or equipment, where the beneficial owner is the government, central bank, etc. of a Contracting Party, and where the interest is paid on a loan guaranteed or insured by the government, central bank, etc. of a Contracting Party
  • Royalties - 5% for royalties paid for the use of, or the right to use, industrial, commercial, or scientific equipment; otherwise, 10%

Capital Gains

The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of shares or other interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other Party.

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Double Taxation Relief

Both parties apply the credit method for the elimination of double taxation.

Limitation of Benefits

Article 26 (Limitation of Benefits) includes the provision that the competent authority of a Contracting Party may deny the benefits of the treaty to any person, or with respect to any transaction if, in its opinion, the granting of the benefits would constitute an abuse of the treaty

Effective Date

The treaty applies from 1 January 2021.

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