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Czech Rep-Luxembourg

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

On 31 July 2014, the income and capital tax treaty between the Czech Republic and Luxembourg entered into force. The treaty was signed 5 March 2013, and once effective, will replace the 1991 treaty between Czechoslovakia and Luxembourg, which currently applies.

Taxes Covered

The treaty cover Czech income tax on individuals and legal persons, and the tax on Immovable property. It covers Luxembourg individual income tax, corporation tax, capital tax and the communal trade tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if a resident of one State furnishes services in the other State through employees or other engaged personnel in the other State for a period or periods aggregating more than six months in any twelve-month period.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner directly holds at least 10% of the paying company's capital for a period of at least one year; otherwise 10%
  • Interest - 0%
  • Royalties - 0% for any copyright of literary, artistic, scientific work (excluding computer software), and films or tapes for television or radio broadcasting; otherwise 10%

Double Taxation Relief

The Czech Republic applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption method. However, in the case of dividend, royalty, and entertainer and sportspersons income, Luxembourg applies the credit method.

MFN Clause

A protocol to the treaty, signed the same date, includes the provision that if the Czech Republic enters into an agreement with any other EU member state that provides for a lower tax rate or exemption on royalties in the Czech Republic, such rate or exemption will apply for the Czech Republic-Luxembourg treaty from the date such other agreement will have effect.

Entry Into Effect

The treaty will apply from 1 January 2015. The 1991 tax treaty between Czechoslovakia and Luxembourg will cease to have effect once the new treaty is effective.

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