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Zuzana Kalincová | July 29, 2022

Novelties in double taxation conventions

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On 21 June 2022, the Treaty for the Avoidance of Double Taxation in the Field of Income Taxes and the Prevention of Tax Evasion and Avoidance of Tax Liability between the Czech Republic and Qatar was signed in Doha to ensure the development of economic relations with Qatar by strengthening the legal certainty of business entities conducting economic activities in the other contracting state.

The treaty defining the method of taxation of income generated in the other contracting state by a resident of one state is based on the OECD and UN model treaty and reflects the national legislation of both countries. However, in contrast to the model contract, the place of sale, farm or plantation is also considered a permanent establishment. An overview of the treaty parameters in terms of the creation of a permanent establishment and the taxation of dividend, interest and royalty income is given in the table below:

Creation of a permanent establishment for construction and assembly projects
duration above ... months
Creation of a permanent establishment for other services
duration above ... months
(in any …-month period)
Maximum rate in the source country
Dividends Interests Royalties
6 6 (12)  5 % --- 10 %

Source: Senate print no. 269/0.

The Government proposal to submit the Treaty for consent with ratification will be discussed in the first reading at the meeting of the Chamber of Deputies on 7 July 2022.

Amendments to the treaties with Spain and China 

On 13 June 2022, a Communication on the Double Taxation Treaty between the Czech Republic and Spain was issued, which mainly amends Article 25 of the Treaty relating to the resolution of cases by agreement. If a person believes that a measure will result in taxation that is not in accordance with this Treaty, he or she has the option of referring the case to the competent authority of the contracting state, but now within a limited time period of 3 years after notification of the measure. If the objection is considered justified, the case may be adjusted by agreement with the authority of the other contracting state. Any agreement reached will be implemented without regard to any time limits in the national laws of the contracting states. This applies to cases submitted on or after 1 July 2022. 

An anti-abuse clause has also been added, which makes it impossible to obtain benefits from a contract unless it is proven that the granting of the benefit was in accordance with the purpose and objective of the contract. The same anti-abuse stipulation has also been added to the Double Taxation Treaty between the Czech Republic and the People’s Republic of China through a communication dated 21 June 2022. 

For further information on double taxation treaties or other international taxation issues, please do not hesitate to contact our tax department.

Author: Zuzana Kalincová, Tereza Koleňáková