Convention

between the Government of the Grand Duchy of Luxembourg and the Government of the Slovak Republic for the avoidance of double taxation and the prevention of fiscal fraud with respect to tax evasion with respect to taxes

on income and on capital

 

The Government of the Grand Duchy of Luxembourg and the Government of the Czech and Slovak Federal Republic, desiring to conclude a convention for the avoidance of double taxation and to prevent fiscal fraud with respect to taxes on income and on capital,

have agreed as follows: 

Article 1

Persons concerned

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

The following paragraphs 1 and 3 of Article 3 of the MI shall apply and prevail over the provisions of this  Agreement:

ARTICLE 3 OF THE IM – TRANSPARENT ENTITIES

For the purposes of [this Convention], income received by or through an entity or arrangement considered wholly or partly transparent for tax purposes under the tax laws of one of the the tax laws of one of the [Contracting States] shall be deemed to be income of a resident of one of the [Contracting States], but only to the extent that the income resident of one of the [Contracting States], but only to the extent that such income is treated for the purposes of taxation by that [Contracting State] as the income of a resident of that [Contracting State]. In no case shall the provisions of this paragraph be construed to affect the right of a [Contracting State] to tax residents of that [Contracting State].

 

Article 2

Taxes covered

1. This Convention shall apply to taxes on income and on capital imposed on behalf of each of the Contracting States, its political subdivisions and its local local authorities, irrespective of the system of collection.

2. Taxes on income and on capital shall be deemed to be taxes on total income, on total capital, on income, on total capital, or on elements of income or capital, including taxes on gains from including taxes on gains from the alienation of movable or immovable property, taxes on the property, taxes on the amount of wages paid by enterprises, and taxes on capital gains taxes on capital gains.

3. The taxes to which the Convention shall apply include

(a) in Czechoslovakia: tax on profits, tax on wages tax on income from creative literary and artistic activity agricultural tax, personal income tax and real estate tax,

(hereinafter referred to as “Czechoslovak tax”);

(b) in Luxembourg: the tax on the income of natural persons, the tax on the income of communities, the special tax on directors’ fees, wealth tax and the communal commercial tax,

(hereinafter referred to as “Luxembourg tax”).

4. This Convention shall also apply to any identical or substantially similar taxes which may be imposed after the date of signature of this Convention and which are in addition which would be added to the existing taxes or which would replace them. The competent authorities of the Contracting States shall notify each other of any significant changes which may be made in their respective taxation laws.

 

Article 3

General Definitions

1. For the purposes of this Convention, unless the context otherwise requires different interpretation:

(a) the term “Czechoslovakia” means the Czech and Slovak Federal Republic

(b) the term “Luxembourg” means the Grand Duchy of Luxembourg

(c) the terms “a Contracting State” and “the other Contracting State” mean, as the context requires, Czechoslovakia and Luxembourg;

(d) the term “person” includes natural persons, companies and any other bodies of persons;

(e) “corporation” means any body corporate or any entity which is treated as a body corporate for tax purposes;

(f) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State

(g) the term “national” means:

(i) any individual who is a national of a Contracting State;

(ii) any legal person, partnership and association organized in accordance with the laws in force in a Contracting State;

(h) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise the place of effective management of which is in a Contracting State, except where the ship or aircraft is operated only between points in the other Contracting State;

(i) the term “competent authority” means:

(i) in the case of Czechoslovakia, the Minister of Finance of the Czech and Slovak Federal Republic or his authorized representative

(ii) in the case of Luxembourg, the Minister of Finance of the Grand Duchy of Luxembourg or his authorized representative.

2. For the purposes of the application of this Convention by a Contracting State, any term not otherwise defined shall have the meaning which it has under the laws of that State governing the taxes covered by this Convention, unless the context otherwise requires a different interpretation.

 

Article 4

Resident

1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax in that State by reason by reason of his domicile, residence, place of management or any other criterion of a similar nature. However, this term does not include persons who are subject to tax in that State in respect only of income from sources in that sources in that State or on capital situated therein.

2. Where by reason of the provisions of paragraph 1 an individual shall be deemed to be of each of the Contracting States, the case shall be resolved according to  the following rules:

(a) such individual shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. Where he has a permanent home available to him in each of the Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (center of vital interests).

(b) If the Contracting State in which such person has his center of vital interests cannot be determined, or if he has no permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which He has a habitual abode.

(c) If such person is ordinarily present in each of the Contracting States or is not ordinarily present in either of them, he shall be deemed to be a resident of the Contracting State of which he is a national.

(d) If such person is a national of both Contracting States or of neither of them, the competent authorities of the States shall settle the question by mutual agreement.

3. Where by reason of the provision of paragraph 1 a person other than an individual an individual is deemed to be a resident of each of the Contracting States, he shall be deemed to be a resident of the Contracting State in which his place of effective management is situated.

 

Article 5

Permanent Establishment

1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business where the enterprise carries on business in whole or in part.

2. The term “permanent establishment” includes in particular :

(a) a place of management

(b) a branch office

(c) an office;

(d) a factory

(e) a workshop;

(f) a mine, quarry or other place of extraction of natural resources

(g) a construction or assembly site of more than six months duration.

3. A permanent establishment shall not be deemed to exist if:

1. a) use is made of facilities solely for the purpose of storing, displaying or delivering goods belonging to the enterprise;

(b) goods belonging to the business are stored solely for the purpose of storage, display or delivery;

(c) goods owned by the business are stored solely for processing by another business;

(d) a fixed place of business is used solely for the purpose of purchasing goods or gathering information for the enterprise;

(e) a fixed place of business is used for the enterprise solely for the purpose of advertising, provision of information, scientific research or similar activities of a preparatory or auxiliary nature.

(4) A person acting in a Contracting State on behalf of an enterprise of the other Contracting State – other than an agent of independent status referred to in paragraph 5 – shall be deemed to be a “permanent establishment” in the first-mentioned State if it has and habitually exercises in that State such powers as will enable it to conclude contracts on behalf of the enterprise, unless the activity of such person is limited to the purchase of goods or merchandise for the enterprise.

5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other intermediary of an independent status, provided that such persons are acting in the ordinary course of their business.

6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting of itself to make any such company a permanent establishment of the other.

 

Article 6

Income from Real Property

1. Income from immovable property, including income from agriculture or forestry or forestry, may be taxed in the Contracting State in which such property is situated.

(a) The term “immovable property” shall, subject to the provisions of subparagraphs (b) and (c), be defined in accordance with the law of the Contracting State in which the property concerned is situated.

(b) The term “real property” includes in all cases the appurtenances, the livestock or dead stock of agricultural and forestry undertakings, the rights to which the provisions of private law concerning the ownership of land, the usufruct of real property and the rights to royalties apply. rights to variable or fixed royalties for the exploitation or concession of exploitation of mineral deposits, springs and other resources of the soil.

c) Ships and aircraft are not considered real property.

3. The provisions of paragraph 1 shall apply to income derived from the direct exploitation leasing or rental, as well as from any other form of exploitation of real or immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to income derived from property of an enterprise as well as to income from real estate used for the property used for the practice of a liberal profession,

 

Article 7

Business Profits

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in that State, unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business in such a manner, the profits of the enterprise may be taxed in the other State but only to the extent that they are attributable to that permanent establishment.

2. Where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, it shall be so attributed,  in each Contracting State, there shall be attributed to that permanent establishment the profits which it might have realized if it had constituted a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In computing the profits of a permanent establishment, there shall be allowed as a deduction expenses incurred for the purposes of that permanent establishment, including management and general administrative expenses so incurred, either in the State in which the permanent establishment is situated or elsewhere.

4. If it is customary in a Contracting State to determine the profits attributable to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its variation between its various parts, nothing in paragraph 2 shall prevent that Contracting State from determining the taxable profits according to the customary allocation. The method of apportionment adopted shall, however, be such that the result obtained is in accordance with the principles set forth in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the fact that the permanent establishment has merely purchased goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs the profits to be attributed to the permanent establishment shall be computed annually by the same method unless there are good and sufficient reasons for sufficient grounds to proceed otherwise.

7. Where profits include items of income which are treated separately in other Articles of thisother Articles of this Convention, the provisions of those Articles shall not be affected by the provisions of this Article.

 

Article 8

Maritime and Air Navigation

1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of the enterprise is situated.

2. If the place of effective management of a shipping enterprise is on board a ship, that place of effective management ship, that place of business shall be deemed to be in the Contracting State in which the port of that ship is situated, or in the absence of a home port, in the Contracting State of which the operator of the ship is a resident.

3. The provisions of paragraph 1 shall also apply to profits from the participation in a participation in a pool, a joint business or an international operating agency.

 

Article 9

Associated enterprises

1. Where

(a) an enterprise of a Contracting State participates directly or indirectly in the 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 the two enterprises are, in their commercial or financial relations, are bound by conditions accepted or imposed, which differ from those which would be made between independent enterprises the profits which, without these conditions, would have been obtained by one of the undertakings, but which could not in fact be so obtained because of those conditions, may be included in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an enterprise of the other Contracting State has been taxed in that State and the profits so included are profits that would have been earned by the profits which would have accrued to the enterprise of the first-mentioned State if the conditions between the two enterprises had been those which would have been agreed upon between independent enterprises, the other State shall make an appropriate adjustment to the amount of tax imposed therein on such profits. In determining such adjustment, due regard shall be had to the other provisions of this Convention and, if necessary, the competent authorities of the Contracting States shall consult each other.

 

Article 10

Dividends

1. Dividends paid by a company that is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but the tax so imposed shall not exceed

(a) 5 percent of the gross amount of the dividends if the beneficial owner of the dividends is a company which directly controls at least 25 percent of the capital of the company paying the dividends

(b) 15 percent of the gross amount of the dividends in all other cases. The provisions of this paragraph shall not affect the taxation of the company profits used to pay dividends.

3. The term “dividends” as used in this section means income from stocks, shares or shares, profit-sharing certificates, mining shares, founder’s shares or other profit-sharing shares, with the exception of debt claims, as well as income from other shares subject to the same tax treatment as income from shares under the law of the State in which the State of which the distributing company is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of the dividends, a resident of a Contracting State, carries on business in the other of which the company paying the dividends is a resident, carries on business in the other Contracting business activity through a permanent establishment situated therein, or performs independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with it. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Where a company that is a resident of a Contracting State derives profits or income from the other Contracting State, the company shall be deemed to have income of the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except to the extent that such dividends are paid to resident of that other State or to the extent that the holding in respect of which the dividends are paid dividends is effectively connected with a permanent establishment or a fixed base situated in that other State, nor impose any tax on the undistributed profits by way of taxation on the distributed profits, even if the dividends paid or the undistributed profits consist of or undistributed profits consist wholly or partly of profits or income arising in that other State.

 

Article 11

Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State.

2. The term “interest” as used in this Article means income from debt-claims of any kind, whether or not secured by a mortgage or by any provision for participation in the of the debtor, including income from government securities and income from bonds or debentures bonds, including premiums and prizes attached to bonds.

3. The provisions of paragraph 1 shall not apply where the beneficial owner of the interest, a resident of interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, carries on business in the other Contracting State  through a permanent establishment situated therein, or performs in the other Contracting State by means of a fixed base situated therein, and the debt-claim in respect of which the interest is effectively connected with it. In this case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

4. If, as a result of a special relationship between the debtor and the beneficial owner or if both beneficiary, the amount of the interest paid, taking into account the claim of the debtor, shall be paid, taking into account the claim for which it is paid, exceeds that which would have been the debtor and the beneficial owner would have agreed in the absence of such relationship, the provisions of this article shall apply only to the latter amount. In such a case, the excess part of the payments shall remain taxable in accordance with the laws of each of the laws of each Contracting State and having regard to the other provisions of this Convention.

 

Article 12

Royalties

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. Contracting State may be taxed in that other State.

2. However, royalties referred to in subparagraph (a) of paragraph 3 may be taxed in the Contracting State in which they arise and according to the laws of that State, but the tax so charged shall not exceed 10 percent of the gross amount of the royalties.

3. The term “royalties” as used in this Article means payments of any kind for the use of, or the right to use

(a) a right to use a design or model of a secret plan, formula or process, or of industrial, commercial or scientific equipment, and for information concerning industrial, commercial or scientific experience

(b) copyright in a literary, artistic or scientific work, including cinematographic films and films or tapes for television or radio broadcasts.

4. The provisions of paragraphs 1 and 2 shall not apply where the of the royalties, being a resident of a Contracting State, carries on business in the other State in which the royalties arise carries on business in that other State through a business activity through a permanent establishment situated therein, or independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with it. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision, a local authority or a resident of that Contracting State. However, where the payer of the royalties whether or not he is a resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed base in a Contracting State in connection with which the payment of the royalties has been made and which bears the expense thereof, such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

6. If, by reason of a special relationship between the payer and the beneficial owner or if both beneficiary or between the debtor and the beneficial owner and third parties, the amount of the royalties paid, taking into account the service for which they are paid, exceeds that which would have been the debtor and the beneficial owner would have agreed in the absence of such a relationship, the provisions of this Article shall apply only to the latter amount. In such a case, the excess part of the payments shall remain taxable in accordance with the laws of each of the laws of each Contracting State and having regard to the other provisions of this Convention.

 

Article 13

Capital Gains

 

1. Gains from the alienation of immovable property, as defined in paragraph 2 of Article 6, may be taxed in the paragraph 2 of Article 6 may be taxed in the Contracting State in which such immovable property is situated.

2. Gains from the alienation of movable property forming part of the business property of a establishment which an enterprise of a Contracting State has in the other Contracting State, or Contracting State, or movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation in the aggregate of such permanent establishment (alone or with the whole enterprise) or fixed base, may be taxed in that other State. However, gains from the alienation of property referred to in paragraph 3 of Article 22 shall be taxable only in the Contracting State in which property itself may be taxed under that Article.

3. Gains from the alienation of any property other than that referred to in paragraphs 1 and 2 shall not be taxed paragraphs 1 and 2 shall be taxable only in the Contracting State of which the transferor is a resident.

 

Article 14

Independent Personal Services

1. Income derived by a resident of a Contracting State in respect of professional services or activities of a similar character shall be taxable only in that State unless that resident has a fixed base regularly available to him in the other Contracting State for the State for the purpose of performing his activities. If he has such a base income may be taxed in the other State but only to the extent that it is attributable to that said fixed base.

2. The term “professional services” includes in particular independent scientific, literary of a scientific, literary, artistic, educational or teaching nature, as well as the independent activities of doctors, lawyers, engineers, architects, dentists and accountants.

 

Article 15

Dependent Professions

1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is exercised in that State, remuneration received in respect thereof may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and

(b) the remuneration is paid by or on behalf of an employer who is not a resident of the other State; and

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration in respect of in respect of an employment exercised aboard a ship or aircraft in international traffic shall be taxable in the Contracting State in which the place of effective management of the enterprise is situated.

 

Article 16

Directors’ Fees

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

Article 17

Artists and Athletes

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a from his personal activities as an entertainer, such as an entertainer in the other Contracting State as an entertainer, such as a theater, motion picture, radio or television artiste, or a musician, or as an athlete, may be taxed in that other State.

2. Where income from activities which an entertainer or athlete performs personally and in that capacity is attributed not to the entertainer or athlete himself but to another person, such income may be taxed, notwithstanding the provisions of Articles 7, 14 and 15, in the Contracting State in which the activities of the activities of the artist or athlete are carried on.

3. Notwithstanding the provisions of paragraphs 1 and 2, income derived from such activities defined in paragraph 1, exercised within the framework of the structures of cultural exchange between the Contracting States, shall be exempt from tax in the Contracting State in which such activities are carried on.

Article 18

Public Offices

1. Remuneration, including pensions, paid by a Contracting State or a political subdivision or local authority thereof to an individual in respect of his political subdivision or local authority thereof to an individual in respect of services rendered to that State or subdivision or local authority in the performance of a public character, may be taxed in that State.

2. However, the provisions of Articles 15, 16 and 19 shall apply to remuneration or pensions paid in respect of remuneration or pensions paid in respect of services rendered in connection with a business carried on by one of the businesses carried on by one of the Contracting States or a political subdivision or local authority thereof.

 

Article 19

Pensions

Subject to the provisions of paragraph 1 of Article 18, pensions and other similar remuneration paid to a resident of a Contracting State in respect of past employment shall be taxable only in that State.

 

Article 20

Students, Professors and Researchers

1. Amounts paid to a student or a trainee who is present in a Contracting State solely for the purpose of for the sole purpose of furthering his education or training and who is, or was immediately before such visit a resident of the other Contracting State, shall be paid to maintenance, education or training, shall not be taxable in the first-mentioned Contracting State the first-mentioned Contracting State, provided that such payments are derived from sources outside that State.

2. A student at a university or other institution of higher education of a Contracting State or a trainee, who is present in the other Contracting State for a period or periods, State for a period or periods not exceeding 183 days in the calendar year concerned calendar year and who is, or immediately before such sojourn was, a resident of the first-mentioned State, shall not be taxable in the other Contracting State by reason of remuneration received for services rendered in that other State, provided that the services are related to his education or training and the remuneration constitutes the resources necessary to meet his maintenance expenses.

3. Remuneration derived by a resident of a Contracting State for engaging in research or teaching for a period of temporary residence not exceeding two years, at a university, research institute or other similar institution of higher learning accredited by the Government in the other Contracting State shall not be taxable in that Contracting State.

 

Article 21

Income not expressly mentioned

1. Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Convention shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income other than income from real property as defined in paragraph 2 of Article 6, where the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State, carries on business in that other State through a permanent establishment situated therein, or performing independent personal services by means of a fixed base situated therein, and the right or property in respect of which the property is effectively connected with it. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

Article 22

Assets

1. Capital represented by immovable property, as defined in paragraph 2 of Article 6, may be taxed in the Contracting State in which such property is situated. of Article 6, may be taxed in the Contracting State in which such immovable property is situated.

2. Capital represented by movable property forming part of the business property of a permanent establishment of an enterprise or by movable property constituting a fixed base for the purpose of performing the performance of independent personal services may be taxed in the Contracting State in which the permanent establishment or fixed base is situated.

3. Ships and aircraft operated in international traffic and movable property pertaining to their operation shall not be taxed in the Contracting State in which the permanent establishment or fixed base is situated. property pertaining to their operation shall be taxable only in the Contracting State in which the place of the effective management of the enterprise is situated.

4. All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

 

Article 23

Elimination of Double Taxation

1. 1. In Czechoslovakia, double taxation shall be avoided in the following manner:

(a) Where a resident of Czechoslovakia derives income or possesses capital which, in accordance with the provisions of this Convention, may be taxed in Luxembourg, Czechoslovakia shall, subject to the provisions of paragraph 1 of this Article, exempt such income or such income or capital, subject to the provisions of subparagraph (b) of this paragraph, but shall not, for the purpose of calculating the amount of tax on the remaining income or capital of such person, apply the same rate as if such income or capital had not been

(b) Czechoslovakia may, in the taxation of its residents, include in the basis of assessment for taxation those items of income which, in accordance with Articles 10, 12, 16 and 17 of this Convention, may also be taxed in Luxembourg, but shall allow the amount of such income to be taxed in Luxembourg. Luxembourg, but shall allow a deduction from the amount of tax computed on that basis of deduction from the amount of tax computed therefrom in an amount equal to the tax paid in Luxembourg. However, the sum the taxable income of the person who is the subject of the taxable income of the taxpayer deduction, corresponding to the income which, in accordance with the provisions of the amount of tax deducted shall not exceed the amount of Czechoslovak tax, calculated before the deduction, corresponding to income which, in accordance with the provisions of Articles 10, 12, 16 and 17 of this Convention, is taxable in Luxembourg.

2. 2. In Luxembourg, double taxation shall be avoided in the following manner;

(a) Where a resident of Luxembourg receives income or has capital which, in accordance with the provisions of this Convention, may be taxed in Czechoslovakia, Luxembourg shall exempt such income or capital from tax, subject to the provisions of subparagraphs (b) and (c), but may not, for the purpose of calculating the taxable income or capital of the resident is not subject to tax in the country of residence; or apply the same rates of tax as if the income or capital had not been exempted.

(b) Where a resident of Luxembourg receives items of income which, in accordance with the provisions of Articles 10 and 12, may be taxed in Czechoslovakia that resident an amount equal to the tax paid in Czechoslovakia. This deduction may not, however, exceed the fraction of the tax, calculated before deduction, corresponding to these items of income.

(c) Where a company which is a resident of Luxembourg receives dividends from Czechoslovak sources, Luxembourg shall exempt such dividends from tax, provided that the company, which is a resident of Luxembourg, has held directly since the beginning of at least 25 percent of the capital of the company paying the dividends since the beginning of the dividends. The above-mentioned shares of the Czechoslovak company are, under the same conditions, exempt from The above-mentioned shares of the Czechoslovak company are, under the same conditions, exempt from Luxembourg wealth tax.

 

Article 24

Non-discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than that to which nationals of that other State in the same circumstances are or may be subject. in the same situation.

2. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorable than the taxation of enterprises of that other State carrying on the same activity. This provision shall not be construed to require a Contracting State to grant personal allowances to residents of the other Contracting State, deductions, allowances and reductions of tax on account of civil status or family responsibilities that it grants to its own residents.

3. Enterprises of a Contracting State, the capital of which is wholly or partly directly or indirectly, owned or controlled by one or more residents of the other Contracting State, shall not be subjected by the first-mentioned Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than that to which other enterprises of the same kind in that first-mentioned State are or may be subjected to.

4. The term “taxation” in this Article means taxes of every kind and description denomination.

 

Article 25

Mutual Agreement Procedure

1. Where a resident of a Contracting State considers that the actions of one or both of the State or by each of the two States results or will result in taxation not in accordance with not in accordance with this Convention, he may, irrespective of the remedies provided by provided for in the domestic laws of those States, submit its case to the competent authority of the Contracting State of which he is a resident. The case must be submitted within three years after the first notification of the measure which results in taxation not in accordance with and not in accordance with the provisions of the Convention.

2. That competent authority shall endeavor, if the objection appears to it to be justified and if it is not a satisfactory solution, to settle the matter by mutual agreement with the taxpayer by mutual agreement with the competent authority of the other Contracting State, with a view to avoid taxation not in accordance with the Convention. The agreement shall be applied irrespective of the time limits provided by the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavor by mutual agreement to resolve agreement, to resolve any difficulties or doubts arising as to the interpretation or application of the interpretation or application of the Convention. They may also consult together with a view to the avoidance of double taxation in cases not provided for in the Convention.

4. The competent authorities of the Contracting States may communicate directly with each other with a view to reaching an agreement as described in the preceding paragraphs above. If oral exchanges of views are deemed to facilitate such agreement, such exchange of views may take place in a Commission composed of representatives of the competent authorities of the Contracting States.

 

Article 26

Exchange of Information

1. The competent authorities of the Contracting States shall exchange such information as is necessary to carry out the provisions of this Convention and the laws of the Contracting States relating to the taxes covered by the Convention to the extent of the information exchanged of the Contracting States relating to taxes covered by the Convention to the extent that the taxation thereunder is in accordance with the Convention. Any information so exchanged shall be treated as secret and may be disclosed only to persons or authorities, including courts, responsible for the assessment, collection, enforcement or prosecution of taxes covered by this Convention.

2. The provisions of paragraph 1 shall in no case be construed to require either State to

(a) to carry out administrative measures at variance with its own laws or administrative practice or with that of the other Contracting State

(b) to supply information that is not obtainable under its own laws or under the normal administrative practice or practice of the other Contracting State

(c) to transmit information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.

Article 27

Diplomatic and Consular Officials

The provisions of this Convention shall not affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of the law of nations or under the provisions of special agreements.

The following paragraph 1 of Article 7 of the MI shall apply and prevail over the provisions of this Agreement:

ARTICLE 7 – PREVENTING THE MISUSE OF AGREEMENTS

(Main object criterion rule)

Notwithstanding any provision of [this Convention], a benefit under [this Convention] shall not be provided on account of income or capital if it is reasonable to conclude, having regard to all the facts and circumstances of the situation, that the granting of such benefit was one of the main purposes of a scheme or transaction that directly or indirectly or transaction by which it was obtained, directly or indirectly, unless it is established that the provision of such benefit in such circumstances would be consistent with the object and purpose of the relevant provisions of [this Convention].

 

Article 28

Exclusion of certain companies

This Convention shall not apply to holding companies within the meaning of the special Luxembourg legislation law of July 31, 1929 and the Grand Ducal decree of December 17, 1938, nor to companies subject in Luxembourg to similar tax legislation. similar tax legislation. It does not apply either to income derived by a resident of Czechoslovakia from such companies from such companies, nor to the shares or other capital securities of such companies owned by such a person or of such companies owned by that person.

 

Article 29

Entry into force

1. This Convention shall be ratified and the instruments of ratification shall be exchanged in Luxembourg as soon as possible.

2. This Convention shall enter into force upon the exchange of the instruments of ratification and its ratification and its provisions shall apply

(a) taxes withheld at source on amounts distributed on or after the first day of January next following the calendar year in which the Convention enters into force

(b) to other taxes on income and taxes on capital on taxes due for any taxable year beginning on or after the first day of January of the calendar year immediately following that in which the Convention enters into force.

 

Article 30

Denunciation

This Convention shall remain in force until denounced by one of the Contracting States by one of the Contracting States. Each of the Contracting States may denounce the Convention by diplomatically with a minimum of six months notice before the end of each calendar year following the period of five years from the date of entry into force of the Convention. In this case, the Convention shall cease to have effect:

(a) taxes withheld at source on amounts distributed on or after the first day of January in the calendar year immediately following that in which the denunciation is notified

(b) to other taxes on income and capital on taxes due for any taxable year beginning on or after the first day of January in the calendar year immediately following that in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned, being duly authorized thereto, have signed this Convention,

DONE in duplicate at Luxembourg, this 18th day of March 1991, in the French and Czech languages, both texts being equally