DT5556 - Czechoslovakia: Royalties

Article 12 provides that royalties arising in Czechoslovakia to a United Kingdom resident either are not taxable at all in Czechoslovakia or are taxable there at a rate not exceeding 10 per cent of the royalties, depending on the precise nature of the royalties. Article 12(3) of the agreement should be consulted in order to determine into which category a particular royalty payment falls.

The EC Directive on Interest and Royalties (2003/49EC) (see INTM400010 to 400110) provides for the abolition of source state taxation on interest and royalty payments made between associated companies in different Member States. It also ensures that the payments are subject to tax once in a Member State.

However, both the Czech Republic and Slovakia have obtained a derogation and will be allowed to defer full implementation of the Directive and carry on deducting withholding taxes on royalties for a limited period.

In respect of the Czech Republic, this is until the expiry of a six year period commencing 1 July 2005.

In respect of Slovakia, this is until the expiry of a two year period commencing 1 July 2005.