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HMRC internal manual

Double Taxation Relief Manual

HM Revenue & Customs
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Czechoslovakia: Dividends

The Czech or Slovakian tax deducted from dividends at the agreement rate of 15 per cent(5 per cent if the recipient is a United Kingdom company which controls at least 25 percent of the voting power in the company paying the dividend) qualifies for credit as adirect tax (see INTM164010(c)). The reduction to the above rates is not given where thedividend is effectively connected (see INTM153110 fifth sub-paragraph) with a permanentestablishment or fixed base which the United Kingdom resident recipient has in CzechRepublic or Slovak Republic.

However, the EC Parent-Subsidiary Directive applies to both Czech Republic and SlovakRepublic from 1 January 2005. This bars the imposition of withholding taxes on dividendspaid by a company resident in one Member State of the Community to a company resident inanother Member State, where the company receiving the dividends holds a minimum of 20 percent (from 1 January 2005)of the capital of the company paying the dividend. The level ofcontrol required to gain exemption will be 15% from 1 January 2007 and 10% from 1 January2009.

Where a Czech or Slovakian company pays a dividend to a United Kingdom company whichcontrols, directly or indirectly, at least 10% of the voting power in the Czech orSlovakian company, credit may also be given for the underlying tax (see INTM164010(d))(Article 22(1)(b)).