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HMRC internal manual

Double Taxation Relief Manual

HM Revenue & Customs
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Czechoslovakia: Royalties

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

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

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

In respect of the Czech Republic, this is until the expiry of a six year period commencing1 July 2005.

In respect of Slovakia, this is until the expiry of a two year period commencing 1 July2005.