New Double Tax Treaty with Liechtenstein

09.06.2016

The Czech Republic signed a double tax treaty with Liechtenstein in September 2014. The treaty was duly ratified by both countries in 2015 and it came into effect on 1 January 2016. Previously, there was no tax treaty between the two countries. The most important provisions of the treaty are:

  • The withholding tax rate on dividends is 0% in case of ownership interest higher than 10% held by a company for at least 1 year; otherwise, the rate is 15%.
  • Interest is taxed only in the country of the recipient, i.e. 0% withholding tax rate applies.
  • The withholding tax rate on royalties is 10% in cases of industrial royalties and 0% in cases of cultural royalties.
  • There is no restriction on taxation of capital gains arising from a sale of shares in a company which is either a resident or holds real estates in one of the treaty countries. Therefore, such capital gains may be taxed both in the state of the seller and in the state where the transferred company is a resident / holds its real estate assets.

Apart from the above, the benefits of the Czech Income Tax Act (such as exemptions on dividends or capital gains provided that further standard conditions are met) will be extended also to Liechtenstein entities due to the existence of a tax treaty between the two countries.

Should you have any questions regarding the issues above, please do not hesitate to contact Jan Soška.

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