News on double taxation treaties

Partial amendment in relation to the application of the double taxation treaty with Japan

Following the introduction of the new tax in Japan, the Japanese Ministry of Finance informed the Czech counterparty that the taxes that are the subject of the double taxation treaty between the Czech Republic and Japan will now include the so-called Special Corporation Tax for Defence. The tax base at a rate of 4% is the amount of income tax of the companies, while the tax period of this “surcharge on tax” is the accounting period of the company. The introduction of this Japanese tax will take effect on April 1, 2026.

World news

Update of the OECD Model Tax Convention and its commentary

In November 2025, the OECD Council approved a major update of the Model Double Taxation Convention and its commentary. This revision, the first comprehensive since 2017, responds to modern trends in labour mobility and to progress in international tax reforms (in particular the BEPS project).

Cross-border remote working

The key topic is the effort to unify the interpretation for assessing the establishment of a permanent establishment for persons working remotely in another country. This issue is addressed through amendments to the commentary to Article 5.

The updated document introduces an analytical framework for assessing whether remote working arrangement meets the characteristics of a “place of business”, which includes two key factors:

1. Time test: Through a commentary, the OECD introduces the presumption that if a person works from home in the other contracting state for less than 50% of the total working time in a twelve-month period, a permanent establishment should not normally be established.
2. Business reason: For the establishment of a permanent establishment, it should be decisive whether the person has an active economic interest in the work taking place from this place. The Commentary distinguishes between the active commercial interest of the taxpayer and the mere “tolerance” of the employee’s wishes.

In order for the establishment of a permanent establishment, or for the conclusion that the taxpayer has a place of business in the other country, both of the above conditions must be met.

For example, the following are considered to be relevant business reasons:

• Absence of office facilities provided by the employer, although the nature of the activity in the given country requires physical facilities.
• Hiring/employing a person specifically to operate on the local market in a given country.
• Installation of employer-specific equipment in the premises used by the worker.

Other changes

• Financial transactions and transfer pricing (commentary on Article 9 – Associated enterprises): The update confirms the priority of the so-called “transaction delimitation”. The tax administrator has the right to first examine whether independent persons would have arranged a loan in such a volume in ordinary business relations (capital structure). This leads to a closer link between the international interpretation and the Czech rules on thin capitalisation: first, the market-usual level of debt is determined (in the context of Article 9) and only then are the national limits on the deductibility of interest applied, including the possibility of changing the classification of interest income into profit shares in relation to the part of the debt that exceeds its market-usual level. This interpretation strengthens the position of tax administrators in assessing whether an entity would be able to obtain debt financing in such a volume under the given circumstances or whether part of the debt actually constitutes a contribution to equity.
• Mining activities (revision/expansion of the text of Article 5 – Permanent establishment): The update introduces optional provisions establishing the establishment of a permanent establishment for mining activities based on a short time test (usually 30 days). It also includes instruments against contract splitting between associated undertakings in order to circumvent this limit.
• Exchange of information (commentary on Article 26 Exchange of information): Flexibility for tax authorities is increased – information obtained from abroad on one entity can now also be used in proceedings with other taxpayers, if it is relevant for them.
• Dispute settlement and GATS (rewording of Article 25 — Mutual agreement procedure): A new paragraph 6 clarifies the relationship with the General Agreement on Trade in Services (GATS). It introduces a “mandatory filter” whereby tax disputes must primarily be resolved in the form of a Mutual agreement procedure (MAP) between tax administrations, thereby limiting solutions through commercial arbitration.

The Czech Republic applied both reservations to the newly drafted texts of the articles and observations to their interpretation in the commentary. The key comment is directed at remote work, where, according to Czech representatives, the test of “business reason” is too subjective and for the establishment of a permanent establishment it is sufficient if the employer actually tolerates remote working from the Czech Republic for a longer period of time (the so-called acquiescence). The Czech Tax Administration will thus continue to proceed in accordance with its 2019 methodology.

In the context of the practical applicability of the updated commentary on the Model Tax Convention, it is also necessary to reflect the fact, confirmed by the case law of the Czech Supreme Administrative Court (e.g. judgment 10 Afs 27/2023-76), that neither the OECD Model Tax Convention nor its commentary are a binding source of law. Updated versions of the comment cannot be automatically applied to previously concluded double tax treaties. In the interpretation of these contracts, the wording and the context in which they were concluded shall prevail. Later versions of the OECD Commentary may be used only exceptionally as a supplementary means of interpretation, and only if they genuinely explain the original meaning of the treaty and do not lead to its de facto extension or amendment to the detriment of the taxpayer, in particular with regard to the protection of legitimate expectations.

OECD: 26 jurisdictions announce intention to join automatic exchange of information in the real estate tax area

In the course of December 2025, 26 jurisdictions announced their intention to join the OECD’s new tax transparency initiative: the Multilateral Competent Authority Agreement on the Exchange of Readily Available Information on Immovable Property (IPI MCAA) – by 2029 and 2030 respectively.

The jurisdictions that have expressed their intention to join the IPI MCAA are Belgium, Brazil, Chile, Costa Rica, Finland, France, Germany, Gibraltar, Greece, Indonesia, Iceland, Ireland, Italy, Republic of Korea, Lithuania, Malta, New Zealand, Norway, Peru, Portugal, Romania, Slovenia, South Africa, Spain, Sweden and the United Kingdom.

In a joint statement, the jurisdictions acknowledged the progress made in recent years in the area of international tax transparency and highlighted the current limitation of the absence of an information exchange mechanism on non-financial assets such as real estate. The new IPI MCAA fills this gap and takes another step towards reducing tax evasion and ensuring fair taxation. This initiative should not impose an obligation for cooperating jurisdictions to collect data beyond current practice, but will only exchange pre-existing information. How the Czech Republic will approach this initiative remains to be seen.

Belgium introduces capital gains tax from 2026: 10% on shares and crypto-assets

With effect from 1 January 2026, Belgium is introducing a capital gains tax on the transfer of shares, business quotas, and other “qualifying financial assets”, which include, but are not limited to, crypto-assets.

The so-called “internal capital gains” realized during the transfer of shares to a company that is directly or indirectly controlled by the transferor himself (or together with his family) are assessed most strictly. In this situation, the profit is fully taxed at a rate of 33%.

Another situation is the transfer of shares and shares within a “significant holding” (i.e. holding at least 20% of the rights in the company’s capital), which is taxed at a progressive rate of 1.25-10%. It is possible to use the exemption up to a limit of 10,000 euros. In this situation, the law also provides for a business exemption up to a limit of EUR 1 million within a five-year period.

The general rule of taxation applies to capital gains from financial assets (e.g. crypto-assets) that do not fall under the previous two situations. A 10% tax rate will apply here, or an exemption up to a limit of 10,000 euros within one category. In addition, an annual exemption of EUR 10,000 per person is provided for small and medium-sized investors, with the possibility of increasing up to EUR 15,000 if the taxpayer has not received any capital gains in the previous five years.

The legislative amendment provides partial exceptions for specific situations, such as the settlement of co-ownership upon death or divorce, as well as a special regime for selected business combinations. A withholding tax of 10% is also adjusted, applying to profits outside a substantial participation and excluding transfers to a taxpayer’s own controlled company. The law further provides for an ‘opt-out’ option, which must be notified to the tax administrator.