Press Releases and Reports - 2011

Luxembourg withholding tax rules applicable to dividends distributed by PEGAS NONWOVENS SA to its shareholders

LUXEMBOURG/ZNOJMO, October 14, 2011 – PEGAS NONWOVENS SA (hereafter"PEGAS" or "Company") announces information on the tax treatment applicableto the payment of EUR 1.00 per share from the share premium account, with therecord date as at October 20, 2011. The payment date is set on or aboutOctober 27th, 2011.

A dividend distributed by PEGAS NONWOVENS SA to its shareholders in 2011 will besubject to Luxembourg withholding tax for the first time. The withholding tax will bededucted at source by the Company from the dividends paid to all shareholders. Thecurrent withholding tax rate is 15%.

The obligation to withhold the tax is derived from the fact that the company createdpositive distributable reserves and the tax is levied regardless the legal classification ofthe payment. In the next year(s) the distribution up to the amount of the 2011 dividendswill be distributed tax free as confirmed with the Luxembourg tax authorities.

The Company prepared general guidelines to all shareholders regarding the withholdingtax applicable to dividends distributed by PEGAS in 2011. The shareholders who are indoubts as to their tax position in Luxembourg and/or in their state of residence or whoneed specific advise should consult their professional advisors.

1. Withholding tax on dividends paid to shareholders, who are privateindividuals and non-residents in Luxembourg

The Company’s shareholders, who are private individuals and non-residents inLuxembourg are subject to Luxembourg withholding tax on dividends (current rate of15%) without possibility for reduction or claim back unless there is a double tax treaty inforce between Luxembourg and the shareholders’ country of residence.These shareholders may be able to receive tax credit for the withholding tax suffered orexempt the dividend income depending on the tax regulations in the country of theirresidence.

2. Withholding tax on dividends paid to shareholders, who are legal entities andnon-residents in Luxembourg

The Company’s shareholders, who are legal entities and non-residents in Luxembourg,may be entitled to reduced withholding tax rate on dividends, if there is a double taxtreaty in force between Luxembourg and the shareholders’ country of residence or byapplication of the Luxembourg participation exemption (described in section 3).

The benefit of a reduced or zero withholding tax rate applicable will be granted by theLuxembourg tax authorities provided that the non-resident shareholder can give evidencethat he is the beneficial owner of the income derived from the shares held in theCompany. A shareholder is generally considered as the beneficial owner if he receivesdividends for his own benefit and not as an intermediary/depositary agent and if he canfreely use his dividend income according to his needs.

In case that a reduced treaty rate applies, then the excessive part of the withholding taxlevied in Luxembourg can be claimed back by shareholders. For this purpose theshareholder has to submit to the Luxembourg tax administration the followingdocuments:

- 4 copies of “form 901bis” which have to be first attested by the tax administration ofthe country of residence of the shareholder. The form 901bis can be obtained from theLuxembourg tax administration website: www.impotsdirects.public.lu, under the folder“Formulaires” (Forms).

- Copy of the Company dividend withholding tax Form # 900 and a copy of the banktransfer as an evidence that the Company has paid the tax (see section 5 below).

The above documents have to be sent to the Luxembourg tax administration at thefollowing address:

Administration des contributions directes
Bureau d’imposition des sociétés VI
L-2982 Luxembourg

The shareholders, who are legal entities and non-residents in Luxembourg, may be ableto receive tax credit for the withholding tax suffered or exempt the dividend incomedepending on the tax regulations in the country of their residence.

3. Participation exemption rules

Shareholders who are beneficial owners of the dividends and that meet the conditionslisted below may qualify for participation exemption from dividend withholding tax inLuxembourg:

A) The shareholder must be a

  • An organism with a collective character which falls within the scope of the article 2of the amended parent subsidiary directive 90/435/CEE, or
  • A joint stock company resident fully taxable non listed at the annex of article 166(10) LITL, or
  • A permanent establishment (i.e. Lux and foreign) of an organism with a collectivecharacter targeted supra a, b, c, or
  • An organism with a collective character fully taxable to a tax corresponding to theLuxembourg Corporate Income Tax and which is resident of a state with whichLuxembourg has concluded a double tax treaty (as well as a Luxembourgpermanent establishment thereof), or
  • A joint stock company resident in Switzerland subject to corporate income tax inSwitzerland without benefiting from an exemption, or
  • A joint stock company or a cooperative company resident in a member state ofthe European Economic Area (EEA) other than an EU member state (i.e. Norway,Liechtenstein and Island) which is liable to a tax corresponding to the LuxembourgCorporate Income Tax, or
  • A permanent establishment (i.e. Lux and foreign) of a joint stock company or of acooperative company resident in an EEA member state other than an EU memberstate

B) Size of participation

The minimum participation that qualifies for the dividend withholding tax exemption is:

  • 10% of share capital of the Company; or
  • An acquisition price of a minimum of € 1,200,000

C) Minimum retention period

The minimum participation in the Company must have been held for at least 12 monthson the date that the dividend is paid. A commitment to hold the minimum shareholdingfor an uninterrupted period of at least 12 months satisfies this condition. The test appliesto the participation in general and is not required on a share-by-share basis.

  • 12 month retention period met at the time of the dividend distribution by the Company

In case that participation exemption applies, then the excessive part of the withholdingtax levied in Luxembourg can be claimed back by shareholders. For this purpose theshareholder has to submit to the Luxembourg tax administration the followingdocuments:

- 4 copies of amended “form 901bis” which have to be first attested by the taxadministration of the country of residence of the shareholder. The amended form 901biscan be obtained from www.pegasas.cz in the “Investors / Dividends withholding tax”menu.
- A copy of the Company’s dividend withholding tax form 900 and a copy of the banktransfer as an evidence that the Company has paid the tax (see section 5 below).

The above documents have to be sent to the Luxembourg tax administration at thefollowing address:
Administration des contributions directes
Bureau d’imposition des sociétés VI
L-2982 Luxembourg

  • Commitment by shareholders to hold the minimum participation for 12 months at least

In case that participation exemption applies but the minimum retention period of 12months is not met at the time of the dividend distribution, shareholders have to committo the minimum retention period in order to claim back the withholding tax. Theseshareholders have to confirm in a letter to the Luxembourg tax administration that theyhave held at least 10% or € 1,200,000 in the Company for 12 months once the minimumretention period is fulfilled. A template of the letter can be obtained fromwww.pegasas.cz in the “Investors / Dividends withholding tax ”menu.

4. Withholding tax on dividends paid to shareholders, who are residents inLuxembourg and not qualifying for participation exemption

The Company’s shareholders, who are beneficial owners and residents in Luxembourg(both private individuals and legal entities) are subject to the Luxembourg withholdingtax on dividends (currently at a rate of 15%).
This withholding tax is credited against the income tax at the level of the shareholder.If the withholding tax exceeds the total income tax, then the shareholder is entitled tocredit this withholding tax against other Luxembourg taxes that become due andpayable. If the shareholder cannot recover the dividend withholding tax by netting off,then he is entitled to claim for repayment of the excessive part.

Under Luxembourg tax law, 50% of the dividends can be exempted from taxation at thelevel of Luxembourg resident shareholders, i.e. these dividends will be subject to a14.815% effective tax rate (50% x 29.63%). This 50% rebate does not apply to 1929holding companies as they are exempt from Luxembourg corporate income tax.

5. Withholding tax declaration by the Company

Within fifteen days of dividend payment the Company will publish on its web site(www.pegasas.cz) in the “Investors / Dividends withholding tax” menu a copy of theLuxembourg dividend withholding tax declaration form 900 and a copy of the banktransfer as an evidence of the withholding tax paid.

The above description of the Luxembourg tax treatment is only general. Theshareholders should not solely rely on these guidelines and there are advised toconsult their professional advisors for managing their own specific tax matters.

The data contained in the announcement are based on current legislation andregulations in force as of the date of the announcement. The Company is notresponsible for a change in the legislation that may occur since the date of thisannouncement.

The data contained in this announcement are not binding on the Luxembourg,Czech and Polish tax authorities and there can be no assurance that the taxauthorities will not take a position contrary to the data in this announcement.The tax treatment described below is based on opinion of the tax advisor ofPEGAS NONWOVENS SA and has not been verified with tax authorities in therespective countries unless stated otherwise above.

Documents to download full text

Document Type Size
2011-10-14-Dividend taxation-EN pdf 80 kB
Date of publication: 14. October 2011
The Company is registered in the Commercial Register maintained by the Municipal Court in Prague under file No. B 23154.
tel.: +420 515 262 411
fax: +420 515 262 511
e-mail: info@pfnonwovens.cz
The Company is registered in the Commercial Register maintained by the Regional Court in Brno under file No. C 51762.
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