S.I. No. 301/1995 - Double Taxation Relief (Taxes on Income) (Republic of Hungary) Order, 1995.

1. The Contracting Parties shall notify each other that their constitutional requirements for the entry into force of this Convention have been complied with.

2. This Convention shall enter into force on the date of the later of the notifications and its provisions shall apply

(

a

) in Hungary

(i) as respects taxes withheld at source, to amounts of income derived on or after 1 January in the calendar year next following the year in which the Convention enters into force;

(ii) as respects other taxes on income, to such taxes chargeable for any taxable year beginning on or after 1 January in the calendar year next following the year in which the Convention enters into force;

(

b

) in Ireland

(i) as respects income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April in the year next following the date on which this Convention enters into force;

(ii) as respects corporation tax, for any financial year beginning on or after the first day of January in the year next following the year in which this Convention enters into force.

ARTICLE 29

Termination

This Convention shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention at any time after five years from the date on which the Convention enters into force provided that at least six months prior notice of termination has been given through diplomatic channels.

In such event, this Convention shall cease to have effect

(

a

) in Hungary

(i) as respects taxes withheld at source, to amounts of income derived on or after 1 January in the calendar year next following the year in which the notice is given;

(ii) as respects other taxes on income, to such taxes chargeable for any taxable year beginning on or after 1 January in the calendar year next following the year in which the notice is given;

(

b

) in Ireland

(i) as respects income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April in the year next following the date on which the period specified in the said notice of termination expires

(ii) as respects corporation tax, for any financial year beginning on or after the first day of January next following the date on which the period specified in the said notice of termination expires.

In witness whereof the undersigned, duly authorised thereto, have signed this Convention.

Done in duplicate at Dublin, this 25th day of April 1995, in the English and Hungarian languages, each text being equally authentic.

DICK SPRING

TIBOR DRASKOVICS

For Ireland

For the Republic of Hungary

PROTOCOL

At the signing today of the Convention between Ireland and the Republic of Hungary for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income the undersigned have agreed upon the following provision which shall form an integral part of the Convention

With reference to paragraph 1 (

c

) of Article 23, it is understood that in the event that the Republic of Hungary should impose any tax on dividends received by companies which are resident in Hungary, the Governments of the Contracting States will enter into negotiations in order to establish new provisions concerning the relief from double taxation of such dividends derived from sources in Ireland.

In witness whereof the undersigned, duly authorised thereto, have signed this Protocol.

Done in duplicate at Dublin, this 25th day of April 1995, in the English and Hungarian languages, each text being equally authentic.

DICK SPRING

TIBOR DRASKOVICS

For Ireland

For the Republic of Hungary

GIVEN under the Official Seal of the Government, this 17th

day of November, 1995.

JOHN BRUTON,

Taoiseach.

EXPLANATORY NOTE.

This Order gives the force of law to the Convention with the Republic of Hungary which is set out in the Schedule. The effect of the Convention is summarised below.

The Convention provides for the allocation of taxing rights between Ireland and Hungary and for the granting of relief from double taxation with regard to items of income and capital gains which, under the laws of Ireland and the laws of Hungary, may be taxed in both countries.

For example, items such as business profits, gains on movable property, interest and royalties (provided none arises through a permanent establishment or fixed base in the country of source), profits from the operation of ships, aircraft or road-transport vehicles in international traffic and payments of pensions and annuities are taxable only in the country of residence of the recipient. On the other hand, remuneration in respect of services rendered to the government of either country is normally taxable only in that country, i.e. the country of source.

Where both countries continue to have taxing rights, for example, with regard to business profits arising through a permanent establishment which an enterprise of one country has in the other country, or to capital gains arising from the disposal of immovable property or of shares linked with immovable property, or of assets of a permanent establishment or fixed base in the other country, the Convention provides in the case of Hungary, that double taxation will be relieved by exemption of the income or gains from further tax in Hungary. Ireland on the other hand undertakes to grant credit against its tax for tax imposed on the same income or gains by Hungary. In the case of dividends, Hungary operates the credit method of relief of double taxation rather than the exemption method. Thus double taxation is relieved.

Hungary does not at present tax dividends paid to corporate investors and this exemption is extended to dividends paid to a Hungarian company by a company resident in Ireland. In the event that Hungary introduces a tax on dividends paid to corporate investors, a Protocol to the Convention provides that the relief afforded to dividends will be subject to renegotiation.

The rate of withholding tax which may be applied by the source country in respect of dividends flowing to the other country is limited to 5 per cent where the recipient is the beneficial owner of at least 10 per cent of the capital of the company paying the dividends; otherwise the rate is limited to 15 per cent. Dividends paid from Ireland to a resident of Hungary are exempt from tax in Ireland under current Irish law.

The benefit of the Irish tax incentives is effectively preserved by the exemption from further tax in Hungary of Irish dividends or Irish branch profits flowing to a Hungarian company. As stated, a provision has been included in the Protocol to ensure that if Hungary changes its domestic tax exemption for inter-company dividends, new negotiations will take place.

Provision is made for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities of the two countries for the purpose of resolving any difficulties or doubts arising as to the interpretation or application of the Convention and for the exchange of such information between these authorities as is necessary for carrying out the provisions of the Convention or of the domestic law of either state in relation to the taxes covered by the Convention.

The Convention will become operative in both states for the tax periods beginning in the calendar year next following the year in which the Convention is ratified and given force in law.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

ARTICLE 26

Exchange of Information

5. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

ARTICLE 25

Mutual Agreement Procedure

6. For the purposes of the preceding paragraphs, the profit to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

7. Where profits include items of income or gains which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

ARTICLE 8

International Transport

S.I. No. 301 of 1995.

DOUBLE TAXATION RELIEF (TAXES ON INCOME) (REPUBLIC OF HUNGARY) ORDER, 1995.

WHEREAS it is enacted by

section 361

(1) of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 86

of the

Finance Act, 1974

(No. 27 of 1974),

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), that if the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax or capital gains tax and any taxes of a similar character, imposed by the laws of the State or by the laws of that territory, and that it is expedient that those arrangements should have the force of law, the arrangements shall, notwithstanding anything in any enactment other than

section 47

of the

Finance Act, 1983

, have the force of law

AND WHEREAS it is further enacted by section 361 (6) of that Act that where such an order is proposed to be made, a draft thereof shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann

AND WHEREAS a draft of this order has been laid before Dáil Éireann and a resolution approving of the draft has been passed by Dáil Éireann

NOW, the Government, in exercise of the powers conferred on them by

section 361

of the

Income Tax Act, 1967

(No. 6 of 1967), as amended by

section 86

of the

Finance Act, 1974

(No. 27 of 1974),

section 38

(1) of the

Capital Gains Tax Act, 1975

(No. 20 of 1975),

section 166

of the

Corporation Tax Act, 1976

(No. 7 of 1976), and

section 47

(4) of the

Finance Act, 1983

(No. 15 of 1983), hereby order as follows