S.I. No. 323/1995 - Double Taxation Relief (Taxes on Income) (State of Israel) Order, 1995.

1. The Contracting States shall notify each other that the 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 referred to in paragraph 1 and its provisions shall apply

(

a

) In Israel

(i) in respect of taxes withheld at source, to amounts of income derived on or after 1 January 1996;

(ii) in respect of other taxes on income, to such taxes chargeable for any taxable year beginning on or after 1 January 1996.

(

b

) In Ireland

(i) as respects income tax and capital gains tax, for any year of assessment beginning on or after 6 April 1996;

(ii) as respects corporation tax, for any financial year beginning on or after 1 January 1996.

ARTICLE 29

Termination

This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year following after the period of five years from the date on which the Convention enters into force. In such event the Convention shall cease to have effect

(

a

) In Israel

(i) in respect of 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) in respect of 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 at Dublin on 20th day of November, 1995 corresponding to 27 Cheshvan 5756, in duplicate in the English and Hebrew languages, both texts being equally authentic.

RUAIRI QUINN

For Ireland

ZVI GABAY

For the State of Israel

GIVEN under the Official Seal of the Government, this 5th

day of December, 1995.

JOHN BRUTON,

Taoiseach.

EXPLANATORY NOTE.

This Order gives the force of law to the Convention with Israel which is set out in the Schedule. The effect of the Convention is summarised as follows.

This Convention with Israel, which was signed in Dublin on 20th November, 1995, is comprehensive in scope and is based on the OECD Model Convention.

It provides, with regard to income (which includes capital gains) which under the laws of Ireland and the laws of Israel may be taxed in both countries, for the allocation of taxing rights between the two countries and for the granting of relief from double taxation if under the Convention items of income continue to be taxable in both countries.

For example, items such as business profits and gains on movable property (provided that they do not arise through or are not connected with a permanent establishment in the source state), profits from the operation of ships or aircraft in international traffic and non-government pensions, are taxable only in the state of residence of the recipient.

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 state has in the other state, or dividends, interest or royalties received in one state from the other state, the Convention provides that the state of residence of the recipient will allow a credit against its own tax for the tax imposed on the same income by the state of source. Thus double taxation is relieved.

Capital gains arising from the disposal of immovable property, or of shares in a company or an interest in a partnership, trust or estate, the majority or principal part of the assets of which consist of immovable property, may be taxed by the state in which the property is situated. Other gains, including gains arising from the disposal of ships or aircraft operated in international traffic, are normally taxable only in the state of residence of the taxpayer, unless they arise from the disposal of assets of a permanent establishment or a fixed base, or from shares in a company in the other state in which the alienator has held 10 per cent or more of the voting power at any time in the previous two years; if so, the gains may be taxed in that other state.

The Convention preserves the taxation rights of a state in respect of income and capital gains arising from the exploration or exploitation of natural resources in its territory.

The Convention also preserves a state's taxing rights in respect of income arising from the provision in that state of services for a period exceeding six months ending in the fiscal year concerned by an enterprise of the other Contracting State.

In the case of dividends, interests and royalties flowing between the two states, the Convention provides for a withholding tax of 10 per cent of the gross amount. Except where the shareholder is entitled to a refund of the Irish tax credit attaching to the dividend, no withholding tax is imposed in Ireland under Irish domestic law.

The Convention also contains provisions for safeguarding citizens and enterprises of one state against discriminatory taxation in the other, for consultation between the competent authorities in both states for the purpose of resolving any difficulties or doubts arising as to the interpretation or application of the Convention and for the exchange of information between these authorities as is necessary for carrying out the provisions of the Convention or of the domestic laws of the Contracting States concerning the taxes covered by the Convention.

Following ratification of the Convention and its being given force in law, it will become operative in both States for the tax periods beginning in 1996.

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. In particular, they may agree

(

a

) to the same attribution of profits of an enterprise of a Contracting State and its permanent establishment situated in the other Contracting State;

(

b

) to the same allocation of income between a resident of a Contracting State and any associated or related person; or

(

c

) to the same classification of particular items of income.

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. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a commission consisting of representatives of the competent authorities of the Contracting States.

5. If any difficulty or doubt arising as to the interpretation or application of this Convention cannot be resolved by the competent authorities pursuant to the previous paragraphs of this Article, the case may, if both competent authorities and the taxpayer agree, be submitted for arbitration, provided that the taxpayer agrees in writing to be bound by the decision of the arbitration board. The decision of the arbitration board in a particular case shall be binding on both Contracting States with respect to that case. The procedures shall be established between the Contracting States by notes to be exchanged through diplomatic channels. The provisions of this paragraph shall have effect when the Contracting States have so agreed through the exchange of diplomatic notes.

ARTICLE 26

Exchange of Information

6. Payments made by an individual who is a resident of a Contracting State to a pension scheme established in the other Contracting State may be relieved from tax in the first-mentioned State; in such case relief from tax shall be given in the same way and subject to the same conditions and limitations as if the pension scheme was recognised for tax purposes by the first-mentioned State, and as if the individual was making the contributions to such a pension scheme in that State, provided that

(

a

) the pension scheme is accepted by the competent authority of that State as corresponding to a pension scheme recognised for tax purposes by that State;

(

b

) the individual was a resident of, and was contributing for a period in excess of two years to the pension scheme in, the other Contracting State before he became a resident of the first-mentioned State; and

(

c

) for the period during which the individual is entitled to relief under this paragraph for contributions to the pension scheme in the other Contracting State, such individual shall be precluded from enjoying any tax relief granted by the other Contracting State in respect of the same contributions.

ARTICLE 25

Mutual Agreement Procedure

7. The provisions of paragraph 2 shall not apply if the right or property giving rise to the royalties was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.

ARTICLE 13

Capital Gains

8. The provisions of paragraphs 2 and 3 shall not apply if the debt-claim in respect of which the interest is paid was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.

ARTICLE 12

Royalties

S.I. No. 323 of 1995.

DOUBLE TAXATION RELIEF (TAXES ON INCOME)(STATE OF ISRAEL) 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