S.I. No. 503/1997 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Lithuania) Order, 1997.

1. Each of the Contracting States shall notify the other of the completion of the procedure required by its law for the bringing into force of this Convention.

2. This Convention shall enter into force on the date of receipt of the later of these notifications and shall thereupon have effect

(a) in Ireland

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

(ii) in respect of corporation tax, for any financial year beginning on or after the first day of January in the calendar year next following the year in which the Convention enters into force;

(b) in Lithuania;

(i) in respect of taxes withheld at source, on income derived on or after the first day of January in the calendar year next following the year in which the Convention enters into force;

(ii) in respect of other taxes on income, for taxes chargeable for any fiscal year beginning on or after the first day of January in the calendar year next following the year in which the Convention enters into force.

ARTICLE 29

Termination

This Convention shat) remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention, through diplomatic channels, by giving written notice of termination at least six months before the end of any calendar year. In such event, this, Convention shall cease to have effect

(a) in Ireland

(i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April in the calendar year next following the year in which the notice has been given;

(ii) in respect of corporation tax, for any financial year beginning on or after the first day of January en the calendar year next following the year in which the notice has been given;

(b) in Lithuania

(i) in respect of taxes withheld at source, on income derived on or after the first day of January in the calendar year next following the year m which the notice has been given;

(ii) in respect of other taxes on income, for taxes chargeable for any fiscal year beginning on or after the first day of January in the calendar year next following the year in which the notice has been given.

IN WITNESS WHEREOF, the undersigned, duly authorised thereto, have signed this Convention.

DONE in duplicate at Dublin this 18th day of November, 1997, in the English and Lithuanian languages, both texts being equally authentic.

NOEL TREACY

JUSTAS VINCAS PALECKIS

For the Government of Ireland

Fat the Government of the Republic of Lithuania

PROTOCOL

At the signing today of the Convention between the Government of Ireland and the Government of the Republic of Lithuania for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains the undersigned have agreed the following provisions, which shall form an integral part of the Convention

1.

With reference to paragraph 1 of Article 4

It is understood that a person which is incorporated or otherwise constituted under the laws of a Contracting State shall not be considered a resident of that State for the purposes of this Convention unless such person is liable to tax in that State on its worldwide income, wherever arising, as a resident of that State.

2.

With reference to paragraph 3 of Article 4

Where a person other than an individual is a resident of both Contracting States and the competent authorities of the Contracting States endeavour to determine its status by mutual agreement, they shall have regard to such factors as the place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors.

3.

With reference to paragraph 3 of Article 6

The Contracting States understand that all income and gains arising from the alienation of immovable property situated in a Contracting State may be taxed in that Contracting State in accordance with Article 13 of this Convention

4.

With reference to paragraph 1 of Article 7

It is understood that profits of an enterprise of a Contracting State derived from the sale of goods or merchandise m the other Contracting State of the same or similar kind as those sold, or from other business activities carried on in the other Contracting State of the same or similar kind as those effected, through a permanent establishment situated m that other State may be considered attributable to that permanent establishment if it is established that such sales or activities were not carried out for valid business reasons or were primarily for the purposes of avoiding tax in that other State.

5.

With reference to paragraph 3 of Article 7

In determining the profits of a permanent establishment, it is understood that expenses to be allowed as deductions by a Contracting State include only expenses that are deductable under the domestic laws of that State.

6.

With reference to Article 12

If in any convention for the avoidance of double taxation signed after the date of signature of this Convention by Lithuania and a thud state which is a member of the Organisation for Economic Co-operation and Development at the date of signature of this Convention, Lithuania agrees to a definition of royalties which excludes any rights or other properly referred to in paragraph 3 or to exempt royalties arising in Lithuania from Lithuanian tax on royalties or to lower rates of tax than those provided for in paragraph 2, such definition, exemption, or lower rates shall automatically apply under this Convention as if they were specified respectively in paragraph 3 or paragraph 2 with effect from the date on which the provisions of that convention, or of this Convention, whichever is the later, become effective.

7.

With reference to Article 16

The Contracting States understand that the Article only applies to the organ which is concerned with the central management and control of the company.

IN WITNESS WHEREOF, the undersigned. duty authorised thereto, have signed this Protocol.

DONE in duplicate at Dublin this 18th day of November, 1997, in the English and Lithuanian languages, both texts being equally authentic.

NOEL TREACY

JUSTAS VINCAS

PALECKIS

For the Government of Ireland

For the Government of the Republic of Lithuania

GIVEN under the Official Seal of the Government, this 16th day of December, 1997.

MARY HARNEY,

Tánaiste.

EXPLANATORY NOTE

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

This Convention with the Republic of Lithuania, which was signed in Dublin on 18th November, 1997, is comprehensive in scope and is based on the OECD Model Convention.

It provides for the allocation of taxing rights between Ireland and she Republic of Lithuania and for the granting of relief from double taxation with regard to items of income and capital gams which, under the laws of Ireland and the taws of Lithuania, may be taxed in both countries.

In many cases, the Convention awards a taxation right over items of income and gains to the country of residence of the recipient only, for example, items such as business profits and gams on movable property, provided neither arises through a permanent establishment or fixed base in the country of source, profits from the operation of ships or aircraft engaged in international traffic and non-governmental pensions. In other cases, such as remuneration in respect of services rendered to the Government of either country, the Convention awards the sole taxation right to the country of source.

Where both countries continue to have taxing rights, for example in the case of dividend, interest and royalty income, business profits arising through a permanent establishment which a person resident m one country has in the other country, or m the case of capital gains arising from the disposal of immovable property or shares linked with immovable property, the Convention provides that the country of residence of the recipient of the income or gain will give credit against its tax on the income or gains for the tax paid in the other country on the same income or gains.

Reduced rates of withholding tax are provided for m the case of dividend, interest and royalty income In the case of dividends, the Convention reduces withholding tax rates to 5% and 15%. The lower rate of 596 of the gross dividend applies where the recipient is a company that owns 25% of the company paying the dividends, otherwise, the 15% rate applies, However. under current domestic law, neither Ireland nor Lithuania at present impose withholding taxes on dividends paid to non-residents.

A reduced withholding tax rate of 10% is provided for in respect of interest payments. Exemption from withholding tax is provided where the payer or the recipient of the interest is the Government of either country, a local authority or any agency of either such Government, the Central Bank or any financial institution wholly owned by either such Government, or if the interest is paid on loans guaranteed by either such Government.

For royalties, provision is made for reduced withholding tax rates of 5% for royalties paid for the use of industrial, commercial or scientific equipment and 15% in all other cases.

The Convention preserves the taxation rights of each country in respect of income and capital gains arising from the oft-shore exploration or exploitation of natural resources in its territory, provided such activities are carried out for an aggregate of 30 days or more in any twelve months. Where associated enterprises also carry out offshore exploration or exploitation activities, the duration of such activities is taken into account in calculating the 30 day period.

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

The Convention will enter into force on the date of the later of the notification by each country to the other of the completion of its procedures for bringing it into force. it will thereupon have effect in both countries for tax periods beginning in the following year.

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.

4. The competent authorities of the Contracting States may communicate with each other directly, including through a joint commission consisting of themselves or their representatives, 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 apply to the taxes which are the subject of this Convention.

ARTICLE 25

Mutual Agreement Procedure

6. Gains derived by a resident of a Contracting State from the alienation of

(a) exploration or exploitation rights, or

(b) property situated in the other Contracting State which is used m connection with the offshore activities carried on in that other State, or

(c) shares deriving their value or the greater part of their value directly or indirectly from such rights or such property or from such rights and such property taken together;

may be taxed in that other State

In this paragraph the term "exploration or exploitation rights" means rights to assets to be produced by offshore activities carried on in the other Contracting State, or to interests in or to the benefit of such assets

ARTICLE 23

Elimination of Double Taxation

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention

ARTICLE 12

Royalties

S.I. No. 503 of 1997.

DOUBLE TAXATION RELIEF (TAXES ON INCOME AND CAPITAL GAINS) (REPUBLIC OF LITHUANIA) ORDER, 1997.

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. 24 of 1975), section i66 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 shat territory, and that it is expedient that those arrangements should have the force of law, the arrangements shall, notwithstanding anything an any enactment other than

section 47

of the

Finance Act, 1983

. as amended, have the force of law

AND WHEREAS it is further enacted by section 361 (ti) of the first-mentioned Act that where such an order is proposed to be made, a draft thereof shall be laid before Dáil Eireann 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 the following 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

(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), hereby order as follows