S.I. No. 496/1998 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Estonia) Order, 1998

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 its 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 in 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 in 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 deductible 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 Estonia and a third State which is a member of the Organisation for Economic Co-operation and Development at the date of signature of this Convention, Estonia agrees to a definition of royalties which excludes any rights or other property referred to in paragraph 3 or to exempt royalties arising in Estonia from Estonian 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, duly authorised thereto, have signed this Protocol.

DONE in duplicate at Dublin this 16th day of December, 1997, in the English and Estonian languages, both texts being equally authentic. In the case of a divergence of interpretation or of any inconsistency the English text shall prevail.

NOEL TREACY

RAUL MLK

For the Government of

Ireland

For the Government

of the Republic of Estonia

GIVEN under the Official Seal of the Government, this 21st day of December, 1998.

BERTIE AHERN

Taoiseach.

EXPLANATORY NOTE.

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

This Convention with the Republic of Estonia, which was signed in Dublin on 16th December, 1997, is comprehensive in scope and is based on the OECD Model Convention.

It provides for the allocation of taxing rights between Ireland and the Republic of Estonia 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 Estonia, 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 gains 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 in one country has in the other country, or in 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 in 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 5% 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.

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 off-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 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 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.

8. Nothing in this Article shall prevent a Contracting State from applying its law relating to the taxation of any person who carries on the business of insurance provided that the business of insurance is carried on through a permanent establishment situated in that Contracting State (as long as that law is in effect on the date of signature of this Convention and has not been changed otherwise than in minor respects so as not to affect its general character).

Article 8

SHIPPING AND AIR TRANSPORT

S.I. No. 496 of 1998.

DOUBLE TAXATION RELIEF (TAXES ON INCOME AND CAPITAL GAINS) (REPUBLIC OF ESTONIA) ORDER, 1998

WHEREAS it is enacted by

sections 826

(1) and

828

of the

Taxes Consolidation Act, 1997

(No. 39 of 1997), 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 168

of the

Taxes Consolidation Act, 1997

, have the force of law

AND WHEREAS it is further enacted by

section 826

(6) of the

Taxes Consolidation Act, 1997

, that where such an order is proposed to be made, a draft of the order 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 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

sections 826

(1) and

828

of the

Taxes Consolidation Act, 1997

(No. 39 of 1997), hereby order as follows