S.I. No. 497/1998 - Double Taxation Relief (Taxes on Income and Capital Gains) (The United Mexican States) Order, 1998.

1. This Convention shall remain in force until terminated by a Contracting State. 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 beginning after the expiration of a period of five years from the date of its entry into force.

2. This Convention shall cease to have effect

(a) 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 that in which the notice of termination is given;

(ii) as respects corporation tax, for any financial year beginning on or after the first day of January next following that in which the notice of termination is given;

(b) in Mexico

in respect of income tax, on or after the first day of January next following that in which the notice of termination is given.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective Governments, have signed this Convention.

DONE in duplicate at Dublin, this 22nd day of October, 1998, in the Spanish and English languages, both texts being equally authentic.

MARTIN CULLEN

DANIEL DULTZIN

For the Government of

Ireland

For the Government of the United

Mexican States

PROTOCOL

At the time of signing this Convention between Ireland and the United Mexican States 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 that the following provisions shall form an integral part of this Convention.

With reference to Article 3.

The term "person" does not include a partnership which is not treated as a body corporate for tax purposes in the Contracting State in which it is established.

With reference to Article 5.

(a) With respect to paragraph 3 of Article 5, it is understood that an enterprise which carries on supervisory activities on a building site or construction or installation project has a permanent establishment only if such activities last more than six months.

(b) With respect to paragraph 7 of Article 5, activities carried on by an enterprise associated with another enterprise within the meaning of Article 9 shall be regarded as carried on by the enterprise with which it is associated if the activities in question are substantially the same as those carried on by the last-mentioned enterprise.

With reference to Article 7.

(a) For the purposes of paragraph 1 of Article 7, profits derived by the head office of the enterprise or any of its branches from the sale in a Contracting State of goods or merchandise of the same or similar kind as those sold by the permanent establishment shall be deemed to be profits of the permanent establishment, if the advertising, marketing, storage, display or delivery of such goods is carried on by the said permanent establishment.

(b) For the purposes of paragraphs 1 and 2 of Article 7, income or profits attributable to a permanent establishment during its existence shall be taxable in the Contracting State in which that establishment is situated, even where the payment is deferred until after that permanent establishment has ceased to exist.

With reference to Article 8.

The Mexican assets tax shall not apply to assets, the income from which is taxable in accordance with Article 8.

With reference to Article 10.

For the purposes of paragraph 4, the term "dividends" shall not include interest which, by reason of the fact that it was paid to a non-resident company, is assimilated to dividends under the domestic laws of either Contracting State, provided that such interest does not exceed the amount which would be expected to be paid between independent parties dealing at arms length.

With reference to Articles 11 and 12.

For the purposes of paragraph 6 of Article 11 and paragraph 5 of Article 12, respectively, it is understood that where a loan has been contracted by the head office of an enterprise of one of the Contracting States and only part of such loan is attributed to a permanent establishment of that enterprise in the other Contracting State, or where a contract under which royalties are paid has been concluded by such head office and only a part of such contract is attributed to such permanent establishment, then such loan or such contract is for that part to be considered as an indebtedness or a contract connected with that permanent establishment.

With reference to Article 12.

It is understood that Mexico shall grant a credit against the asset tax on the assets referred to in Article 12 of this Convention by an amount equal to the income tax that would have been imposed on the royalties paid for the furnishing of those assets, applying the rate of tax provided in its national legislation as if this Convention is not applicable.

With reference to Article 13.

For the purposes of paragraph 2 of Article 13, the term "recognised securities market" means

(a) in the case of Ireland, the Irish Stock Exchange;

(b) in the case of Mexico, stock exchange duly authorised under the terms of the Stock Market Law (Ley del Mercado de Valores) of January 2, 1975;

(c) any other stock exchange or securities market agreed upon by the competent authorities of the Contracting States.

With reference to Article 13.

It is understood that a participation of at least 25 per cent in the capital of a company is held during a twelve month period when it is held at any time during the twelve month period.

With reference to Articles 23 and 25.

In the event that the laws of Ireland are amended to permit the exchange of information and non-discrimination articles of an existing Agreement or Convention concluded by Ireland for the avoidance of double taxation to apply to taxes not covered by such Agreement or Convention then the provisions of Articles 23 and 25 of this Convention shall also apply to such taxes.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective Governments, have signed this Protocol.

DONE in duplicate at Dublin, this 22nd day of October, 1998, in the Spanish and English languages, both texts being equally authentic.

MARTIN CULLEN

DANIEL DULTZIN

For the Government of

Ireland

For the Government of the United

Mexican States

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 United Mexican States which is set out in the Schedule. The effect of the Convention is summarised below.

This Convention with the United Mexican States, which was signed in Dublin on 22nd October, 1998, is comprehensive in scope and is generally based on the OECD Model Convention.

It provides for the allocation of taxing rights between Ireland and the United Mexican States 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 Mexico,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, and profits from the operation (including leasing) of ships or aircraft engaged in international traffic. 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 another 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 10%. The lower rate of 5% of the gross dividend applies where the recipient is a company that owns 10% of the company paying the dividends; otherwise, the 10% rate applies. However, under current domestic law, neither Ireland nor Mexico at present impose withholding taxes on dividends paid to non-residents.

In the case of interest, the Convention reduces withholding tax rates to 5% and 10%. The lower rate of 5% of the gross amount of the interest applies where the beneficial owner is a bank; otherwise, the 10% rate applies.

For royalties, provision is made for a reduced withholding tax rate of 10%.

The Convention also provides for the safeguarding of 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 as 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 for the purpose of reaching an agreement in the sense of the preceding paragraphs. The competent authorities through consultations, may develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this Article.

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 States with respect to that case. The procedures shall be established between the States by notes to be exchanged through diplomatic channels. The provisions of this paragraph shall have effect when the States have so agreed through the exchange of diplomatic notes.

6. Notwithstanding any international agreement on trade or investment to which both Contracting States are or may become parties,

(a) the provisions of this Article exclusively shall apply to any dispute concerning whether a measure is within the scope of this Convention, and the procedures under this Convention exclusively shall apply to that dispute; and

(b) unless the competent authorities determine that a taxation measure is not within the scope of this Convention, the non-discrimination obligations of this Convention exclusively shall apply with respect to that measure.

Article 25

EXCHANGE OF INFORMATION

7. The provisions of paragraph 6 shall not affect the right of a Contracting State during the three consecutive fiscal years following the fiscal year in which an individual who was a resident of that Contracting State ceases to be so resident to tax according to its laws capital gains derived by such an individual from the alienation of any property.

Article 14

INDEPENDENT PERSONAL SERVICES

8. The provisions of this Article shall not apply if the competent authorities agree that the debt-claim in respect of which the interest is paid was created or assigned with the main purpose of taking advantage of this Article. In that case the provisions of the domestic law of the Contracting State in which the interest arises shall apply.

Article 12

ROYALTIES

9. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Article 6

INCOME FROM IMMOVABLE PROPERTY

S.I. No. 497 of 1998.

DOUBLE TAXATION RELIEF (TAXES ON INCOME AND CAPITAL GAINS) (THE UNITED MEXICAN STATES) 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 Eireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Eireann

AND WHEREAS a draft of the following Order has been laid before Dáil Eireann and a resolution approving of the draft has been passed by Dáil Eireann

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