S.I. No. 426/1999 - Double Taxation Relief (Taxes on Income and Capital Gains) (The Slovak Republic) Order, 1999.

1. This Convention shall be ratified and the instruments of ratification shall be exchanged as soon as possible.

2. The Convention shall enter into force upon the exchange of instruments of ratification and its provisions shall have effect

(

a

) in Slovakia

(i) in respect of taxes withheld at source, for amounts paid or credited 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 and on capital gains, for any tax 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 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 this 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 this Convention enters into force.

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 written notice of termination at least six months before the end of any calendar year beginning five years after the year in which the Convention enters into force.

In such event, the Convention shall cease to have effect

(

a

) in Slovakia

(i) in respect of taxes withheld at source, for amounts paid or credited on or after the first day of January in the calendar year next following the year in which the notice of termination is given;

(ii) in respect of other taxes on income and capital gains, for any tax year beginning on or after the first day of January in the calendar year next following the year in which the notice of termination is given;

(

b

) 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 of termination is given;

(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 notice of termination is given.

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

DONE in duplicate at Dublin this 8th day of June, 1999, each in the English and Slovak languages, both texts being equally authentic.

For Ireland

For the Slovak Republic

Charlie McCreevy

Ludovit Cernak

GIVEN under the Official Seal of the Government, this 22nd day of December, 1999.

BERTIE AHERN,

Taoiseach.

EXPLANATORY NOTE.

(This note is not part of the Instrument and does not purport to be a legal interpretation.)

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

This Convention with the Slovak Republic, which was signed in Dublin on 8th June, 1999, is comprehensive in scope and is based on the OECD Model Convention.

It provides for the allocation of taxing rights between Ireland and the Slovak Republic 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 Slovakia, may be taxed in both countries.

In many cases, the Convention awards the taxation right over items of income and gains to the country of residence of the recipient only, for example, for items such as business profits, interest income and gains on movable property, provided such income or gains do not arise 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 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.

With respect to dividend and royalty income the Convention provides for either limited source state taxation or, in certain circumstances, for exemption from tax in the source state. In the case of dividends, the Convention provides for exemption from withholding tax where the recipient is a company that owns 25% of the company paying the dividends; otherwise, taxation in the source state is limited to 10% of the gross dividend. For royalties, provision is made for the exemption from withholding tax of cultural royalties and a reduced rate of 10% of the gross payment applies for technical royalties. Interest payments are taxable only in the country of residence of the recipient.

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 such 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 upon the exchange of the instruments of ratification. 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 case of the preceding paragraphs.

Article 26

Exchange of Information

5. Where, under any provision of this Convention, income or gains is or are wholly or partly relieved from tax in a Contracting State and, under the laws in force in the other Contracting State, an individual, in respect of the said income or gains, is subject to tax by reference to the amount thereof which is remitted to or received in that other state, and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned State shall apply only to so much of the income or gains as is remitted to or received in that other State.

Article 24

Non-Discrimination

6. 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 royalties, having regard to the use, right or information for which they are 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 13

Capital Gains

7. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11

Interest

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