S.I. No. 574/2002 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Croatia) Order, 2002

1. Ad Article 22, paragraph 1

It is understood that in the event that the Republic of Croatia should impose any tax on dividends received from companies which are resident in Ireland, the Governments of the Contracting States will enter into negotiations in order to establish new provisions concerning the relief from double taxation on such dividends derived from sources in Ireland.

2. Ad Article 24, paragraph 3

It is understood that the competent authorities may consult for the elimination of double taxation in cases not provided for in the Agreement only with respect to covered taxes.

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

Done at Zagreb, on 21 June, 2002 in two originals, in the Croatian and English languages, all versions being equally authentic. In case of divergence in interpretation, the English text shall prevail.

For the Government of

Ireland

For the Government of the

Republic of Croatia

John Lawton

Mato Crkvenac

Given under the Official Seal of the Government,

this 3

rd

day of December, 2002.

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 force of law in Ireland to the Agreement with the Republic of Croatia which is set out in the Schedule. The principal provisions of the new Agreement are summarised below.

This Agreement with the Republic of Croatia, which was signed in Zagreb on 21

st

June, 2002, 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 Croatia 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 the Republic of Croatia, may be taxed in both countries.

In many cases, the Agreement 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 derived other than through a permanent establishment in the source country, interest income or profits from the operation 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 Agreement 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 an enterprise resident in one country has in the other country, or in the case of capital gains arising from the disposal of immovable property, the Agreement 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.

The Agreement 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 Agreement and for the exchange of information that is relevant for carrying out the provisions of the Agreement or of the domestic laws of each country in relation to the taxes covered by the Agreement.

The Convention will enter into force on the date of the later of the notifications 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.

EXPLANATORY NOTE.

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

This Order gives force of law in Ireland to the Agreement with the Republic of Croatia which is set out in the Schedule. The principal provisions of the new Agreement are summarised below.

This Agreement with the Republic of Croatia, which was signed in Zagreb on 21

st

June, 2002, 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 Croatia 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 the Republic of Croatia, may be taxed in both countries.

In many cases, the Agreement 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 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, interest income or profits from the operation 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 Agreement 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 an enterprise 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 Agreement 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.

The Agreement 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 Agreement and for the exchange of information that is relevant for carrying out the provisions of the Agreement or of the domestic laws of each country in relation to the taxes covered by the Agreement.

The Convention will enter into force on the date of the later of the notifications 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 Agreement.

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.

Article 25

EXCHANGE OF INFORMATION

5. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3 and 4, shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14

INDEPENDENT PERSONAL SERVICES

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 Agreement.

Article 13

CAPITAL GAINS

7. Where profits include items of income or gains which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

WHEREAS it is enacted by subsection (1) of

section 826

and

section 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 in respect of income and chargeable gains or 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 then, subject to sections 168, 826 and 835 of that Act, the arrangements shall notwithstanding any enactment other than the said section 168, 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

section 826

(1) of the

Taxes Consolidation Act 1997

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