S.I. No. 26/2012 - Double Taxation Relief (Taxes on Income) (Kingdom of Saudi Arabia) Order 2012.

1. With reference to Article 3 (General Definitions)

It is understood that with respect to sub-paragraph (

d

) of paragraph (1) the term “person” also includes the State, its political and administrative sub-divisions or local authorities.

2. With reference to Article 4 (Resident)

It is understood that the term “resident of a Contracting State” includes a legal person organised under the laws of a Contracting State and that is exempt from tax in that Contracting State and is established and maintained in that Contracting State either

(

a

) exclusively for a religious, charitable, educational, scientific, or other similar purpose; or

(

b

) to provide pensions or other similar benefits to employees pursuant to a plan.

3. With reference to Article 5 (Permanent Establishment) and Article 13 (Capital Gains)

(

a

) any offshore activities (defined as activities carried on on the Continental Shelf of a Contracting State in connection with the exploration or exploitation of the seabed and its subsoil and their natural resources) shall be deemed to be carried on through a permanent establishment in that Contracting State, and

(

b

) gains derived from the alienation of rights, including shares or interests in a trust or partnership deriving the greater part of their value from such rights, to exploration or exploitation of the seabed and its subsoil and their natural resources on the Continental Shelf of that Contracting State may be taxed in that Contracting State.

4. With reference to Article 7 (Business Profits)

(

a

) It is understood that the term “business profit” includes, but is not limited to income derived from manufacturing, mercantile, banking, insurance, from the operation of inland transportation, the furnishing of services and the rental of tangible personal movable property. Such a term does not include the performance of personal services by an individual either as an employee or in an independent capacity.

(

b

) The business profits derived by an enterprise of a Contracting State from the exportation of merchandise to the other Contracting State shall not be taxed in that other Contracting State. Where export contracts include other activities carried on through a permanent establishment in the other Contracting State profits derived from such activities shall be taxed in the other Contracting State in accordance with this Article.

5. With reference to Article 10 (Dividends)

Notwithstanding any other provision of this Convention, where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, that other Contracting State may tax any remittances or deemed remittances of profits transferred by the permanent establishment to the company which is a resident of the first-mentioned Contracting State; the tax so charged shall not exceed 5 per cent of the remittances or deemed remittances of profits transferred.

6. With reference to Article 13 (Capital Gains)

It is understood that the provisions of paragraph 5 shall not affect the right of a Contracting State to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the five years immediately preceding the alienation of the property.

7. With reference to Article 25 (Exchange of Information)

It is understood that as long as the domestic laws of both Contracting States so allow, both Contracting States shall exchange information held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or information relating to ownership interests in a person.

8. In the event of Saudi Arabia introducing an income tax applicable to its nationals who are residents of Saudi Arabia, or the existing tax being modified accordingly, then the two Contracting States shall enter into negotiations in order to introduce in the Convention an article on non-discrimination.

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

Done in duplicate at Riyadh this 19 day of October, 2011, in the English and Arabic languages, both texts being equally authentic.

FORIRELAND

FOR THE KINGDOMOF SAUDI ARABIA

Niall Holohan

Hamad S. Al-Bazai

GIVEN under the Official Seal of the Government,

24 January 2012.

ENDA KENNY,

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 between Ireland and the Kingdom of Saudi Arabia for the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income, which is set out in the Schedule to the Order. The effect of the Convention is summarised below.

This Convention with the Kingdom of Saudi Arabia, which was signed at Riyadh on 19 of October, 2011, is comprehensive in scope and is based on the OECD Model Convention.

The taxes covered by the Convention are, for Ireland, Income Tax, Universal Social Charge, Corporation Tax and Capital Gains Tax: for the Kingdom of Saudi Arabia, the Zakat and the income tax including the natural gas investment tax.

The Convention provides for the allocation of taxing rights between Ireland and the Kingdom of Saudi Arabia 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 Kingdom of Saudi Arabia may under the terms of the Convention be taxed in both countries.

Where both countries continue to have taxing rights, for example in the case of certain dividends and royalties, 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, the Convention provides that the country of residence of the recipient of the income or gain will give relief against its tax on the income or gains for the tax paid in the other country on the same income or gains. Irish direct investors (i.e. Irish companies holding 5% or more of the voting power of the paying company) in receipt of dividends from a Saudi company are granted credit for the tax paid by the Saudi company on the profits out of which the dividends are paid (known as credit for underlying tax).

Where source State taxation of dividends or royalties applies, this is restricted to 5% of the gross amount of the dividend and 5% or 8% of the royalty. Exemption from source State taxation of dividends include dividends paid to a company (other than a partnership) which is a resident of the other Contracting State, as long as it holds directly at least 25% of the capital of the company paying the dividends. Also exempt are dividends received by the Government of a Contracting State, the Central Bank or any institution, agency or fund wholly owned by the Government of a Contracting State.

The Convention also provides 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 forseeably relevant for carrying out the provisions of the Convention or of the domestic law of either country in relation to the taxes of every kind.

The Convention will enter into force when each country notifies the other of the completion of its procedures for bringing the Convention into force. It will thereupon have effect in both countries for tax periods in the following year.

Notice of the making of this Statutory Instrument was published in

“Iris Oifigiúil” of

31

st January

, 2012.

WHEREAS it is enacted by section 826(1) (as substituted by

section 35

of the

Finance Act 2007

(No. 11 of 2007)) of the

Taxes Consolidation Act 1997

(No. 39 of 1997) that where 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, capital gains tax or any taxes of a similar character imposed by the laws of the State or by the laws of that territory and, in the case of taxes of any kind or description imposed by the laws of the State or the laws of that territory, in relation to exchanging information for the purposes of the prevention and detection of tax evasion or granting relief from taxation under the laws of that territory to persons who are resident in the State for the purposes of tax, and that it is expedient that those arrangements should have the force of law, and that the order so made is referred to in Part 1 of Schedule 24A of the

Taxes Consolidation Act 1997

, then, subject to section 826 of that Act, the arrangements shall, notwithstanding any enactment, have the force of law as if such order were an Act of the Oireachtas on and from the date of the insertion of a reference to the order into Part 1 of Schedule 24A;

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) (as substituted by

section 35

of the

Finance Act 2007

(No. 11 of 2007)) of the

Taxes Consolidation Act 1997

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