DoubW T ..... tlon Rdid' (TUfl!I on h...-)

L.N. 75 of 1994

INCOME TAX ACT

(CAP. 123)

DoubW T ..... tlon Rdid' (TUfl!I on h...-)

(Republk of Hllnpry) Order, 1994

IN exercise of the powers conferred by lCC'lion 80 of the

Inc:omc Tax Act , the Minister 01 rm:ux:c IIas made the foUowio&

ordc r: -

This order may be cited all the Double Taxation Relid

(Taxes on Income) ( Republ ~ of Hungary) Order, 1994.

It is hcreby dedared:-

(a) thal the arrangeme nts specified in the Agreement ~I

in the ScheduLe 10 this Order have been made with the

OUI

Govc:mment of the Republic of Hungary with a view to

affordin, relid frOltl doIIble taxation in relation to the followin,

taxes imposed by the laws of the Republic of Hungary

(i)

Ihe income lax on individuals;

(ii)

lile profil tues ;

(b) that it is e.pedient that tlH>se arrangements should

have dfect .

SCH EDULE

AGREEMENT

BElWEEN

MALTA AND TIl E REPU BLIC OF HUNGARY

FOR TIl E AVOIDANCE OF DOUBLE TAXATI ON

The Governmenl of Malta and the Government of the Republic of Hungary

Oc:siring to conclude an Agreement for the Avoidance of Double Taxation and Ihe

preventio n of fiscal evasion with respect to ta~es on illCOme. lIave allreed as

CHAPTER I

Scope of the Aueemenl

ARTICLE 1

PefJOMl Sco~

This Agreement shall apply 10 persons who are residents of one or both of

the Contraclinll States.

ARTI CLE 2

Tax~J

Cownd

( I) The existing tues to which this AveclMnt shall apply are

(a) in Hungary

(i)

the income tu on individual! ; I nd

(ii) the profit tues

(hereinafter referred 10 lIS KHunprian WI~);

in Malta

(b)

the income tu

( herc:inafter referred to lIS ~ M Il!1 tax~) .

(2) This Agreement shall Ipply also to Iny identical or wbstlntially similar

taxes which arc imJl'l*d after the date of signature of this Agreement in addition

to, Or in place of, the existi ng tues. The competent authorities of the Contrading

States shall notify 10 each other any signi rocant changes which have been made in

their respcclive tantion laws,

(3)

Notwithstanding the other provisions of this Articl e this Agree ment sha ll

not apply to tax paid Or payable in Malta at the rate provided for in subsection

(11 ) of section 31 of the Income Tu Ad (Cap. 123).

CHAPTER 11

~nl1ltlonJ

ARTI CLE 3

(krWfl / lH/iniliotu

(1) For the purposes of this Agreement, un less the context otherwise

req uires

(a) the term "Hungary" ,,'lien used in a geographical sense means tile

territory of the Republic of Hungary ; and

(b) the term ~ M alta~ ..... hen used in 1 geographical sense, lMaTU the

Island of Mal ta , the Island of Goto and the other islands of the Maltcsc

an:h;pelago including the terri torial wlten thcrc:of, and I ny area outside the

territorial sea of Malta which, in II()()()fdance with intc rnationallaw, has becn

or may hereaftcr be de5ignatcd. under the law of Malta concerni ng thc

Continen tal Shelf, as an area within which the rights of Malta with respect 10

the :;eabed and subsoi l and tlle;r natu ral resources may be exercised;

(c ) tile terms Ma Contracting Statc" and Mthe other Contrading StItcH

mean Hungary or Malta as thc context rcquirc:l ;

".

(d) the term ~personM includes an individual, a company and any othe r

body of pe1WflS

(e) Ihe term Moompany" meallS any body COI'pOrate or Iny entity which

is Irt'alcd as a body oorporale for tax pUrpo$e$;

(t) the lerms ~enlerprise of a Contracting State" and "enterprise: of Ihe

olher Contracting State" mean, respectively, an en terprise carried on by a

resident of a Contracti ng Stale and an en terprise carried on by I rnidc:nt of

the oIlier Contracting State;

(g) the te rm Mn alionals" means all individuals who are citizens of I

Contracting State and all legal persons, partnerships, assoaalioll5 and other

entilies deriving their status as such from the laws in fort:e in that Conlractin,

State;

(h) the term "international traffic" means any transpOrt by • ship.

aim-aft or road transport vehicle operated by an enlerprille of • Contracting

Slale, except whcn Ihe mip, aircraft or road transport vehicle ;$ operated

~Iely between plao;es in tile other Contracting State

the term "oompetent authority" means

(i)

(i) in the case of Hungary, the Minister of Finance, or his

authorised representative;

(ii) in the case of Malta, the Minister responsible for finance or his

authorised representative.

(2) In the application of this A~ement by a Contracting State any lerm not

otherwise defmed mall, unless the contellt otherwise requires, hue the meaning

which it hu under the law of that State concerning the tues to which this

Agreement applies.

ARTICLE 4

Ruidtnl

(I) For the purposes of this Agm:mc:nl. the term Mresiden t of a ConlTacting

State~ meam any person who. under the lallo"5 of Ihal State. is liable to tU therein

by reason of his domicile. residence , place of managemt:n t or any OIher criterion

of a similu natUre. But this term does not indude any person who is Liable to taX

in that State in respect only of income · from sources in that State .

(2) Where by reason of the provisiom of ~ragraph (I) an individuaL is a

resident of both Contracting StalC/i, then bis status shall be detcrmined as follows

(a) he shall be deemed to be a resident solely of the Contracting State

in wbich he has a permanent home available 10 him; if he has a permanent

home available 10 bim in bolh Slales. he shall be deemed 10 be a reside nt

solely of thc Contracting State wi th which his personal and economic reLations

are closer (centre of vital interests);

•

.29

(b) if the Slate in which he has his centre of yital interests cannot be

determined , or if he has no pcnnar>ent home available to him in cilltcr Slate,

he shall be deemed to be • resident sole ly of the Cont raetinz State in which

he has an habitual abode ;

(c) if he has an habitual abode in both Slales or in neither of them. he

shall be deemed to be a reside nt solely of the Contracting Slale of which he

is a national ;

(d) jf he is • natWnal of both Slates or of ne ithe r of ~m . Ihe

competent authori ties of the Contracting Slates shaD senle the question by

I'IUltUal agreement .

(3) Where by reason of the provi~iolls o f paragraph (I) a person other than

an indi vidual ill a n:sidcnt of both Contractin& Slates, Ihen it shall be deemed 10

be a re$ident solely of the Contracting Stale in wbich il$ place of effective

management is silulled.

ARTICLE 5

PtmtlJltnll EsUl~tIl

( I) FOT the pu rposes of Ihis Agreement Ihe term Mpcrm ane nt establishment"

means a rixed place of business through which the bu~iness of the enterprise is

wholly or partly carried on.

(2) 1lIe term kpermanc nl eSlabljshmenl ~ includes especially

(a)

a place of management;

(b)

a branch;

(c) an office;

(d) a factory;

(e)

wmbOOp ;

I

(I) I mine , I n oil or gas wen , I quarry o r Iny other place of ulraction

of nl tu",1 ,..,soun:es;

(g)

a building site or construction or installation or assembly project

or supervisory activities in connection therewith, wbe,.., such site, project or

activity continues for 0>0f"e than nine (9) montlu.

(3) NOIwilhstanding tbe precedi ng provisions of this Anic le. the lerm

··permanent establishment" sh all be deemed r>Ot to include

(a) the use of facilities solely for the purpose of sto"'tc. display or

delivery of goods or mercbandise belonging to the enterprise

B

.'"

(b) the maintcncnoe of a Jloct of goods or merchandise belonging 10 tile

enterprise 50lely for the plll'Jl'* of stonlgc. display or delivery;

(c) the maintenance of a stock of goods or merchandise belonging 10 the

enterprise solely for the PUrpo$e of processing by another enterprise;

(d) tile maintenance of a rUled place of business solely fo.- the PUrp<!5e

of purchasing goods or merchandise, Or of collecting information, for IIw;

enterprise;

(c) the maintenance of a filed place of husillQll solely for the purpose

of C<lTr)'ing on, for the clllerprise, any other activity of a preparatory or

uuxilia ry character;

(Q the maintenance of • fixed pllICC Qf business solely for any

<,)

oombination of activities mentioned in wb-paragrapbs

10 (c), provided Ilia!

the o~rall activity of the fixed place of business re5U11illl from this

combination is of a preparatory or auxiliary character.

(4) An enterprise of • Contracting Stale shan be deemed to have I

permanent establishment in the other ContrilCting Stale if

(a) substantial equipment IS In that other State being used b~ , for or

under contract with the enterprise for more than nine (9) months; and

(b) it camCl on supervisor)' activities in that State in conneetion with the

use of equipment referred 10 in subparagraph (a).

(5) Notwithstanding the provisions of paragraphs ( I) and (2) where a person

- other than an agent of an independent stalUs 10 ",'hom paragraph (6) applies

- is acting on behalf of an enterprise and has. and habitua lly exercises, in a

Contracting State an authority to conclude contracts in the name nf the en terprise,

that enterprise shall be deemed to have a permanent establishment in that State

in respect of any actiYities which Ihal person undertakCl for the enterprise, unless

the activities of liuch perwn arc limi ted to those mentioned in paragraph (3) which.

if exercised through a fi~cd place of business, would not make Ihis fixed place of

busineS!; a permanent establishment under the provisinns of thal paragraph .

(6) An enlerprise of a Contl1K1ing Slale shall not be ckemed 10 haye a

permartent establishment in the olher Con1Tacting State me rely b«ause ;t carries

on business in that other State through a broker, general commission agent or an~

olher agent of an independent stalUS, where such persons are acl ing in th e

ordinary course of their business. However, when the activities of such an agent

are devoted wholly or almost wholly on behalf of lhe enterprise, he $hall nOI be

considered as agent of an independent litatus if Ihe transactions between Ihe agent

and the enlerprise were not made under arm 's length conditions.

(7) The fact that a company which is a residenl of a Contracting Slate

con!rols or is controlled by a company which is a resident of the olher Contracting

Slate, or which carries on business in thal other Slate (whether through a

permanent establishment Or otherwise), shall nO! of itself constitute either

company a permanent establishment of the ot her.

CHAPTt:R III

Taxation or Income

ARTICLE 6

Incoltl#: from Immoyabl~ Prop~rty

(i) income derived by a resident of a Contracting State from immovable

property including income from agriculture or forestry. situated in tile otller

Contracting State may be taxed in that other State.

(2) The tenn "immovable property" shall have the meaning which it has

un<ler the law of the Contrdcting State in which the property in question is

situated. The term shall in any case include property accessory to immovable

property. livestock and equipment used in agriculture and forestry. rights to which

the provisions of general law respecting immovable property apply, usufruct of

immovable property and rights to variable or fixed payments as consideration for

the working of, or the right to work or to explore for , mineral deposits, sources

and other natural resources; ships, boats and aircraft shall nOI be registered as

Immovable property.

(3) The provisions of paragraph (I) shall apply to income derived from the

direct use. letting, or use in any otber fono of immovable property.

(4) The provisions of paragraphs (i) and (3) shall also apply to the income

from immovable property of an enterprise and to income from immovable property

used for the perfonnance of independent pelMlnal services.

ARTICLE 7

Profil!J

Businu~

(I) The profits of an enterprise of a Contracting State shall be taxable only

in that state unless the enterprise carries on business in the other Contracting Slate

through a permanent establishment situated therei n. If the enterprise carries on

business as aforesaid. Ihe profits of the enterprise may be taxed in the other State

but only SO much thereof as is attributable to that pennanent establishment.

(2) Subject to the provisions of paragraph (3), where. an enterprise of a

Contracting State carries on business in the other Contracttng State through a

pennanent establishment situated tberein, there shall in e~ch ~n~racting State be

3uributed to that permanent establishment the profits whICh It mIght be expected

to make if it were a distinct and separate enterprise engaged in the same Or similar

activities under the same or similar conditions and dealing wholly independently

with the enterprise of wllich it is a permanent establishment or with other

enterprises with which it deals.

(3) In the detennination of the profits of a pcnoa nen t establishment, there

shall be allowed as deductions expenses of the enterprise, being expenses which

are incurred for the purposes of the pennanent establishment (including executive

B

and general admini§trative e~pense:s so incurred) and which would be deductible

if the permanent establ ishment were an independent entity which paid those

o:xpenses, wbetber incurred in the Contracting State in whicb the permarK: nt

establishment is situated or elsewhere.

(4) In SO far as it has been customary in a Contracting State to determirK

the profits to be allriDuled 10 a permanent eslablisllment on tile basis of an

apportionment of the total profit§ of the enterprise to its various ~rI$, nothing

in paragraph (2) shall preclude that Contracting State from determining lbe profits

to be taxed by such an apportionment as rn~y be custOmary. The melhod of

apportionment adopted shall. however. be such tbat the reSU11 sha ll be in

acx:ordanc:e with lit<: printiples contained in this Article.

(S) Nothing in this Article shall affect the application of Iny la .... of a

Contracting State relating to the determination of the tllll liability of • perwn,

including the determination of such liability by the exercise of di5Crelion or the

making of an estimate by the competent authority of that Stale in ca5C5 in whidl.

from the information available to the competen t authority of that State, i1 is nol

possible or not practicable 10 ascertain the profits to be attributed to a permanent

establishment, provided that that law shall be applied , 50 fa r as the information

available to the competent authority permits, consistently with the principles of this

Article.

(6) No profilS shall he allributed to a permlocnt establish meOL by reason of

the mere purchue by thal permanent establishment of goods or merehandi$e for

the enterprise:.

(7) For the purposes of the preceding paragraphs, the profits to be allributed

to the pennanent establi shme nt shall be determined by the !lime method ye ar by

year unless there is good and sufficient reason to t he (;(IntraI)'.

(8) llle provisions of this Article shall not affect the provisions of the law

of a Contracting State regarding the taxation of profits from the business of

insuranoe.

(9) Where profits include items of income whicb are dealt with se~rately in

ot her Articles of this Agreement. then the provi~ion5 of tOOSe Articles sball no1

be affected by the provisions of this Article.

ARTICLE 8

l ruerMlio.w Traffic

(1) Profits of an enterprise of a Contracti ng State from the operation of

ships, aircraft or road tran§port vehicles in internatonal traffic shall be taxable only

in that State .

(2) TIle provisions of paT1lgraph ( I) .shall also apply to profits from the

participation in I pool, a joint busiMS5 or In international opeT1lting agency.

B 4)3

ARTI CLE 9

(I)

Whe re

(I) an enterprise of I Contracting State participates directly or indirectly

in the management, control or capital of an e nterpri~ of the othe r

Contracti ng State, or

(b) the same persons plIrticipate directly or indire<:tly in the

management, control or capital of an enterpri5e of a Contracting Sllte and an

en terprise of the other Contracting State,

and in either case condilions art: made or imposed bel_en Ihe two enterprises

in their commercial or financial rt:lalions which differ from those which would be

made between independent enterprises, then any profit! which would, but for

those conditiom, have accrued to onc of the enterpri!;e5, but, by re>lSOn of tliosc

conditions, have 001 so accrued , may be included in the profits of that enterprise

and taxed III(:Wfdingly.

(2) Nothing in this Anicle shall affect the application of any law of D

Contracting SI~te relating to Ihe determination of such liability by tbe exercise of

a diS(retion or the mak ing of an estimate by tbe competent authority of Ihal State

in case$ wbich , from the information available to the competent authority of tbal

Slate, it is not po»:>ible or not practicable to detennine the income to be l!tributed

to an enterprise. provided that tbat I,w shall be applied,,,,, far u the inform ation

available to Ihe competent authority pennits, consistently witb Ihe principles of this

An ide.

(3) Where, Contracting State include$ in the profits of an enterprise of that

Sute, and laxes accordingly, profits on which an enterprise of the othe r

Contracti ng State has been charged 10 tu in that other State and the profits so

included are profits which would have an:rued 10 tbat enterprise of the fint

mentioned State if the conditions made between Ihe tw~ enterpri5C1i lied been

IhOSl: whkh would have been made between indepe ndent enterpri§«, then thal

other State shall make an appropriate adjuslment 10 the amount of Ihe IU cha rged

th~rein on those profits. In detenni ning such adjustment. due regard shall be had

10 the otber provisions of Ihis Agreemenl and Ihc oompelcnl authorities of the

Contracting States 511a11 if ne«ssary consult each other.

ARTI CLE 10

Divltknth

(I) Dividends paid by a company whic h is a resident of a Cont racting Slate

tQ a residenl of the other Contracti ng State may be taxed in IlIal other State.

(2) 11owevc r. such dividends may also be Iued in the Contracting StDle of

wllich the company paying the dividends is a residenl and according to the laws

of that Stale, bUI

<a) where the dividendi IrC paid by I oompany resident of H ungary 10

a resident of Malta who is lne bcncrlCial owner tilcreof, the H ungarian tax

so charged shall not eJloeed

(i) 5 per cent of the gfO$$ amount of the dividends if the ber>efic:ial

owner is a company which holds directly at least 2'i% of the capital of

the company paying the dividends

15 per ccnt of the gross amount of the dividends in all other

(ii)

cases;

(b) wher.Cl the dividends are paid by a rompan)' which is a resident of

Malta 10 a resIdent of Hungary who is lhe beneficia l Owner thereof Malta lax

on llie 8Jt>:" amount of the dividends shall rIOt exc«d Ihat chargeable on It.<

profits OUI of which the dividends are paid.

This paragraph shall nOI affect the taxation of the company in res~ of

the profits 0111 of which the dividends are paid.

(3) The term ~dividcnds~ as used in Ihis Article means income from shares.

joui$sarn:e M rights. mining shares, founders' shares or olher

~jouissance~ shares or M

rights, 001 being debHlaims, partidpating in profits , as well as income from other

corporate rights which is subjected to the same taxation treatment as inoome from

shar~ by the laWli of thoe State of whic h the company making the distribution is

a resident.

(4) The pro~isions of paragraphs (I) and (2) shall 001 apply if thoe bene ficial

Owner of the dividends , being a resident of I Contracting State. carries on busineu

in the othe r Contracting State of whic:h the company paying !hoe dividends is a

resident, through a permanent ~!abli~hmcn ! situated therein. Or performs in that

othe r State independent personal sc:rvic:es from a fixed bue si tu~ted therein. and

'the holding in respeet of wh ich the dividends are paid is effectively connected with

such permanent establiShment or fixed base. In such a case the provisions of

Article 7 or Article 14. as the case may be. I>hall apply .

(5) Where a company which is a resident of a Cont racting State derives

profits or income from the other Contracting State. that ot her State ma, nOt

impose any tax on the di~idends paid by the company except inliOfar as such

dividends arc paid to a resident of tha t other State Or insofar as the holdi ng in

respect of which the dividends arc 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 tu on the company's undistributed profi ts.

even if the dividends paid or the undistributed profits consist wholly or partly of

profits or income arisi ng in such othe r State .

ARTICLE I1

(I) Interest arising in I Contracting State and paid to a resident of the other

Con tracting State may be taxed in that other State.

(2) However. such interest may be tued in the Contracting Slate in which

it arisa; and according to the laws of that Slate, but if tne recipient is the bcnerlCial

owner of the inte rest. the tu so charged Iihal1 001 exceed ten (10) percent of the

gross amount of the inle rest.

B 43S

(3)

Notwit hSla nd ing the provisions of paragraph (2)

(8 ) interest arising in Malta and deri¥(:d by the Go¥(:mment of Hungary

including local authorities thereof, the Central Bank or any financial

institu tion oontrolled by the Hungarian Go¥el11ment, or interest derived on

loans guaramud by the Hungarian ~mment , dlall be e:o:empt from tu in

Malta;

(b) in terest arising in Hungary and paid to the Malta Government , the

Central Bank of Malta or the Malta Developme nt Corporation shall be

uempt from Hungarian tu .

(4) llle term "interest" as used in th is Article mean s income from debt ·

claims of every kin d, whether Or not secured by mortgage and whether or not

carryi ng a right to participate in the debtor's profits, and in particular, inoome

from government secu rities and inoome from bonds or debentures, including

premi ums and pri~es attoching to such securitie$, bonds or debentures.

(S) The provisions of paragraphs ( I) and (2) shall not apply if the benerocial

owner of the interest, being a residenl of a Coo1 tract ing State, Clirnes on busine>5

in tbe ot her Contracting Stl.le in which the intern! arises, through a permanent

establishment situated therein , Of performs in that other Slate independent

personal services from a fixed bas.c si tuated therein, and the debt-claim in respect

of whidt the interest is paid is effeCli¥(:ly oonnected witll such penna nent

Clitablisllment Of fixed bne. In socII case the provioons of Article 7 or Article 14,

as the case may be. shall appl)'.

(6) In lerest 511.11 be deemed to arise in a Cont racting Stale when the payer

is thal State itself. a politica l subdivision , a local au thorit y, or a resident of that

State. Where , however. the person paying the interest, wllethe r he is a resident

of a Contracting State or nol. has in a Contracting State D permanent

establishment or fixed base in connection wi th which the indcbtedneu on which

the in terest is paid wa s incurred. and sucll interesl is borne by such permanent

est ablisllment or fixed base then such imerest shall be deemed to arise in the Stale

in which the permanen t elitablishmen t or rlXed base is si tuated.

(7) Where. by reason of a special relationship betwun the payer and the

beneficial owner Or between both of lhem. and some OIher person , the amount

of Ihe interest paid havin& regard to the dcbt-claim for which il is paid, e~ceeds

the amount which would ita¥(: been agrud upon by [he payer and the beneficial

owne r in the a~ncc of ~ueh relationshi p. lhe provisions of Ihis Article slla ll apply

onl)' 10 the IMt-mentioned amount . In suc h case, tile exccS$ pari of the payments

shall remain taxable itCIXlrding 10 Ihe laws of each Con tracting Slate , due regard

bc:ing had 10 the ot ller provisions of this Agree ment.

ARTICLE 12

Roytlll~$

(I) Royalties anslDg ID a Contracti", State and paid to a reside nl of the

olher Contracting State may be taxed in titat other State.

·

."

(2)

Howeve r. such royalties may aOO tIC' taJr.cd in the Cont racting State in

which they ari§e and accord ing \0 the laW$ o f that Slate, but if the recipien t is the

benefICial owner of the royalties the tu 50 t hrge<! shan not u~d Ic n (10) pe r

cent of the grDU amount of the royaltie$.

(3) The Icrm Mw)'a]lies" in Ihis Anide means payments or crediu , whether

periodical Or ROt, and I\Qwever described or computed, to the extent to wh ich they

are made as conside ration for

(a) the use of, or the rigb l 10 U5e, any copyright, palent, design or

model. plan. se<;rel formula or PI'OCeWl. trademark or othe r like property or

right;

(b) the use of, or the right to use, any industrial. commerci al or

scientific equipment;

tedinical.

(c) the supply of scicntifK,

industrial

or commercial

koowlcdge or information;

(d) the supply of an y assistance that is ancili ary and subsidiary 10, and

is furnished 8$ a means of enabli ng the application or enjoyment of, any sud!

prope rty or righ t a$ is mentioned in sub-paragraph (b), or any such knowledge

or infonnation as is mentioned in sub-paragraph (e);

(e)

the use of , or che riglll to use

(i)

mOlion pkcure film.;

(ii)

fil ms o r video tapes for use in connection with television; or

(iii)

tapes for use in (:(lnnection with radio broadcasting; or

(f) tOlal or partial forbearam::e in raped of the use: or supply of any

property or right referred to in this paragraph .

(4) The provisio ns of paragra phs ( I) and (2) shall not apply if the benefici al

owne r of the royalties, being a resident of a COnlracti ng State . carries on busi ness

in tbe other Contracting State in which the royalties arise. through a permane nt

eslllblishment si tuated therein, or perfonns in that other State independent

p"rwnal servitts from a fixed base sicuated therein. and the right Or propcrty in

respect of which the royalties are paid is effectively (:(lnnccted wilh such pennanent

esta blishme nt or fixed base. In such case the provision of A rticle 1 or Article 14,

as the case may be, shall appl y.

(S) Royalties sh all be dee med to arise in a Contract ing St ate whe n the paye r

is that Stale itself. a polit ical subdivision. a local authority or a resident of th at

State. Whe re, however, the pef'5Oll paying the royalties. whether he is a resident

of a Con tracting Stale or 00(, has in a Contracting Stale a pennanent

establishment 0.- fixed base in CQnnection with whid! the obligation to pay tile

royalt ies was incurred , and such royalties are borne by such pennanenl

establishment Or fixed base, t hen such royalt ies shall be deemed 10 arise in the

Slate in which the penna ne n! establishment or fixed base is situated.

(6) ~re, by reason of a special relationship bet_en the payer and the

beneficial owner or between both of them and S(lme other person, the amount of

the royahies , having reprd 10 the u:>e, right or information for whieh they are

paid, eJa:eds the amount whH:h w.ould have been agreed upon by the payer and

the beneficial owner in the absence of such relationship , the provisions of this

Artkle shall apply only to tile last -mentioned amount. In such case, the excess part

of the payments shall remain taxable ac:.;:ording to the laws of each Contracting

Stale, due regard being had to the other provisions nf Ihis Agreement.

ARTICLE 13

Alienation of Pro~rry

(1) Inoome or gai ns from the alienation of immovable property, as defined in

paragraph (2) of Anide 6. may be taxed in tile Contracting State in which weh propeny

is situated.

(2) Income: or gains from the al ienation of shares or oomparable interests in a

company. Ihe assctso{whieh consist ... ·holl y or principally of immQVable propeny. may

be taxed in the Contracting State in which the assets or the prindpal assets nf the

company are situated.

(3) Income or gains from the alie nation of movable property fonning part of the

busi ness propeny of a permanent establish mem which an en terprise of a Colllracting

State has in Ihe other Contracting State or of movable propeny penaining 10 a fixed

base available to a resident of a Contrading State in the nther Contracting State for the

purpose of performing independent personal services. including such income or gains

from the alienation of such a permanent CSlablish""'lII (alone or together with the

whole enterprise) or of such fixed base. may be taxed in the other State.

(4) Income or gains from the al ienation of ships . aircraft and road transport

vehieles operated in interna tional traffic Or movable property penaining to the

operation of such means of transportation shall be laxable only in the Contracti ng StBte

o( which the enl erprise is a resident .

(5) Income or gaim from the alienation of any properly other than that referred

to in paragraphs (I). (2) , (3 ) and (4), shall be taxable only in the Contracting State of

whkh tile alie nalor is a reside nt .

ARTICLE 14

(\ )

Income derived by a resident of a Contracting StDte in respect of professional

~rviees or otlle r activities of an irnlependent character shall be taxable only in that

State. However , such income may be taxed in the other Contracti ng State in the

follOwing circum~l anea

(a) if he has It fi~cd base regularly available to him in the other Contracting

State (or the purpose of performing hi$ activitiC$ (in which case on ly S(I much of the

income as is attributable to that fi~ed base may be taxed in that other Contncting

Slate) ; or

(b) if his ~tay in the "'her Contracti ng State is for a period or periods

amounting to Or exceeding in the aggrcgate 183 days during any calendar year; or

•

if the remuneration for his se,....ices in the other Contracting State is

(c)

deri~ed from residents of that State and cl<ceeds the equivalent in the ~urre ncy of

that State of five thousand U.S. dollars (US$ !i,OOO) during the calendar year.

no!wi thsunding that his stay in that State is for . period 01'" periods amounting in

the aggregate \0 less than 183 days during Ihal year.

(2) The term ~ prorc:ssional services w includes especially independent S(ierl1ific,

lilcnry. an islic, educational Or teaching activities as weLl as the independent activities

of ph ysicians, dentisui. lawyers. engineers. architects and acoou.nlanlS.

ARTICLE IS

~fH"denl Per$/)Nli s"rvlcf'J

(I ) SUbject \0 the provisions of Articles 16. 18. Ill. 20 and 21. salaric$, wage$ and

othe r similar remuneration derived by a resident of a Contracting Slate in respect of an

employment shall be \lUCable only in Ihat State unless the employment is exercised in the

OIher Contracting State. If the employmen t is:;o ue rcUed, ,och remuneration lIS is

derived therc:from may be taxed in that other State.

(2) Notwithstanding the provisions of paragraph ( I) . remuneration derived by a

ruident of a Contracting State in TC$pect o f an employment uerrised in the other

Contracting State sball be taltlbk only in the fim·mcnt>oned State if

(a) the recipient is prese nt in the other State for a period or periods not

uceeding in the aggregate 183 days in the calendar year concerned; and

(b) the remuneration is pa id by, or on behalf of, an employer who is not a

reside nt of th c othe r State; and

(c) the remuneration is nol borne by. perm.""nl establishment or a filted

bMe which Ihe employer has in the ol her State.

(J) Notwithstanding the precedin, provisions of this Anicle , remuneration

derived in respect of an employmenl exercised aboard a sbip. aircraft Or road transport

vehicle operated in intemationaltraffic by an enterprise of a Contracting State may be

tu ed in that State.

ARTICLE 16

D irtClon' Fus

DireelOr$' fees and similar payments derived by a resident of one of the

Contracting States in his capacity as a member of the board of direclOl'1l , or OIher

oompaTllble body however deJcribed, of a company which is • resident of the othe r

Contracting State, may be taxed in that ot her State.

B ."

A RTIC LE 17

Arlisleltmd Alhl~u

(I) Notw;th.5tanding the provisions of Articles 14 arKIl5 . income dc:riVC'd by.

resident of a Contracting Slate as an entertainer. such as a theatre. motion picture,

radio or tdevision artiste, or musician« as an athlete, from hi$ pcr$Ollal at'Iivilies as

such exercised in the other Contracting Stale. may be wed in ll1al oIlier Slate.

(2) Where income in respect of pcnooal activiticsucrciscd by an entertaincror

an athlete in his capaci ty as such accrues not lothe entertainer or athlete himsel f bulto

another pcrwn , Ihal illOOlTlC' may. fIO{wilMlanding the provisions of Articles 7, 14 and

IS, be taxed in tile CoRlrlet;n, Slale in wllich the activities of the enlerfaincr o r athlete

afC exercised. if that person is directly or indirc"ly oontrolled by the e ntertainer or

athlete.

(3)

Notwithstanding the provisions of paragraphs (1) and (2) of tllis Ankle.

income mentioned in tbis Article sball be exempt from tax in the Contracting State in

wbich the activity of the entertainer or athlete is exercised provided that this aelivily is

supported in a coMiderahle part out of public funds of this State or of the other State o r

the activity is exercised under a cultural agreement o r arrangenlC'nt between Ihe

Contracting States.

ARTICLE 18

Pensions

( I) Subject 10 the provisions of paragraph (2) of Articl e 19. pensions and other

similar remuneration paid to a resident of a Contracting State in consideration of past

employment shall be luable o nly in that Slate.

(2 ) Notwithstanding the provisions of pa ragrapb (I). pensions IInd olher

payments made undn the social sec urity legislation of a Contracting Stale shall be

taxable o nly in that State .

ARTICLE 19

( I) (a ) Remuneration . other than a pension. paid by a Contrncting State o r a

poli tical subdivision or a local authority thereof to ao individual in respect of

serviCC$ rendered to Ihat Stlte or subdivision or authority sh all be tuable only in

that Stale .

(b) However . such remuneration Sha lL be tuable only io the other

Contracting State if Ihe services arc renll.ered in that State and the individual is a

resident of that State who

(i) is a national of that State; o r

(ii) did not bewme a resident of that Stale solcly for the purpD5Cs of

rendering the services.

· ...

(2) (a) AllY pension paid by, oroul oHundscrcated by a Contracting Stale or •

political subdivision or a klcal authority tt.c:..tQf \0 an individual in respect of

servK:e$ rendc::Ted 10 llIal Slate or subdivision or authority shall be ta)(able only in

Ihal Stale.

(b) 'iowevcr, ",I("h. pension shall be la.llblc only in tnc otner Contracti ng

State if the individual is. resi~nI of, . nd a national of, that Slatl:.

(3) llle provisions of Articles 15, 16 and 18 shall appl y to remuneration and

pensions in respect of 5ernces rendered in conn«lion with. a busin~ carn.,d on by a

Contracti ng Slale or a political subdivision or a local authority tllcreof.

Where remuncTlIlion is paid under a development assi~lance programme of.

(4)

Contracting Stale, OUl of funds c~clusively supplied by Ihal Slale to a specialist or

volunteer seconded 10 the 01 her Contracti ng Slale with the oonsent of that other Stale,

such remuneration shan be deemed to lIave been paid by tM: first-mentioned State and

sllall be taxable on ly in that State.

ARTIC LE 20

(t) Remuneration which a professor or teacher who iSOf was immediately before

visiting a Con tneting Slale. resident of the other Contracting State and who is present

in the fiT$l.-men!ioned Slate rOT a period noI: exceeding two years for the purpose of

carrying out advanced 5tl.ldy o r research or for leaching at a university , college. school

o r oilier educational institution received for such work shall no! be taxed in that State.

provided Ihal :such remune nnion is derived by lIim outside that Stale.

(2) This Anicle shall noI: apply to income from research if such research is

undertaken primarily for the private benefit of. specific person or persons.

ARTICLE 21

Slud~,,1S and Troinus

An individual wllo is resident of a Contracting Sta te immediately before making a

visit to the other Contracting State and is tcmporarily present in Ihe OIlier State solely

(a) as a student at a reeoaniscd university, oollcge, school Or other simi la r

recognised educational institution in that other Slate.

(b)

as a business or technical appren tice; Or

(c) as a recipient of a pnt, allowance Of award for lIIe primary pul"Jl'OK of

study, rC$UTCh or trai ning from the Government of either State or from a

~ntirlC. educational. reli&ioul, or charitable organisation Or under a technical

assi5tance programme entered into by the Government of either Stale ,

· ... ,

shall be exem pt from tax in that other Slate on

(a) .U I"C'minances from abroad far the p!.Irpo5eS of his maintenance,

education, study . resean:h or training;

(b)

the amoun! of such grant , aUowlInce or award; I nd

(c) any u muneralioll nol exceedi ng the eq uivalent in the CUlUncy of IIial

o the r Slate of two thoulHlnd U.S. dollars (US$ 2,(00) in respect o f sc:rvioes in that

othe r Slate pro~idcd the serv~s are performed in connection wilh his study ,

research Or training or are necessary for the purpose of his maintenance.

A RT IC LE 22

Other Incom e

(\ ) h ems of income of a reside nt of a Contracting Stale, wh ere~c r arising. nOI

dealt wilh in the foregoing Articles ohhls Agreement shall be taxable on ly in that Stale.

(2) 'fhc, provisions of paragraph (I) shall not apply 10 irlC()me , other than income

from immovable property as defined in paragraph (2) of Article 6, if the reci pient of

such inrome. being a re~denl of. CoIll rad in, Stat~, carries on business in the other

Contractin, State throogh a permanent establishment si tuated therein . or pe rforms in

that other S\.ilt~ independent perwnalservK:c:s from a filed base situated therein, and

the right or propeny in respect ofwhich the income ispaid iseff«tivclyronneCled with

such permanent establishmento.-fixed base. In such case, the provisions of Ankle 7 or

Ankle 14, as the case may be. shall apply.

CHAPTER IV

FJlmlDIIUoII of Double Taxation

ARTICLE23

E1imiMtioll of Dor.dJIe Taxation

In the case of H ungal)" doubl~ wation shall be eliminaled as follows

(I)

(a) where a resident of Hungal)" derives income which. in ao;:ordanc:c with

the proYisionsof this Agreement may be tued in Malla , Hungal)" shall, subject to

the provisions of subpara,raphs (b) and (c). exempt such income from tu;

(b) where a resident of Hun,ary deri ves items of income wh ich. in

accordance with the proYisionsof Anicle \0. may be tued in Malta , Hungal)"shal\

allow as a d~duction from the tax on the income of Ihal resident an amount equal 10

the tax paid in Malta. Such deduction Shall nOl, however, excecd that pan of thc

tax, as computed before the deduction is givcn which is all ribulablc 10 such items

of incomc derived from Malla; and

{cl where in accordance with any proVIsIOn of this Agreement income

derived by a resident of Hungary is exempt from tax in Hungary. Hungary may

nevertheleSl;, in calculating the amount of tax on the remaining income of such

resident, take into account the exempted income.

(2)

In the case of Malta. double taxation shall be eliminated as follows

Subject to the provisions of the law of Malta regarding the allowance of a

credit against Malta tax in respect of foreign lax, where, in accordance with the

provisionsofthisAgrcemcnt. there is ilKluded in a Maltaassessmem income from

""UTees within Hungary the Hungarian lax on such income shall be allowed as a

credit againslthe relative Malta lax payable Ihereon.

(3) For the purpose of allowance as 3 credit the tax payable in Hungary or Malta.

as Iheconlexl requires. shall be deemed 10 include Ihe laX which is olherwise payable in

a Conlracting Slale bUI has been reduced Or waived by Ihal Slale under its legal

provisions for lax inccmives.

(4) Where the Agreement provides that income arising in a Contracting State

sball be relieved from tax in that State, either in fun or in part. and, under the law in

force in the olher Contracting Stale, such income is subject to tax by reference to the

amoum therCQfwhieh is remined to or rece ived in that otherStale and not by reference

to the full amoum thereof, then the relief to be allowed in the first mentioned State shall

apply on ly to $0 much of the income as is remitted to or received in the other State.

CHAPT ER V

Spedal Provisions

ARTIC LE 24

(I) Nationals of a Contracting Stale shall not be subjected in the other

Contracting State to any taxation or any requirement connected therewith which is

other or mOre burdensome than the taxation and connected requirements to which

nationals of that other State in the same circumstances are or may be subjected. This

provision shall, notwithstanding the provisions of Article I , also apply 10 persons who

arc not residents of one or both of the Comracting States.

(2) The taxation on a permanent establishment which an enterprise of a

Contracting Slate has in the other Contracting State shall not be less favourably levied

in that othe r State than the taxation levied On enterprises of that other Slate carrying On

tbe same activities.

(3) Except where the provisions of paragraph (I) of Arlicle 9, paragraph (7) of

Artide 11. or paragraph (6) of Artide 12 apply, interest. royalties and other

disbursements paid by an enterprise of a Contracting State to a resident of the other

Contracting State shall, for the purpose of delennining the taxable profits of such

enterprise. be deductible under the same conditions as if they had !.>een paid to a

resident of the first-mentioned State,

· . ,

(4) EnterpOKS of. Contracting Slate, the capital of which is wholly or p;1nly

owned or controlled, directly or indirectly by onc or more residents of tile ollle r

Contracting State, shall not be subjected in the fint-mentioned Stale 10 any UUllinn or

any requi rement connected therewith which is IJl(}rc burdensome than the laxllion and

oon neclcd req uirements 10 which oth er si milar enterprises of Ihal first-me nt ioned State

are or may be 5ub;Ccled.

(5)

NOIhing in Ihis Anicle &hall be construed as obliging a Contracting Slate 10

granl 10 indiYiduals woo are .e$idcnt of the olher Contracting Slale any personal

allowances, reliefs and red....:tions for lax purposoes on account of civil status, family

rcsponsibililinor any other pel'$Oflal circum"anc« which i1 granlS 10 i!sown residents.

(6) The provisions of III is Article shall, notwithstanding the provisions of Article

2, appl y to tu esof every kind and descri ption.

A RTI C LE 2.5

MU/Ulli AglUtm'III Proadure

(I) Where a person oon$idcrs that the actions of one Of both of the Contracting

States result o r will result for him in tu.tion not in aa:ordanoc: with the provisions of

this Agreemen t. he may, inespecti~e of the remedies pro~ided by the domestic law of

those States. present his case to the competent authority of the Contracting State of

whiCh he is a resident o r if his case comes under paragraph (I) of Anide 24, to that of

Ihe ContractingState of whi ch he isa national. Thecase must be presented within three

years from the first notificalion of the aClion resulting in taxa tion not in acrordallCC with

Ihe provisions of the Agreement.

(2) The oompetelll.uthority shall endeavour. if the objcdion appears to it 10 be

justi rlCd and if it is not itse lf abLe 10 anive at a satisfactory 5OIulion . to resolve the casc

by mutual agrttment with the compe tent authority of the OIher Contracting State. with

I view to the a~oidallCCof tllllation which is nOl inllCCOrdancewith the Agreement . Any

agreement reached shall be implemen ted notwithstanding any lime limits in the

domestic law of the Con tracling States.

(3)

The competent autho rities of Ihe Contracting Stales shall endeavour to

rC$(ll~e by mutual agreement any difficulties or doubts lrising as to the interpretation or

application of the Agreement. They may also oonwlt to,elher for Ihe elimination of

doubLe tllllation in Ca5CS 001 provided for in the Agreement.

(4) 1lle oompete nt authorities of the Contracting Slates mayrommunicate with

each other directly for the purpose of reachi ng an .greement in th<: sensc of the

preceding paragraphs.

ARTICLE 26

( I) The competent luthorities of the Contracting Statcs shall exchange sudt

information as is necessary for carryin, OUt the provi5io ns of this Agreement orof the

domestic taws of Ihe C<>ntracting States conce rning tlllles rovered by the Agreement

insofar as the tUition thereunder is not COntrary to the Agreement . The e~change of

• 444

informatioo i$ rI()I rt:Stricted by Article I. Any information r~ceivcd by a Contracting

w

Stale ~all

trealed as lItCret in the ialTK: manner as infonnation obtained under the

domelilic laws of that State and shall be disclosed only 10 perwns Of au thorities

(including courts and admi nistrative bodies) involved in the asseSlimcnt or collection of,

the enforcement or prosecution in respect of. or the determination of a~al5 in

relalion to. the ta~cs fXlvc rcd by the Agreemcm. Su~h per~m50r authorities IobaU U5C'

the information only for such purposes. They may diKlosc the in form~ l ion in public

roun proceedings or in judicial decisions.

(2) In !lOuse shall the provisions of paragMIph (1) be construed so as to impose

on a Contracting State the obligation

(a) to carry out administrative ITK:a5UTC5 al variance with the laws and

admiDim.live practice of tilat or of the other Contracting Stale ;

(b) 10 supply information wllich is 1101 ob(ainable under the laws or in the

normal course of Ihe adminislralion oflhat orof the other CofIlnctingSlate;

(c) to supp ly information which would disclose any ~rade. b~sineS$.

industrial, com mercial or profeSlliona l sccrc t or trade process. or ,Monnanon, Ihe

diKlosure of which would be contrary 10 public policy (o,d,t public).

ARTICLE 1:1

Nothing in this Agreement shall affect Ihe fiscal privileges of diplomatic a,.,nts or

consular omela ls under the general rules of internat;"na] law or unde r the provisions of

special agreements.

CHAPTER VI

""" ............

ARTI CLE 28

Entry ;'110 Fo,et

(1) . The Govc:rnmenl. of tile Cont racting States shall notify each other that the

consll~uhon.a] requm'ments for tile entry inlo forCC' o f this Agreement ha~e been

complied wnh .

(2) The Agreement shall enter into fon:e thirty <la)" afler the dale of Ihe

notifications referred \0 in paragraph ( I) and its provisions shall Mvt: effect

(a)

in Hungary

(i) in respect of taxe$ withheld at sour«. to amounts of income

derivt:d On Or after 1 January in Ihe calendar year ne~1 fo llowing the year in

whKh the Agreement en lers into force; and

B

44S

(ii) iD respect of other laxes On income, to JUdJ lUes chargeabLe for

any taxable year beginning on or after I January in the calendar year next

follo wing the year in which the Agreement clllers into rom:;

(b)

in Malta;

in respect of taxes for any year of assessment beginning on or after I

January in tile scoond calendar year following the year in which this

Agreement enters in to fom:.

ARTlCl.E29

TtrmintUibn

Th is Agreement shall remain in force until terminaled by a Contracting State.

Either Contracting Stale may te rminat e the Agreement. through d iplo ma tic channels.

by giving notice o f te rminatio n &l lcasl six months befo re the e nd of any calendar year

beginni ng ,ftcr the expiration of a period of five yean from tile da le of its entry in lo

fOm! . In s uch eve nl, the Agrumen t shall cease 10 have effecc

(a) in Hungary

(i) in respect o f lUes withheld at source , 10 amounl$ofincome derived

on or after 1 Januar)' in the calendar year ne~t following the yeari n which the

notice i~ given ; and

( ii) in rC$pe~t of othe r taxes on income. to slK:h taxes ~hargeable for

any taxable year beginning on or after I January in the calendar year ne~t

following the year in wh ic h the notice is given

(b) in Malta

in respect of taxes (01' any yea r of a~ment beginning on o r after I

January in the KOOnd calendar year following the year in which the notice is

given.

IN Wll1IIESS WHEREO F the undersigned. duly autl'loriud thereto , have lligncd

this Agree ment.

DONE in duplicate at Budapest this 6th day of August. 1991. in the English

language.

TOr6k Bo!la

Josepb eu.s.r

FOil TIl EGOVEIlI<MI;'NTOFTIlE

FOil TIl E GOVEIlI<MENT Of'

IIErllBUCOF HUNGA IIY

MALTA

....

PROTOCOL

At Ihe 5igning today oflh" Agn,,,rru.nt between the Gove rnment of Malta and Ihe

Government of the Republic of Il ungary for the avoidance of double luation "";111

respect to taxes on inoome the undenigned have agreed upon Ihe following provisions

wllich shall form an integral part of the Agreement

(1) Concerning paragraph (3) of Article 2, subsection (11) of section 31 of

the Income Tu Act (Cap. 123) provi<k:s lhat the lax upon the chargeable income

of any person engaged in the production of petroleum produced in Malta shall be at

the rate of fifty cents on every lira of such part of his chargeable inoome lIS is

de rived therefrom. Under Ihe law in force in Malla, no double taxation

!lrrangemenlshall have effect in wb, as it applies 10 tax paid or payable in respect

of gains or profits chargeable 31 the rate provided for in substttion (11) of section

31 ofthe Act.

(2) Conce rning Article 5 it is understood that the term Mplace of busine5$~

includes alw a place of production .

(3) Concerning Article 7 wh ere a building site, construction, installation or

assembly project constitu tes a pcrmanetll establishmen t . on ly those profits can be

attribu ted to Ihal permanent establishment whicb derive from the activity of the

building site, construction . instaliation or asse mbl y project.

No profit can be anributed 10 Ihe permanent eSlablish metll by reason of

delivery of goods or merchandise , machinery or equipment notwithstanding that

the delivery was carried out by the enterpri se Or by a th ird perwn.

(4) Concerning Article 8 operation in intemationaltraffieofshipsoraircraft

or road transport vehicles includes the activi ty of agencies of in ternational

transport enterprises and olher auxiliary activities of these cnterprises namely

transport bybus between a tOwn and the airport inwfar asthese above-mentioned

activities arc closely connected with in ternational transport .

(5) Concerning paragraph (2) (b) of Article \0 it is understood that in case

there will be a ehange in the imputation system presently applied in Malta the

oompetenl authorities of the Contracting State!l will consult eaeh other in o rder to

agree on the taxation of dividends in vicw of avoiding double taxation .

IN WITN ESS whcreofthe undersigned , duly authorised thercto, have signed

this Protorol.

DONE in duplicate at Budapest this 6t h day of August. 1991. in the English

language .

TOrOiI: ~Ia

Joseph Cas5ar

RDRTHEOOVERNMENTOf

FOR THEOOVERNMf7<TOfTHE

MAI,.TA

REPlIBUCOFHIINGARY

c.. .,_ ... ,........,....

M""""'ft.h .... pmjO~

_

.....

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