The Hungarian government has approved the pending income and capital tax treaty with Iraq, and submitted it to the National Assembly for ratification. The treaty, signed 22 November 2016, is the first of its kind between the two countries.
The treaty covers Hungarian personal income tax, corporate tax, land parcel tax, and building tax. It covers Iraqi income tax, real estate tax, vacant land tax, and income tax on foreign oil companies contracting for work in Iraq.
The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes consultancy or administrative services in a Contracting State through employees or other engaged personnel for a period or periods aggregating more than 6 months within any 12-month period.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Hungary generally applies the exemption method for the elimination of double taxation, although the credit method is applied in respect of income covered by Articles 10 (Dividends), 11 (Interest), and 12 (Royalties). Iraq applies the credit method.
Article 28 (Entitlement to Benefits) includes the provision that a benefit provided under the treaty will not be granted if it is reasonable to conclude that obtaining the benefit was one of the principle purposes of any arrangement or transaction that resulted directly or indirectly in the benefit. However, the denial of benefits will not apply if it is established that the granting of the benefit would be in accordance with the object and purpose of the relevant provisions of the treaty. Before a resident of a Contracting State is denied benefits, the competent authorities of both States will consult with each other.
The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.
We’re here to answer any questions you have about the Orbitax products and services.
We’re committed to providing high value, low cost tax research and management solutions.
Our Twitter account is where you can find latest information, news updates, offers and lots more.