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Bahrain-Hungary

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Tax Treaty between Bahrain and Hungary has Entered into Force

The income tax treaty between Bahrain and Hungary entered into force on 19 June 2015. The treaty, signed 24 February 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Bahrain income tax payable under Amiri Decree No. 22/1979, and Hungarian personal income tax and corporate tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company (other than a partnership that is not liable to tax), otherwise 5%
  • Interest - 0%
  • Royalties - 0%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
  • Gains from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Bahrain applies the credit method for the elimination of double taxation, while Hungary generally applies the exemption method. However, in the case of income covered by Article 10 (Dividends), Hungary applies the credit method.

Limitation on Benefits

The treaty includes a limitation of benefits article (27), which includes the provision that a resident of a Contracting State shall not receive the benefit of any reduction in or exemption from tax provided for by the treaty if the competent authority determines that the main purpose or one of the main purposes of such resident or a person connected with such resident was to obtain the benefits of the treaty.

The limitation may only apply after the competent authorities of both Contracting State have consulted with each other.

Effective Date

The treaty applies from 1 January 2016.

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