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.
The treaty covers Bahrain income tax payable under Amiri Decree No. 22/1979, and Hungarian personal income tax and corporate tax.
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.
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.
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.
The treaty applies from 1 January 2016.
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