Details of the income tax treaty and protocol between Hong Kong and Hungary, signed on 12 May 2010, have become available. The treaty was concluded in the English language and generally follows the OECD Model Convention.
The maximum rates of withholding tax are:
|-||10% on dividends in general; 5% if the beneficial owner is a company (other than partnership) which holds directly at least 10% of the capital of the company paying the dividends;|
|-||5% on interest in general; an exemption applies on interest payments to the government and other government bodies and institutions as defined; and|
|-||5% on royalties.|
Deviations from the OECD Model include:
|-||A building site, a construction, assembly or installation project or supervisory activities in connection therewith, constitute a permanent establishment only if such site, project or activities lasts more than 6 months (Art. 5(3)(a)).|
|-||An enterprise furnishing services (including consultancy services) in the other contracting state is deemed to have a PE if the services are provided for a period exceeding 183 days in any 12-month period, and these services are performed for the same or a connected project directly or through employees or other personnel engaged by the enterprise (Art. 5(3)(b)).|
Hong Kong generally applies the credit method to avoid double taxation. Hungary generally applies the exemption method for the avoidance of double taxation.
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