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Treaty Changes (5)

Argentina-Chile

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Tax Treaty Negotiations between Argentina and Chile Concluded

The Chilean Ministry of Finance announced on 9 April 2015 that the tax treaty negotiations between Chile and Argentina have been concluded. The treaty must now be signed and ratified before entering into force. The 1976 income and capital tax treaty between the two countries was terminated effective 1 January 2013.

Bahrain-Hungary

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Bahrain Ratifies Tax Treaty with Hungary

On 12 April 2015, Bahraini King Hamad bin Isa Al Khalifa signed the law ratifying the pending income tax treaty with Hungary. The treaty, signed 24 February 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Bahraini income tax, and Hungarian income tax and corporate tax.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company, otherwise 5%
  • Interest - 0%
  • Royalties - 0%
  • Capital gains - generally exempt, although the following 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 directly or indirectly deriving more than 50% of their value from immovable property situated in the other 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.

Entry into Force and Effect

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.

Ethiopia-Untd A Emirates

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Tax Treaty between Ethiopia and the U.A.E Signed

On 12 April 2015, officials from Ethiopia and the United Arab Emirates signed an income tax treaty. The treaty is the first of its kind between the two countries, and will enter into fore after the ratification instruments are exchanged.

Additional details will be published once available.

Luxembourg-Croatia

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Luxembourg Approves Tax Treaty with Croatia

On 2 April 2015, Luxembourg's Council of Ministers approved the pending income and capital tax treaty with Croatia. The treaty, signed 20 June 2014, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Croatian profit tax, income tax, and the local income tax and any surcharges. It covers Luxembourg individual income tax, corporation tax, capital tax and the communal trade tax.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 10% of the paying company's capital, otherwise 15%
  • Interest - 0% if the beneficial owner is a financial institution or collective investment vehicle, otherwise 10%
  • Royalties - 5%
  • Capital gains - generally exempt, although the following 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 directly or indirectly deriving more than 50% of their value from immovable property situated in the other State, although an exemption applies for shares listed on an approved stock exchange, shares alienated as part of a corporate reorganization, and shares whose value is derived from immovable property in which business is carried on

Double Taxation Relief

Croatia applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption method. However, in the case of income covered by Article 10 (Dividends), Article 11 (Interest), Article 12 (Royalties), and Article 17 (Artistes and Sportspersons), Luxembourg applies the credit method.

Entry into Force and Effect

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.

Luxembourg-Estonia

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Luxembourg Approves Tax Treaty with Estonia

On 2 April 2015, Luxembourg's Council of Ministers approved the pending income and capital tax treaty with Estonia. The treaty was signed 7 July 2014, and once in force and effective will replace the 2006 treaty between the two countries.

Taxes Covered

The treaty covers Estonian income tax, and Luxembourg individual income tax, corporation tax, capital tax and communal trade tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise of one Contracting State furnishes services in the other State for a period or periods aggregating more than 183 days in any 12 month period.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company directly holding at least 10% of the paying company's capital, otherwise 10%
  • Interest - 0%
  • Royalties - 0%
  • Capital gains - generally exempt, although the following 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 directly or indirectly deriving more than 50% of their value from immovable property situated in the other State, although an exemption applies for shares listed on any stock exchange of a member state of the Organization for Economic Co-operation and Development (OECD) or the European Economic Area (EEA) or any other stock exchange as may be agreed between the competent authorities of the Contracting States

Double Taxation Relief

Both countries generally apply the exemption method for the elimination of double taxation. However, in the case of income covered by Article 10 (Dividends), both countries generally apply the credit method. Luxembourg also applies the credit method for income covered by Article 16 (Artistes and Sportsmen).

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

The 2006 income and capital treaty between the two countries will cease to have effect from the date the new treaty applies.

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