In the newsflash sent on 6 July 2015, we gave advices on the new DTT for the avoidance of the double taxation with respect to taxes on income and capital. This treaty was signed on 10 March 2015 between Hungary and the Grand Duchy of Luxembourg and the related Act XCI of 2015, was officially published on 2 July 2015.
According to the protocol, the contracting parties have notified each other through diplomatic channels that the domestic requirements were complied with, for the convention to come into force.
The Ministry of Foreign Affairs and Trade has announced in its communiqué that the DTT has come into effect in both contracting states on the 26 January 2017 and can be applied:
- with respect to taxes withheld at source, on income derived in or after the 1 January 2018;
- with respect to other taxes on income and capital, for taxes chargeable for any tax year beginning on or after the 1 January 2018.
Upon the entry into force of the new DTT, the earlier Convention between the Republic of Hungary and the Grand Duchy of Luxembourg, which was signed at Budapest on 15 January 1990, has been terminated and shall not be applied:
- with respect to taxes withheld at source, on income derived in or after the 1 January 2018;
- with respect to other taxes on income and capital, for taxes chargeable for any tax year beginning on or after the 1 January 2018.
Impact on investors: Hungary has progressed further by extending the circle of existing DTTs, thereby increasing the possibility of avoiding double taxation.