Hungary - Israel Tax Treaty

Israel

Ministry Of Foreign Affairs

Treaties Department

CONVENTION

BETWEEN THE GOVERNMENT OF THE STATE OF ISRAEL

AND

THE GOVERNMENT OF THE REPUBLIC OF HUNGARY

FOR THE AVOIDANCE OF DOUBLE TAXATION AND FOR

THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of the State of Israel and the Government of the Republic of Hungary,

Desiring to conclude a Convention for the avoidance of a double taxation and for the prevention of fiscal evasion with respect to taxes on income,

and further develop and facilitate their economic relationship,

have agreed as follows:

Article 1 PERSONAL SCOPE

this Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 2 TAXES COVERED This Convention shall apply to taxes on income imposed on behalf of a Contracting State,

irrespective of the manner in which they are levied.

There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises as well as taxes on capital appreciation.

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The existing taxes to which the Convention shall apply are in particular:

a in the Republic of Hungary:

(i) the income tax on individuals (ii)the profit taxes (hereinafter referred to as “Hungarian tax");

b) in the State of Israel: (1) income tax (11) company tax (11i)capital gains tax (iv)land appreciation tax (v) employers’ tax (vi) profit tax paid by banks and insurance companies (hereinafter referred to as “Israeli tax").

4. The Convention shall apply also to any identical

which are tmnnceod or substantially Similar taxes which are smposesc

after the date of signature of this Convention in addition to, or in place of, the existing taxes. Israel

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The competent authorities of the Contracting

States shall notify each other of any significant

changes which have been made in their respective taxation lavs.

Article 3

GENERAL DEFINITIONS

For the purposes of this Convention, unless the context otherwise requires:

a) the tern “Hungary” when used in a geographical sense means the territory of the Republic of Hungary;

b) the term "Israel" when used in a geographical sense includes the territory in which the Government of the State of Israel may enforce the collection of taxes according to international law and the laws of the State of Israel;

c) the terms “a Contracting State" and "the other Contracting State" mean the Republic of Hungary or the State of Israel as the context requires;

d) the term “person” includes an individual, a company and any other body of persons;

e) the term “company" means any body corporate or any entity which is treated as a body corporate for tax purposes;

f) the terms “enterprise of a Contracting State" and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

g) the term “nationais” means:

(i) all individuals possessing the nationality of a Contracting State:

(ii) all legal persons, partnerships and associations deriving their status as such from the laws in force in a Contracting State;

h) the term. “international traffic" means any transport by a ship, aircraft or road-transport vehicle operated by an enterprise which has its place of effective management and policy making in a Contracting State, except when the ship, aircraft or road-transport vehicle is operated solely between places in the othner Contracting State; - Israel

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i} the term “competent authority" means:

(i) in the case of the Republic of Hungary

the Minister of Finance, or his authorized representative

(ii) in the case of the State of Israel the

Minister of Finance, or his authorise representative.

As regards the application of the Convention by a Contracting State any term not defined therein Shall, unless the context otherwise requires, have the meaning which it has under the law of that

State concerning the taxes to which the Convention applies.

Article 4 FISCAL DOMICILE

For the purposes of this Convention, the term “resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a Similar nature. However, a person will not be deemed to be a resident of a Contracting State by virtue only of having received income from sources within that State.

Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

a) He shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State in which he has his centre of vital interests:

bd) If the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to hin in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

cj If he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

dj} If he is a national of both States or of neither of them the competent authorities of the Contracting States shall settle the question by mutual agreement. : : Israel

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Where by reason of the provisions of paragraph ! a person other than an individual is a president of both Contracting States, then it shall be deemed to be a resident of the State in which its place

of effective management OF accrue 9 and policy making is

Article 5 PERMANENT ESTABLISHMENT

For the purposes of this Convention, the term “permanent establishment” means a fixed place of business (including a place of production) through which the business of an enterprise is wholly or partly carried on.

The term “permanent establishment" includes

especially:

a} & place of management;

b) branch;

c) an office;

d) a factory;

e) a workshop; and

f) mine, an oil or gas veil, a quarry or any other place of extraction of natural resources.

A building site, construction, installation or assembly project or supervisory or consulting activities connected therewith constitutes a permanent establishment only if it lasts more than 12 months.

Notwithstanding the preceding provisions of this article the term "permanent establishment" shall

pe deemed not to include:

a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise:

bd} the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

c) the maintenance of 4 stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by

another enterprise;

a} the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information,

for the enterprise;

the maintenance of a fixed place of business solely for the purpose of carrying on, the enterprise, any other activity of a

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preparatory or auxiliary character:

f) a building site, construction, installation or assembly project or supervisory or consulting activities connected the revith carried on by an enterprise of a Contracting State in connection with the delivery of materials, machinery or equipment from that State to the other Contracting State;

g) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs a) to £), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 6 applies - is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Article 6 INCOME FROM IMMOVABLE PROPERTY

Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

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The term “immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property livestock and equipment used in agriculture and forestry. rights to which the provisions of general law respecting landed property apply usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.

The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.

The provisions of paragraphs 1 and 3 shall aiso apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

Article 7 BUSINESS PROFITS

The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State tnrough a permanent establishment situated therein. If the enterprise carries on business as aforesaid the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State, through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the Same or similar activities under the same of similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses 50

incurred, whether in the State in which the permanent establishment is gutted or elsewhere.

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4. In so far as it has been custom Contracting State to determine the profits to be attributed to a permanent establishment on the basis Of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary. The method of apportionment adopted Shall, however, be such that the result shall be in accordance with the principles contained in this article.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by

that permanent establishment of goods or merchandise for the enterprise.

For the purposes of the preceding paragraphs, the profit to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

Where profits include items of income which are dealt with separately in other articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

INTERNATIONAL TRANSPORT

Profits from the operation of ships, road-transport vehicles, or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management and policy making of the enterprise is situated.

2. If the place of effective management and policy making of a Shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the Ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.

3. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

Article 9

ASSOCIATED ENTERPRISES

Where

a) an enterprise of a Contracting State

participates directly or indirectly in the management, control or capital of an enterprise of the other

or Contracting State,

b) ing come persons participate directly or a treed in the management, control or Petal of an enterprise of a Contracting

State an enterprise of Contracting State, P eneorner

and in either case conditions are may

between the two enterprises in their commercial financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, May be included in the profits of that enterprise and taxed accordingly.

7 Article 10

DIVIDENDS

a Dividends paid by a company which is a resident of a Contracting State to a resident of the other 5 Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the

Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, put if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed:

a) 5 percent of the gross amount of the dividends if the recipient holds directly at least 10 percent of the capital of the company paying the dividends;

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b) 15 percent of the gross amount of the dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

3. The term “dividends” as used in this Article means income from shares, “jouissance" shares or “jouissance" rights, mining shares, founders

shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which Israel

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the company paying the dividends is a resident, through 2 permanent establishment Situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except in so far as such dividends are paid to a resident of that other State or in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistribited profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11 INTEREST

Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, if such resident is the beneficial recipient of the interest.

The term “interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to bonds or aebpentures, and including linkage a@ifferentials.

The provisions of paragraph 1 shall not apply if the recipient of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply. - Israel i]

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Where by reason Of a special relationship between the payer ana the recipient or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of ea

due regard being had to the other this Convention.

Article 12

ROYALTIES

Royalties arising ina Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if such resident is the beneficial owner of the royalties.

The tern “royalties" as used in this article means payment of any kind received as a consideration for the use of, or the Fright to use, any copyright of literary, artistic or scientific work (including cinematograph films, video recordings and films or tapes for radio or television broadcasting) any patent, trade mark, design or model, plan, software, secret formula or process, or for the use of or the right to use industrial, commercial, or scientific equipment, or for information concerning industrial commercial or scientific experience.

The provisions of paragraph 1 shall not apply if the recipient of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base Situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

Where, by reason of a Special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In euch case, the excess part of the payments shall remain Israel

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taxable according to the laws of each Contracting State, due regard being paid toa the other provisions of this Convention.

Article 13

CAPITAL GAINS

Capital gains from the alienation of inmovable property, as defined in paragraph 2 of Article 6, or from the alienation of shares not dealt in on a stock exchange being shares in a company of which the assets consist principally of such property, may be taxed in the Contracting State in which such property is situated.

Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment {alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

Gains from the alienation of ships or aircraft or road-transport vehicles operated in international traffic, or movable property pertaining to the operation of such ships, or aircraft, or road-transport vehicles shall be taxable only in the Contracting State in which the place of effective management and policy making of the enterprise is situated.

Gains from the alienation of any property other than that referred to in paragraphs 1, 2 and 3 shall be taxabie only in the Contracting State of which the alienator is a resident.

Article 14

INDEPENDENT PERSONAL SERVICES

Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless he has a fixed pase regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as

well as the independent activities of physicians,

dentists, lavyers,

engineer accountants. g ers, architects and

Article 15

DEPENDENT PERSONAL SERVICES

Ll. Subject to the provisions of Articles 16, 18, 19 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an enployment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercise@ in the other Contracting State shall be taxable only in the first-mentioned State if:-

a) the recipient 1s present in the other State for a period or periods not exceeding in the

aggregate 183 days in the fiscal year concerned, and

Dd) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

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Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship, aircraft, or road-transport vehicle operated in international traffic, may be taxed in the Contracting State in which the place of effective management and policy making of the enterprise is situated.

Article 16

DIRECTORS’ FEES Directors‘ fees and other similar payments derived by a resident of a Contracting State in his capacity as a4 member of the board of directors or any similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17

ARTISTS AND ATHLETES

les 14 anda l. Notwithstanding the provisions of artic 15, income derived by a resident of a Contracting State ag an entertainer, such as a theatre, motion - Israel

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picture, radio or te musician, or as an athletes activities as such exercised Contracting State, may be State.

artists, or a from his personal in the other taxed in that other

Where income in respect of personal activities exercised Dy an entertainer or an athlete in his capacity aS such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of articles 7 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised, if that person is directly or indirectly, wholly or partly owned by the entertainer or athlete, unless the competent authorities of the Contracting State agree that such ownership is insignificant.

Notwithstanding the provisions of paragraphs 1 and 2 of this Article, income mentioned in this Article shall be exempt from tax in the Contracting State in which the activity of the entertainer or athlete is exercised provided that this activity is supported in a considerable part out of State funds of that State or of the other State or the activity is exercised under a Cultural Agreement or arrangement between the Contracting States.

Article 18

PENSIONS

eSubject to the provisions of paragraph 2 of Article 19,

= pensions and other similar remuneration paid to a

2resident of a Contracting State in consideration of past employment shall be taxable only in that State.

Article 19 GOVERNMENT SERVICE

a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in

that State.

bd} However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

(i) is a national of that State; or (11) did not become resident of that State

solely for the purpose of rendering the services.

a) Any pension paid by, or out of funds created

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by. a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or

subdivision or authority shall b that State. ¥ e taxable only in

b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of and a national of that State.

3. The provisions of article 15, 16 and 18 shall apply to remuneration and pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 20

STUDENTS

Payments which a student or an apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first~mentioned State solely for the purpose Of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

Articie 21 TEACHERS

Remuneration received for education or scientific research by an individual who is or was immediatley before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State for the purpose of scientific research or for teaching at an educational institution shall be exempt from tax in the first-mentioned State. This Article shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons.

Article 22

OTHER INCOME

1. Items of income of a& resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of article 6, if the recipient of such income, being a resideit of a Contracting state, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in

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that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent soot enment or fixed base. In such case the provisions of Article 7 or ar é

may De, shall appig. ticle 14, as the case

Article 23

ELIMINATION OF DOUBLE TAXATION

The double taxation shall be eliminated as follows:

a)

b)

In the Republic of Hungary;

(1) Where a resident of the Republic of Hungary derives income which, in accordance with the provisions of this Convention may be taxed in the State of Israel, the Republic of Hungary shall, subject to the provisions of

subparagraphs (ii) and (iii). exempt such income from tax.

{i11) Where a resident of the Republic of Hungary derives items of income which, in accordance with the provisions of Article 10, may be taxed in the State of Israel, the Republic of Hungary shall allow as a deduction from the tax on the income of that resident an amount equal to the tax paid in the State of Israel. Such deduction shall not, however, exceed that part of the tax, as computed before the deduction is given, which is attributable to such items of income derived from the State of Israel.

(i11)Where in accordance with any provision of the Convention income derived by a resident of the Republic of Hungary is exempt from tax in the Republic of Hungary the republic of Hungary may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted incone.

In the State of Israel where a resident of the State of Israel derives income which, in accordance with the provisions of the Convention, may be taxed in Hungary. Israel shall allow as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Hungary; such deduction shall not, hovwever, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income which may be taxed in

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Article 24

NON~DISCRIMINATION

Nationals of a Contractin State sha

subjected in the other Contracting State to. any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not

residents of one or both of the Contracting States.

The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other state than the taxation

levied on enterprises of that other State carrying on the same activities.

Except where the provisions of Article 9, paragraph 7 of Article 11, or paragraph 4 of Article 12, apply, interest, royalties and other adisbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

An enterprise of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.

The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

The provisions of this Article shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. - Israel

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Article 25

LIMITATION OF BENEFITS

tf one of the Contracting States has reason to believe that a person who is a resident of a Contracting State js not entitled to the benefits of this Convention pecause the existence, structure or activity of that person improperly reduces the tax payable, through the application of this Convention where the Convention yould not otherwise apply, the competent authority of that Contracting State may request the competent authority of the other Contracting State to deny the penefits of this Convention to that person and those penefits may be denied by mutual agreement.

Article 26 MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or poth of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may. irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention.

2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not iself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Convention. Any agreement reached shail be implemented notwithstanding any time limits in the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any aifficulties or doubts arising as to the interpretation or application of the Convention. They may also consuit together for the elimination of double taxation in cases not provided for in the convention.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of Israel

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Nothing in this Convention privileges of members of missions under the gene or under the provisions of spec

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representatives of the compet the Contracting States. petent authorities of

Article 27

EXCHANGE OF INFORMATION

The competent authorities of the

States shall exchange such information as ic necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation therunder is not contrary to the Convention. The exchange of information is not restricted by aArticie 1. any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of the State or at the request of the other Contracting State giving the information and shali be disclosed oniy to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State;

b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other

Contracting State;

c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process or information, the disclosure of which would be contrary to public policy (ordre public).

Article 28

MEMBERS OF DIPLOMATIC OR CONSULAR MISSIONS

shall affect the fiscal diplomatic or consular ral ruies cof international lav ial agreements.

• Israel

• Ministry Of Foreign Affairs

Treaties Devartment

-20- Article 29

ENTRY INTO FORCE

l. The Contracting States shall notif eac that the constitutional y ne entry

requirements for the entr vate force of this Convention have Deen complied v :

2. This Convention Shall enter into force sixty days after the date of the latter of the notifications

referred to in paragraph 1 and its provisions shall apply:

4. in respect of taxes withheld at source, to amounts of income derived on or after 1 January in the calendar year next following

the year in which the Convention enters into force;

b) in respect of other taxes on income, to such _taxes chargeable for any taxable year beginning on or after 1 January in the Calendar year next following the year in which the Convention enters into force.

Article 30 TERMINATION

his Convention shall remain in force until terminatea Y one of the Contracting States. Either Contracting tate may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year following after the period of five years from the date on which the Convention enters into force. In such event the Convention shall cease to have effect:

a) in respect of taxes withheld at source, to anounts of income derived on or after 1 January in the

calendar year next follving the year in which the notice is given;

b) in respect of other taxes on income, to such taxes chargeable for any taxable year beginning on or after 1 January in the calendar year next following the year in which the notice is given. - Israel

• Min

Treaties Department

-21-

In witness whereof the undersigned, duly authorized hereto,

have Signed this Convention.

Done in duplicate at Jerusalen this day of hay 1991 which corresponds to the 1 xs}. day of Sivaw S751, in the English language.

FOR THE GOVERNMENT OF OF SHE STATE OF ISRAEL

FOR THE GOVERNMENT OF THE REPUBLIC OF HUNGARY