The first agreement on the avoidance of double taxation and
prevention of fiscal evasion between Hungary and Iran entered into
force on 1 January 2017. Iran has concluded more than 40 tax
treaties but very few of them provide for zero withholding tax
rates on rental income and consulting fees. Thus, this specific tax
treaty can be a good platform for multinationals looking to invest
The agreement is applicable to any individual and company liable
to tax under the laws of Iran or Hungary.
If any company is resident in both contracting states, it shall
be taxed only in the state where the effective management is
The key provisions of this agreement are discussed below.
Income from any shares or rights such as dividends shall be
taxable in the residency state of the beneficial owner.
Income from royalty and interest rates realized in the other
country will be subject to a 5% withholding tax in the country of
residence of the beneficiary. The royalty income includes any
payments received for the right of use or a consideration for the
use of any copyright such as patent, trademark, design or model,
plan, literary, scientific work or formula, cinematograph films and
for any information about experience in industry, trade, market or
science. The interest income includes sale on credit of any
merchandise or equipment, credit or loan of any kind granted by a
bank or a governmental authority.
Income from consultancy and lease in other country shall be
taxable only in the state of residence of the beneficiary.
Capital gains derived by a resident of one country from the
alienation of immovable assets situated in the other country are
taxable in that other country as are movable assets of a permanent
establishment held by a company in the other country.
A company or movable property relating to the operation of
ships, aircraft or road and railway vehicles in the other country
shall be taxable only in that country. Additionally, if a resident
of one country has more than 50% of shares or other comparable
corporate rights of immovable assets located in the other country,
directly or indirectly, those shall be taxed only in that
Lastly, it is worth noting that any construction project with
duration exceeding six months in the other country, may rise to a
permanent establishment according to the tax treaty.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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