Convention, with Exchange of Notes, Signed at Washington February 12, 1979; 　　Ratification Advised by the Senate of the United States of America July 9, 1979; 　　Ratified by the President of the United States of America August 7, 1979; 　　Ratifications Exchanged at Budapest September 18, 1979; 　　Proclaimed by the President of the United States of America November 28, 1979; Entered into Force September 18, 1979. GENERAL EFFECTIVE DATE UNDER ARTICLE 25: 1 JANUARY 1980 TABLE OF ARTICLES Article 1----------------------------------Personal Scope Article 2----------------------------------Taxes Covered Article 3----------------------------------General Definitions Article 4----------------------------------Fiscal Domicile Article 5----------------------------------Permanent Establishment Article 6----------------------------------Income from Immovable Property (Real Property) Article 7----------------------------------Business Profits Article 8----------------------------------Shipping and Air Transport Article 9----------------------------------Dividends Article 10--------------------------------Interest Article 11--------------------------------Royalties Article 12--------------------------------Capital Gains Article 13--------------------------------Independent Personal Services Article 14--------------------------------Dependent Personal Services Article 15--------------------------------Pensions Article 16--------------------------------Government Services Article 17--------------------------------Teachers Article 18--------------------------------Students and Trainees Article 19--------------------------------All Other Income Article 20--------------------------------Relief from Double Taxation Article 21--------------------------------Non-discrimination Article 22--------------------------------Mutual Agreement Procedure Article 23--------------------------------Exchange of Information Article 24--------------------------------Effect of Convention on Diplomatic and Consular Officials, Domestic Laws, and Other Treaties Article 25--------------------------------Entry into Force Article 26--------------------------------Termination Letter of Submittal---------------------of 25 April, 1979 Letter of Transmittal-------------------of 9 May, 1979 Notes of Exchange---------------------of 12 February, 1979 The "Saving Clause"-------------------Paragraph 2 of Article 1 　　　　　　　　　　　　　　MESSAGE 　　　　　　　　　　　　　　　FROM 　　　　　　THE PRESIDENT OF THE UNITED STATES 　　　　　　　　　　　　　TRANSMITTING 　　THE CONVENTION BETWEEN THE GOVERNMENT OF THE 　　UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE 　　HUNGARIAN PEOPLE'S REPUBLIC FOR THE AVOIDANCE OF 　　DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO 　　TAXES ON INCOME, SIGNED AT WASHINGTON, FEBRUARY 12, 1979 　　　　　　　　　　　　LETTER OF SUBMITTAL 　　　　　　　　　　　　　　　　　　　　　　　　　DEPARTMENT OF STATE, 　　　　　　　　　　　　　　　　　　　　　　Washington, April 25, 1979. THE PRESIDENT, The White House. 　　THE PRESIDENT: I have the honor to transmit to you, with a view to its transmission to the Senate for advice and consent to ratification, a Convention between the Government of the United States of America and the Government of the Hungarian People's Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Washington, February 12, 1979. 　　This Convention is the first income tax convention to be negotiated between the United States and the Hungarian People's Republic. 　　The Convention clarifies the rules governing income tax jurisdiction and sets certain limits on the rights of each country to tax income derived within its territory by residents of the other country. For example, the treaty provides for exemption at source of interest and royalties derived by a resident of the other country. It also limits the tax on dividends paid to a resident of the other country to 15 percent in general and to 5 percent on dividends paid to a parent corporation. Employees of United States companies will generally not become subject to tax by Hungary unless they remain there more than six months of the year, and employees of Hungarian enterprises will be exempt from United States income tax under the same conditions. 　　The Convention also ensures nondiscriminatory taxation and provides for exchange of information and administrative cooperation between the tax authorities of the two countries to avoid double taxation and prevent fiscal evasion with respect to taxes on income. An accompanying exchange of notes clarifies certain technical points and provides for adjustments by the tax authorities in cases where transactions between related parties are at other than arm's length prices, and provides for assistance in collecting additional tax when reductions in tax under the Convention benefit persons not entitled to the benefits of the Convention. 　　The Convention will enter into force as soon as the parties have notified each other that their respective constitutional requirements have been met. Its provisions will have effect for withholding taxes for amounts paid or credited on or after the first day of the second month next following the entry into force of the Convention, and for other taxes, for taxable periods beginning on or after the first day of January next following the date on which the Convention enters into force. 　　This Convention will be in force for at least five years and will remain in force thereafter unless terminated by one of the parties. After five years, either party may terminate the Convention by giving at least six months' notice through diplomatic channels. In such event, the Convention would cease to have effect as of January 1 following such notification. 　　A technical memorandum explaining the provisions of the Convention will be prepared by the Department of the Treasury and submitted to the Senate Committee on Foreign Relations. 　　The Department of the Treasury with the cooperation of the Department of State, was primarily responsible for the negotiation of this Convention. It has the approval of both Departments. Respectfully submitted, CYRUS VANCE. LETTER OF TRANSMITTAL THE WHITE HOUSE, May 9, 1979. To the Senate of the United States: 　　I transmit, herewith, for Senate advice and consent to ratification, the Convention between the Government of the United States of America and the Government of the Hungarian People's Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Washington February 12, 1979. For the information of the Senate, I also transmit the report of the Department of State with respect to the Convention. 　　This Convention is the first income tax convention to be negotiated between the United States and the Hungarian People's Republic. It is intended to facilitate economic relations and the exchange of scholars between the two countries by removing tax obstacles to the flow of investment and the travel of persons. 　　The Convention follows closely the United States model income tax convention and the 1977 model convention of the Organization for Economic Cooperation and Development (OECD). It clarifies taxing rules reduces or waives the tax at source on investment income and income from limited business or employment activities, ensures nondiscriminatory taxation and provides for administrative cooperation between the tax authorities of the two countries to avoid double taxation and to prevent fiscal evasion with respect to taxes on income. An accompanying exchange of notes clarifies some technical points and includes some administrative provisions. 　　I recommend that the Senate give early and favorable consideration to the Convention and give advice and consent to its ratification. JIMMY CARTER. BY THE PRESIDENT OF THE UNITED STATES OF AMERICA A PROCLAMATION CONSIDERING THAT: 　　The Convention between the Government of the United States of America and the Government of the Hungarian People's Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was signed at Washington on February 12, 1979, together with a related exchange of notes, the texts of which are hereto annexed; The Senate of the United States of America by its resolution of July 9, 1979, two-thirds of the Senators present concurring therein, gave its advice and consent to ratification of the Convention and related exchange of notes; 　　The Convention and related exchange of notes were ratified by the President of the United States of America on August 7, 1979, in pursuance of the advice and consent of the Senate, and was approved on the part of the Hungarian People's Republic; 　　The parties notified one another at Budapest on September 18, 1979, that their respective constitutional requirements had been met, and accordingly the Convention, with related exchange of notes, entered into force on September 18, 1979, effective as specified in Article 25; 　　NOW, THEREFORE, I, Jimmy Carter, President of the United States of America, proclaim and make public the Convention with related exchange of notes, to the end that they be observed and fulfilled with good faith on and after September 18, 1979, by the United States of America and by the citizens of the United States of America and all other persons subject to the jurisdiction thereof. 　　IN TESTIMONY WHEREOF, I have signed this proclamation and caused the Seal of the United States of America to be affixed. 　　DONE at the city of Washington this twenty-eighth day of November in the year of our Lord one thousand nine hundred seventy-nine and of the Independence of the United States of America the two hundred fourth. By the President: (s) Jimmy Carter CYRUS VANCE Secretary of State