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FREE: How the new UK-Hungary DTA will improve certainty

The UK and Hungary have signed a comprehensive agreement for the avoidance of double taxation that will provide increased cross-border certainty between the two countries.

The treaty was signed on Wednesday 7 September and will enter into force once both countries have finalised the necessary parliamentary procedures.

A previous treaty had been signed in 1977.

The treaty covers taxes on income and on capital gains imposed on behalf of a contracting state, as well as providing clarification over issues of residency and permanent establishment.

Greg Dorey, British ambassador to Hungary, said the agreement will increase confidence in cross-border trade.

“Since bilateral trade has reached record levels and the citizens of our two countries increasingly contribute to both of our economies, this is good news.”

“It also helps contribute towards a stable business environment which can foster foreign investment. And it protects governments’ taxing rights and against attempts to avoid or evade tax liability,” he added. “So this is an important step in making sure that our citizens pay their fair share towards the costs of our governments and the important services they provide.”

The treaty comes at a time when the UK government has been seeking stakeholder comment on legislation that was intended to combat tax avoidance schemes which exploit DTA provisions. Last week the Treasury announced it is cancelling that consultation. The cancellation is welcome, said one adviser.

“The cancellation of the consultation on double tax treaties, launched in summer, and confirmation that the government will adopt a more targeted approach in future, will be greeted with a sigh of relief,” said Chris Sanger, head of global tax policy at Ernst & Young. “Had the government’s proposals gone ahead, UK competitiveness would have been eroded. It would have hit commercial transactions by restricting access to funding markets and hiked up costs of investing into the UK.”

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