- 1
- The Netherlands, when imposing tax on its residents, may include in the basis upon which such taxes are imposed the items of income or capital which, according to the provisions of this Convention, may be taxed in the Hungarian People's Republic.
- 2
- However, where a resident of the Netherlands derives items of income or owns items of capital which according to Article 6, Article 7, paragraph 6 of Article 10, paragraph 4 of Article 11, paragraph 4 of Article 12, paragraphs 1 en 2 of Article 13, Article 14, paragraph 1 of Article 15, Article 16, paragraph 3 of Article 18, Article 19, paragraph 2 of Article 22 and paragraphs 1 and 2 of Article 23 of this Convention may be taxed in the Hungarian People's Republic and are included in the basis referred to in paragraph 1, the Netherlands shall exempt such items of income or capital by allowing a reduction of its tax. This reduction shall be computed in conformity with the provisions of Netherlands law for the avoidance of double taxation. For that purpose the said items of income or capital shall be deemed to be included in the total amount of the items of income or capital which are exempt from Netherlands tax under those provisions.
- 3
- Further, the Netherlands shall allow a deduction from the Netherlands tax so computed for the items of income which according to paragraph 2 of Article 10, paragraph 5 of Article 13, Article 17 and paragraph 2 of Article 18 of this Convention may be taxed in the Hungarian People's Republic to the extent that these items are included in the basis referred to in paragraph 1. The amount of this deduction shall be equal to the tax paid in the Hungarian People's Republic on these items of income, but shall not exceed the amount of the reduction which would be allowed if the items of income so included were the sole items of income which are exempt from Netherlands tax under the provisions of Netherlands law for the avoidance of double taxation. For the purposes of this paragraph, the taxes referred to in paragraphs 3 b) and 4 of Article 2, other than taxes on capital, shall be considered taxes on income.
- 4
- In the case of the Hungarian People's Republic double taxation shall be avoided as follows:
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- a)Where a resident of the Hungarian People's Republic derives income or owns capital which, in accordance with the provisions of the Convention may be taxed in the Netherlands, the Hungarian People's Republic shall, subject to the provisions of subparagraphs b) and c), exempt such income or capital from tax.
- b)Where a resident of the Hungarian People's Republic derives items of income which, in accordance with the provisions of Article 10, may be taxed in the Netherlands, the Hungarian People's Republic shall allow as a deduction from the tax on the income of that resident an amount equal to the tax paid in the Netherlands. 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 Netherlands.
- c)Where in accordance with any provision of the Convention income derived or capital owned by a resident of the Hungarian People's Republic is exempt from tax in the Hungarian People's Republic, the Hungarian People's Republic may nevertheless, in calculating the amount of tax on the remaining income or capital of such resident, take into account the exempted income or capital.
