The income tax treaty between Hungary and Kyrgyzstan entered into force on 18 September 2021. The treaty, signed 29 September 2020, is the first of its kind between the two countries.
The treaty covers Hungarian personal income tax and corporate tax and covers Kyrgyz tax on income and profits of legal persons and income tax on individuals.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel if the activities continue for a period or periods aggregating more than 6 months within any 12-month period.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Kyrgyzstan applies the credit method for the elimination of double taxation, while Hungary generally applies the exemption method. However, Hungary will allow a deduction (credit) in respect of tax paid in Kyrgyzstan in accordance with the provisions of Article 10 (Dividends), 11 (Interest), and 12 (Royalties).
Article 27 (Entitlement to Benefits) provides that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.
The treaty applies from 1 January 2022.