Convention between the IS and Hungary… Taxation of Income, February 4, 2010

CONVENTION

BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND THE GOVERNMENT OF THE REPUBLIC OF HUNGARY

FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE
PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME

The Government of the United States of America and the Government of the
Republic of Hungary, desiring to conclude a Convention for the avoidance of double
taxation and the prevention of fiscal evasion with respect to taxes on income, have
agreed as follows:

Article 1
GENERAL SCOPE

1. This Convention shall apply only to persons who are residents of one or both
of the Contracting States, except as otherwise provided in the Convention.

2. This Convention shall not restrict in any manner any benefit now or hereafter
accorded:

a) by the laws of either Contracting State; or

b) by any other agreement to which both of the Contracting States are
parties.

3. a) Notwithstanding the provisions of subparagraph b) of paragraph 2 of
this Article:
i) for purposes of paragraph 3 of Article XXII (Consultation) of
the General Agreement on Trade in Services, the Contracting States
agree that any question arising as to the interpretation or application of
this Convention and, in particular, whether a taxation measure is
within the scope of this Convention, shall be determined exclusively in
accordance with the provisions of Article 25 (Mutual Agreement
Procedure) of this Convention; and

ii) the provisions of Article XVII of the General Agreement on
Trade in Services shall not apply to a taxation measure unless the
competent authorities agree that the measure is not within the scope of
Article 24 (Non-Discrimination) of this Convention.

b) For the purposes of this paragraph, a "measure" is a law, regulation,
rule, procedure, decision, administrative action, or any similar provision or
action.

4. Except to the extent provided in paragraph 5, this Convention shall not affect
the taxation by a Contracting State of its residents (as determined under Article 4
(Resident)) and its citizens. Further, except to the extent provided in paragraph 5 and
notwithstanding the other provisions of this Convention, a former citizen or former
long-term resident of a Contracting State may, for the period of ten years following the
loss of such status, be taxed in accordance with the laws of that Contracting State.

5. The provisions of paragraph 4 shall not affect:

a) the benefits conferred by a Contracting State under paragraph 2 of
Article 9 (Associated Enterprises), paragraphs 1 b), 2, and 3 of Article 17
(Pensions and Income from Social Security) and Articles 23 (Relief From
Double Taxation), 24 (Non-Discrimination), and 25 (Mutual Agreement
Procedure); and

b) the benefits conferred by a Contracting State under Articles 18
(Government Service), 19 (Students and Trainees), 20 (Professors and
Teachers), and 27 (Members of Diplomatic Missions and Consular Posts),
upon individuals who are neither citizens of, nor have been admitted for
permanent residence in, that State.

6. An item of income, profit or gain derived through an entity that is fiscally
transparent under the laws of either Contracting State shall be considered to be derived
by a resident of a State to the extent that the item is treated for purposes of the taxation
law of such Contracting State as the income, profit or gain of a resident.

Article 2
TAXES COVERED

1. This Convention shall apply to taxes on income imposed on behalf of a
Contracting State irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income all taxes imposed on total income,
or on elements of income, including taxes on gains from the alienation of movable or
immovable property (real property), and taxes on the total amounts of wages or salaries
paid by enterprises, but excluding social security and unemployment taxes.

3. The existing taxes to which this Convention shall apply are:

a) in the case of Hungary:

i) the personal income tax;
ii) the corporate tax;

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iii) the surtax;

b) in the case of the United States: the Federal income taxes imposed by
the Internal Revenue Code (but excluding social security and unemployment
taxes), and the Federal excise taxes imposed with respect to private
foundations.

4. This Convention shall apply also to any identical or substantially similar taxes
that are imposed after the date of signature of the Convention in addition to, or in place
of, the existing taxes. The competent authorities of the Contracting States shall notify
each other of any significant changes that have been made in their taxation laws.

Article 3
GENERAL DEFINITIONS

1. For the purposes of this Convention, unless the context otherwise requires:

a) the term "person" includes an individual, an estate, a trust, a
partnership, a company, and any other body of persons;

b) the term "company" means any body corporate or any entity that is
treated as a body corporate for tax purposes;

c) the terms "enterprise of a Contracting State" and "enterprise of the
other Contracting State" mean respectively an enterprise carried on by a
resident of a Contracting State, and an enterprise carried on by a resident of
the other Contracting State; the terms also include an enterprise carried on by
a resident of a Contracting State through an entity that is treated as fiscally
transparent in that Contracting State;

d) the term "enterprise" applies to the carrying on of any business;

e) the term "business" includes the performance of professional services
and of other activities of an independent character;

f) the term "international traffic" means any transport by a ship or
aircraft, except when such transport is solely between places in a Contracting
State;

g) the term "competent authority" means:

i) in Hungary: the Minister of Finance or his authorized
representative; and

ii) in the United States: the Secretary of the Treasury or his
delegate;

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h) the term "Hungary" means the Republic of Hungary and, when used in
a geographical sense, it means the territory of the Republic of Hungary;

i) the term "United States" means the United States of America, and
includes the states thereof and the District of Columbia; such term also
includes the territorial sea thereof and the sea bed and subsoil of the
submarine areas adjacent to that territorial sea, over which the United States
exercises sovereign rights in accordance with international law; the term,
however, does not include Puerto Rico, the Virgin Islands, Guam or any other
United States possession or territory;

j) the term "national" of a Contracting State means:

i) any individual possessing the nationality of that State; and

ii) any legal person, partnership, association or other entity
deriving its status as such from the laws in force in that State;

k) the term "pension fund" means any person established in a Contracting
State that is:

i) generally exempt from income taxation in that State; and

ii) operated principally either:

A) to administer or provide pension or retirement
benefits; or

B) to earn income for the benefit of one or more persons
described in clause A); and

l) the terms "a Contracting State" and "the other Contracting State" mean
the United States or Hungary, as the context requires.

2. As regards the application of the Convention at any time by a Contracting
State any term not defined therein shall, unless the context otherwise requires, or the
competent authorities agree to a common meaning pursuant to the provisions of Article
25 (Mutual Agreement Procedure), have the meaning which it has at that time under the
law of that State for the purposes of the taxes to which the Convention applies, any
meaning under the applicable tax laws of that State prevailing over a meaning given to
the term under other laws of that State.

Article 4
RESIDENT

1. For the purposes of this Convention, the term "resident of a Contracting State"
means any person who, under the laws of that State, is liable to tax therein by reason of

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his domicile, residence, citizenship, place of management, place of incorporation, or
any other criterion of a similar nature, and also includes that State and any political
subdivision or local authority thereof. This term, however, does not include any person
who is liable to tax in that State in respect only of income from sources in that State or
of profits attributable to a permanent establishment in that State.

2. The term "resident of a Contracting State" includes:

a) a pension fund established in that State; and

b) an organization that is established and maintained in that State
exclusively for religious, charitable, scientific, artistic, cultural, or educational
purposes,

notwithstanding that all or part of its income or gains may be exempt from tax under
the domestic law of that State.

3. Where, by reason of the provisions of paragraph 1, an individual is a resident
of both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident only of the State in which he has a
permanent home available to him; if he has a permanent home available to
him in both States, he shall be deemed to be a resident only of the State with
which his personal and economic relations are closer (center of vital interests);

b) if the State in which he has his center of vital interests cannot be
determined, or if he does not have a permanent home available to him in
either State, he shall be deemed to be a resident only of the State in which he
has an habitual abode;

c) if he has an habitual abode in both States or in neither of them, he shall
be deemed to be a resident only of the State of which he is a national;

d) if he is a national of both States or of neither of them, the competent
authorities of the Contracting States shall endeavor to settle the question by
mutual agreement.

4. Where by reason of the provisions of paragraphs 1 and 2 of this Article a
person other than an individual is a resident of both Contracting States, the competent
authorities of the Contracting States shall endeavor to determine by mutual agreement
the mode of application of this Convention to that person. If the competent authorities
do not reach such an agreement, that person shall not be entitled to claim any benefit
provided by this Convention, except for those provided by Article 24 (Non-
Discrimination) and Article 25 (Mutual Agreement Procedure).

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Article 5
PERMANENT ESTABLISHMENT

1. For the purposes of this Convention, the term "permanent establishment"
means a fixed place of business through which the business of an enterprise is wholly
or partly carried on.

2. The term "permanent establishment" includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop; and

f) a mine, an oil or gas well, a quarry, or any other place of extraction of
natural resources.

3. A building site or construction or installation project, or an installation or
drilling rig or ship used for the exploration of natural resources, constitutes a permanent
establishment only if it lasts, or the exploration activity continues for more than twelve
months.

4. Notwithstanding the preceding provisions of this Article, the term "permanent
establishment" shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display or
delivery of goods or merchandise belonging to the enterprise;

b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery;

c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;

d) the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or of collecting information, for the
enterprise;

e) the maintenance of a fixed place of business solely for the purpose of
carrying on, for the enterprise, any other activity of a preparatory or auxiliary
character;

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f) the maintenance of a fixed place of business solely for any
combination of the activities mentioned in subparagraphs a) through e),
provided that the overall activity of the fixed place of business resulting from
this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other
than an agent of an independent status to whom paragraph 6 applies – is acting on
behalf of an enterprise and has and habitually exercises in a Contracting State an
authority to conclude contracts in the name of the enterprise, that enterprise shall be
deemed to have a permanent establishment in that State in respect of any activities that
the person undertakes for the enterprise, unless the activities of such person are limited
to those mentioned in paragraph 4 that, if exercised through a fixed place of business,
would not make this fixed place of business a permanent establishment under the
provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent establishment in a
Contracting State merely because it carries on business in that State through a broker,
general commission agent, or any other agent of an independent status, provided that
such persons are acting in the ordinary course of their business.

7. The fact that a company that is a resident of a Contracting State controls or is
controlled by a company that is a resident of the other Contracting State, or that carries
on business in that other State (whether through a permanent establishment or
otherwise), shall not be taken into account in determining whether either company has a
permanent establishment in that other State.

Article 6
INCOME FROM IMMOVABLE PROPERTY (REAL PROPERTY)

1. Income derived by a resident of a Contracting State from immovable property
(real property), including income from agriculture or forestry, situated in the other
Contracting State may be taxed in that other State.

2. The term "immovable property (real property)" shall have the meaning which
it has under the law of the Contracting State in which the property in question is
situated. The term shall in any case include property accessory to immovable property
(real property), including livestock and equipment used in agriculture and forestry,
rights to which the provisions of general law respecting landed property apply, usufruct
of immovable property (real property) and rights to variable or fixed payments as
consideration for the working of, or the right to work, mineral deposits, sources and
other natural resources. Ships, boats and aircraft shall not be regarded as immovable
property (real property).

3. The provisions of paragraph 1 shall apply to income derived from the direct
use, letting, or use in any other form of immovable property (real property).

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4. The provisions of paragraphs 1 and 3 shall also apply to the income from
immovable property (real property) of an enterprise.

5. A resident of a Contracting State who is liable to tax in the other Contracting
State on a gross basis on income from immovable property (real property) situated in
the other Contracting State may elect for any taxable year to compute the tax on such
income on a net basis as if such income were business profits attributable to a
permanent establishment in such other State. Any such election shall be binding for the
taxable year of the election and all subsequent taxable years unless the competent
authority of the Contracting State in which the property is situated agrees to terminate
the election.

Article 7
BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that
State unless the enterprise carries on business in the other Contracting State through a
permanent establishment situated therein. If the enterprise carries on business as
aforesaid, the profits of the enterprise may be taxed in the other State but only so much
of them as are attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting
State carries on business in the other Contracting State through a permanent
establishment situated therein, there shall in each Contracting State be attributed to that
permanent establishment the profits that it might be expected to make if it were a
distinct and independent enterprise engaged in the same or similar activities under the
same or similar conditions and dealing wholly independently with the enterprise of
which it is a permanent establishment. For this purpose, the profits to be attributed to
the permanent establishment shall include only the profits derived from the assets used,
risks assumed and activities performed by the permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed
as deductions expenses that are incurred for the purposes of the permanent establish-
ment, including executive and general administrative expenses so incurred, whether in
the State in which the permanent establishment is situated or elsewhere.

4. No profits shall be attributed to a permanent establishment by reason of the
mere purchase by that permanent establishment of goods or merchandise for the
enterprise.

5. For the purposes of the preceding paragraphs, the profits to be attributed to the
permanent establishment shall be determined by the same method year by year unless
there is good and sufficient reason to the contrary.

6. Where profits include items of income that are dealt with separately in other
Articles of the Convention, then the provisions of those Articles shall not be affected by
the provisions of this Article.

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7. In applying this Article, paragraph 6 of Article 10 (Dividends), paragraph 4 of
Article 11 (Interest), paragraph 3 of Article 12 (Royalties), paragraph 5 of Article 13
(Gains) and paragraph 2 of Article 21 (Other Income), any income or gain attributable
to a permanent establishment during its existence is taxable in the Contracting State
where such permanent establishment is situated even if the payments are deferred until
such permanent establishment has ceased to exist.

Article 8
SHIPPING AND AIR TRANSPORT

1. Profits of an enterprise of a Contracting State from the operation of ships or
aircraft in international traffic shall be taxable only in that State.

2. For purposes of this Article, profits from the operation of ships or aircraft
include, but are not limited to:

a) profits from the rental of ships or aircraft on a full (time or voyage)
basis;

b) profits from the rental on a bareboat basis of ships or aircraft if the
rental income is incidental to profits from the operation of ships or aircraft in
international traffic; and

c) profits from the rental on a bareboat basis of ships or aircraft if such
ships or aircraft are operated in international traffic by the lessee.

Profits derived by an enterprise from the inland transport of property or passengers
within either Contracting State shall be treated as profits from the operation of ships or
aircraft in international traffic if such transport is undertaken as part of international
traffic.

3. Profits of an enterprise of a Contracting State from the use, maintenance, or
rental of containers (including trailers, barges, and related equipment for the transport
of containers) shall be taxable only in that Contracting State, except to the extent that
those containers are used for transport solely between places within the other
Contracting State.

4. The provisions of paragraphs 1 and 3 shall also apply to profits from
participation in a pool, a joint business, or an international operating agency.

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Article 9
ASSOCIATED ENTERPRISES

1. Where:

a) an enterprise of a Contracting State participates directly or indirectly in
the management, control or capital of an enterprise of the other Contracting
State; or

b) the same persons participate directly or indirectly in the management,
control, or capital of an enterprise of a Contracting State and an enterprise of
the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their
commercial or financial relations that differ from those that would be made between
independent enterprises, then any profits that, but for those conditions, would have
accrued to one of the enterprises, but by reason of those conditions have not so accrued,
may be included in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State,
and taxes accordingly, profits on which an enterprise of the other Contracting State has
been charged to tax in that other State, and the other Contracting State agrees that the
profits so included are profits that would have accrued to the enterprise of the
first-mentioned State if the conditions made between the two enterprises had been those
that would have been made between independent enterprises, then that other State shall
make an appropriate adjustment to the amount of the tax charged therein on those
profits. In determining such adjustment, due regard shall be had to the other provisions
of this Convention and the competent authorities of the Contracting States shall if
necessary consult each other.

Article 10
DIVIDENDS

1. Dividends paid by a company that is a resident of a Contracting State to a
resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which
the company paying the dividends is a resident and according to the laws of that State,
but if the dividends are beneficially owned by a resident of the other Contracting State,
except as otherwise provided, the tax so charged shall not exceed:

a) 5 percent of the gross amount of the dividends if the beneficial owner
is a company that owns directly at least 10 percent of the voting stock of the
company paying the dividends;

b) 15 percent of the gross amount of the dividends in all other cases.

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This paragraph shall not affect the taxation of the company in respect of the profits out
of which the dividends are paid.

3. Notwithstanding paragraph 2, dividends shall not be taxed in the Contracting
State of which the company paying the dividends is a resident if:

a) the beneficial owner of the dividends is a pension fund that is a
resident of the other Contracting State; and

b) such dividends are not derived from the carrying on of a trade or
business by the pension fund or through an associated enterprise.

4. a) Subparagraph a) of paragraph 2 shall not apply in the case of dividends
paid by a U.S. Regulated Investment Company (RIC) or a U.S. Real Estate
Investment Trust (REIT). In the case of dividends paid by a RIC,
subparagraph b) of paragraph 2 and paragraph 3 shall apply. In the case of
dividends paid by a REIT, subparagraph b) of paragraph 2 and paragraph 3
shall apply only if:

i) the beneficial owner of the dividends is an individual or pension
fund, in either case holding an interest of not more than 10 percent in
the REIT;

ii) the dividends are paid with respect to a class of stock that is
publicly traded and the beneficial owner of the dividends is a person
holding an interest of not more than 5 percent of any class of the
REIT’s stock; or

iii) the beneficial owner of the dividends is a person holding an
interest of not more than 10 percent in the REIT and the REIT is
diversified.

b) For purposes of this paragraph, a REIT shall be "diversified" if the
value of no single interest in real property exceeds 10 percent of its total
interests in real property. For the purposes of this rule, foreclosure property
shall not be considered an interest in real property. Where a REIT holds an
interest in a partnership, it shall be treated as owning directly a proportion of
the partnership's interests in real property corresponding to its interest in the
partnership.

c) The rules of this paragraph shall also apply to dividends paid by
companies resident in Hungary that are similar to the U.S. companies referred
to in this paragraph.

5. For purposes of this Article, the term "dividends" means income from shares
or other rights, not being debt-claims, participating in profits, as well as income that is
subjected to the same taxation treatment as income from shares by the laws of the State
of which the company making the distribution is a resident.

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6. The provisions of paragraphs 1 through 4 shall not apply if the beneficial
owner of the dividends, being a resident of a Contracting State, carries on business in
the other Contracting State, of which the payer is a resident, through a permanent
establishment situated therein, and the holding in respect of which the dividends are
paid is effectively connected with such permanent establishment. In such case the
provisions of Article 7 (Business Profits) shall apply.

7. A Contracting State may not impose any tax on dividends paid by a resident of
the other State, except insofar as the dividends are paid to a resident of the first-
mentioned State or the dividends are attributable to a permanent establishment, nor may
it impose tax on a corporation's undistributed profits, except as provided in paragraph 8,
even if the dividends paid or the undistributed profits consist wholly or partly of profits
or income arising in that State.

8. a) A company that is a resident of one of the States and that has a
permanent establishment in the other State or that is subject to tax in the other
State on a net basis on its income that may be taxed in the other State under
Article 6 (Income from Immovable Property (Real Property)) or under
paragraphs 1 or 4 of Article 13 (Gains) may be subject in that other State to a
tax in addition to the tax allowable under the other provisions of this
Convention.

b) Such tax, however, may be imposed:

i) on only the portion of the business profits of the company
attributable to the permanent establishment and the portion of the
income referred to in subparagraph a) that is subject to tax under
Article 6 or under paragraphs 1 or 4 of Article 13 that, in the case of
the United States, represents the dividend equivalent amount of such
profits or income and, in the case of Hungary, is an amount that is
analogous to the dividend equivalent amount; and

ii) at a rate not in excess of the rate specified in paragraph 2 a).

Article 11
INTEREST

1. Interest arising in a Contracting State and beneficially owned by a resident of
the other Contracting State may be taxed only in that other State.

2. Notwithstanding the provisions of paragraph 1:

a) interest arising in Hungary that is determined with reference to
receipts, sales, income, profits or other cash flow of the debtor or a related
person, to any change in the value of any property of the debtor or a related
person or to any dividend, partnership distribution or similar payment made

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by the debtor or a related person may be taxed in Hungary, and according to
the laws of Hungary, but if the beneficial owner is a resident of the United
States, the interest may be taxed at a rate not exceeding 15 percent of the gross
amount of the interest;

b) interest arising in the United States that is contingent interest of a type
that does not qualify as portfolio interest under United States law may be
taxed in the United States but, if the beneficial owner of the interest is a
resident of Hungary, the interest may be taxed at a rate not exceeding 15
percent of the gross amount of the interest; and

c) interest that is an excess inclusion with respect to a residual interest in
a real estate mortgage investment conduit may be taxed by each State in
accordance with its domestic law.

3. The term "interest" as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage, and whether or not carrying a right to
participate in the debtor's profits, and in particular, income from government securities
and income from bonds or debentures, including premiums or prizes attaching to such
securities, bonds or debentures, and all other income that is subjected to the same
taxation treatment as income from money lent by the taxation law of the Contracting
State in which the income arises. Income dealt with in Article 10 (Dividends) and
penalty charges for late payment shall not be regarded as interest for the purposes of
this Convention.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of
the interest, being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent establishment situat-
ed therein, and the debt-claim in respect of which the interest is paid is effectively
connected with such permanent establishment. In such case the provisions of Article 7
(Business Profits) shall apply.

5. Where, by reason of a special relationship between the payer and the
beneficial owner or between both of them and some other person, the amount of the
interest, having regard to the debt-claim for which it is paid, exceeds the amount which
would have been agreed upon by the payer and the beneficial owner in the absence of
such relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In such case the excess part of the payments shall remain taxable according to
the laws of each State, due regard being had to the other provisions of this Convention.

Article 12
ROYALTIES

1. Royalties arising in a Contracting State and beneficially owned by a resident
of the other Contracting State may be taxed only in that other State.

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2. The term "royalties" as used in this Article means:

a) payments of any kind received as a consideration for the use of, or the
right to use, any copyright of literary, artistic, scientific or other work
(including cinematographic films), any patent, trademark, design or model,
plan, secret formula or process, or for information concerning industrial,
commercial or scientific experience; and

b) gains derived from the alienation of any property described in
subparagraph a), to the extent that such gain is contingent on the productivity,
use, or disposition of the property.

3. The provisions of paragraph 1 shall not apply if the beneficial owner of the
royalties, being a resident of a Contracting State, carries on business in the other
Contracting State in which the royalties arise through a permanent establishment
situated therein and the right or property in respect of which the royalties are paid is
effectively connected with such permanent establishment. In such case the provisions
of Article 7 (Business Profits) shall apply.

4. Where, by reason of a special relationship between the payer and the
beneficial owner or between both of them and some other person, the amount of the
royalties, having regard to the use, right, or information for which they are paid,
exceeds the amount which would have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the provisions of this Article shall
apply only to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each Contracting State, due regard being
had to the other provisions of the Convention.

Article 13
CAPITAL GAINS

1. Gains derived by a resident of a Contracting State that are attributable to the
alienation of immovable property (real property) situated in the other Contracting State
may be taxed in that other State.

2. For the purposes of the application of this Article by the United States, the
term "immovable property (real property) situated in the other Contracting State" shall
include:

a) immovable property (real property) referred to in Article 6 (Income
from Immovable Property (Real Property)); and

b) a United States real property interest.

3. For the purposes of the application of this Article by Hungary, the term
"immovable property (real property) situated in the other Contracting State" shall
include immovable property (real property) referred to in Article 6.

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4. Gains derived by a resident of a Contracting State from the alienation of
shares or comparable interests deriving more than 50 percent of their value directly or
indirectly from immovable property (real property) situated in Hungary may be taxed in
Hungary.

5. Gains, other than those dealt with in paragraph 4 of this Article, from the
alienation of movable property forming part of the business property of a permanent
establishment that an enterprise of a Contracting State has in the other Contracting
State, including such gains from the alienation of such a permanent establishment
(alone or with the whole enterprise), may be taxed in that other State.

6. Gains derived by an enterprise of a Contracting State from the alienation of
ships or aircraft operated in international traffic or movable property pertaining to the
operation of such ships or aircraft shall be taxable only in that State.

7. Gains derived by an enterprise of a Contracting State from the alienation of
containers (including trailers, barges and related equipment for the transport of
containers) used for the transport of goods or merchandise shall be taxable only in that
State, unless those containers are used for transport solely between places within the
other Contracting State.

8. Gains from the alienation of any property other than property referred to in
paragraphs 1 through 7 shall be taxable only in the Contracting State of which the
alienator is a resident.

9. Where an individual, upon ceasing to be a resident of one of the Contracting
States, is treated under the taxation law of that State as having alienated any property
for its fair market value and is taxed in that State by reason thereof, the individual may
elect to be treated for purposes of taxation in the other Contracting State as if the
individual had, immediately before ceasing to be a resident of the first-mentioned State,
alienated and reacquired such property for an amount equal to its fair market value at
such time.

Article 14
INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 15 (Directors' Fees), 17 (Pensions and
Income from Social Security), 18 (Government Service), 19 (Students and Trainees)
and 20 (Professors and Teachers), salaries, wages, and other similar remuneration
derived by a resident of a Contracting State in respect of an employment shall be
taxable only in that State unless the employment is exercised in the other Contracting
State. If the employment is so exercised, such remuneration as is derived therefrom
may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the other
Contracting State shall be taxable only in the first-mentioned State if:

15

a) the recipient is present in the other State for a period or periods not
exceeding in the aggregate 183 days in any twelve month period commencing
or ending in the tax year concerned; and

b) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the other State; and

c) the remuneration is not borne by a permanent establishment which the
employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration
described in paragraph 1 that is derived by a resident of a Contracting State in respect
of an employment exercised aboard a ship or aircraft operated in international traffic as
a member of the regular complement of the ship or aircraft shall be taxable only in that
State.

Article 15
DIRECTORS' FEES

Directors' fees and other compensation derived by a resident of a Contracting
State in his capacity as a member of the board of directors of a company that is a
resident of the other Contracting State may be taxed in that other Contracting State.

Article 16
ENTERTAINERS AND SPORTSMEN

1. Income derived by a resident of a Contracting State as an entertainer, such as a
theater, motion picture, radio, or television artiste, or a musician, or as a sportsman,
from his personal activities as such exercised in the other Contracting State, which
income would be exempt from tax in that other Contracting State under the provisions
of Articles 7 (Business Profits) and 14 (Income from Employment) may be taxed in that
other State, except where the amount of the gross receipts derived by such entertainer
or sportsman, including expenses reimbursed to him or borne on his behalf, from such
activities does not exceed twenty thousand United States dollars ($20,000) or its
equivalent in Hungarian Forints for the tax year of the payment.

2. Where income in respect of activities exercised by an entertainer or a
sportsman in his capacity as such accrues not to the entertainer or sportsman himself
but to another person, that income, notwithstanding the provisions of Article 7 or 14,
may be taxed in the Contracting State in which the activities of the entertainer or
sportsman are exercised unless the contract pursuant to which the personal activities are
performed allows that other person to designate the individual who is to perform the
personal activities.

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Article 17
PENSIONS AND INCOME FROM SOCIAL SECURITY

1. a) Pensions and other similar remuneration beneficially owned by a
resident of a Contracting State shall be taxable only in that State.

b) Notwithstanding subparagraph a), the amount of any such pension or
remuneration arising in a Contracting State that, when received, would be
exempt from taxation in that State if the beneficial owner were a resident
thereof shall be exempt from taxation in the Contracting State of which the
beneficial owner is a resident.

2. Notwithstanding the provisions of paragraph 1:

a) payments made by the United States under provisions of the social
security or similar legislation of the United States to a resident of Hungary
shall be taxable only in the United States; and

b) payments made by Hungary under the mandatory pension scheme of
Hungary to a resident or citizen of the United States shall be taxable only in
Hungary.

3. Where an individual who is a resident of one of the States is a member or
beneficiary of, or participant in, a pension fund that is a resident of the other State,
income earned by the pension fund may be taxed as income of that individual only
when, and, subject to the provisions of paragraph 1, to the extent that, it is paid to, or
for the benefit of, that individual from the pension fund (and not transferred to another
pension fund in that other State).

Article 18
GOVERNMENT SERVICE

1. Notwithstanding the provisions of Articles 14 (Income from Employment), 15
(Directors’ Fees), 16 (Entertainers and Sportsmen), 19 (Students and Trainees) and 20
(Professors and Teachers):

a) Salaries, wages and other remuneration, other than a pension, paid by a
Contracting State or a political subdivision or a local authority thereof to an
individual in respect of services rendered to that State, or subdivision or local
authority shall, subject to the provisions of subparagraph b), be taxable only in
that State;

b) such remuneration, however, shall be taxable only in the other
Contracting State if the services are rendered in that State and the individual is
a resident of that State who:

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i) is a national of that State; or

ii) did not become a resident of that State solely for the purpose of
rendering the services.

2. Notwithstanding the provisions of paragraph 1 of Article 17 (Pensions and
Income from Social Security):

a) any pension and other similar remuneration paid by, or out of funds
created by, a Contracting State or a political subdivision or a local authority
thereof to an individual in respect of services rendered to that State or
subdivision or authority (other than a payment to which paragraph 2 of Article
17 applies) shall, subject to the provisions of subparagraph b), be taxable only
in that State;

b) such pension, however, shall be taxable only in the other Contracting
State if the individual is a resident of, and a national of, that State.

3. The provisions of Articles 14, 15, 16 and 17 shall apply to salaries, wages and
other remuneration, and to pensions, in respect of services rendered in connection with
a business carried on by a Contracting State or a political subdivision or a local
authority thereof.

Article 19
STUDENTS AND TRAINEES

1. Payments, other than compensation for personal services, received by a
student or business trainee who is, or was immediately before visiting a Contracting
State, a resident of the other Contracting State, and who is present in the first-
mentioned State for the primary purpose of his education or training, shall not be taxed
in that State, provided that such payments arise outside that State and are for the
purpose of his maintenance, education or training. The exemption from tax provided
by this paragraph shall apply to a business trainee only for a period of time not
exceeding one year from the date the business trainee first arrives in the first-mentioned
Contracting State for the purpose of training.

2. A student or business trainee within the meaning of paragraph 1 shall be
exempt from tax by the Contracting State in which the individual is temporarily present
with respect to income from personal services in an aggregate amount equal to $9,000
or its equivalent in Hungarian Forints annually. The competent authorities shall, every
five years, adjust the amount provided in this subparagraph to the extent necessary to
take into account changes in the U.S. personal exemption and the standard deduction.

3. For purposes of this Article, a business trainee is an individual:

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a) who is temporarily in a Contracting State for the purpose of securing
training required to qualify the individual to practice a profession or
professional specialty; or

b) who is temporarily in a Contracting State as an employee of, or under
contract with, a resident of the other Contracting State, for the primary
purpose of acquiring technical, professional, or business experience from a
person other than that resident of the other Contracting State (or a person
related to such resident of the other Contracting State).

Article 20
PROFESSORS AND TEACHERS

1. A professor or teacher who visits one of the Contracting States for a period not
exceeding two years starting from the date he first visits that Contracting State for the
sole purpose of teaching or carrying out advanced study (including research) at a
university, college or other recognized research institute or other establishment for
higher education in that Contracting State and who was immediately before that visit a
resident of the other State shall be exempt from tax in the first-mentioned Contracting
State on any remuneration for such teaching or study. If the visit exceeds two years, the
first-mentioned State may tax the individual under its domestic law for the entire period
of the visit.

2. The preceding provisions of this Article shall not apply to remuneration which
a professor or teacher receives for conducting research if the research is undertaken
primarily for the private benefit of a specific person or persons.

Article 21
OTHER INCOME

1. Items of income beneficially owned by a resident of a Contracting State,
wherever arising, not dealt with in the foregoing Articles of this Convention shall be
taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income, other than income
from real property as defined in paragraph 2 of Article 6 (Income from Immovable
Property (Real Property)), if the beneficial owner of the income, being a resident of a
Contracting State, carries on business in the other Contracting State through a
permanent establishment situated therein and the right or property in respect of which
the income is paid is effectively connected with such permanent establishment. In such
case the provisions of Article 7 (Business Profits) shall apply.

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Article 22
LIMITATION ON BENEFITS

1. Except as otherwise provided in this Article, a resident of a Contracting State
shall not be entitled to the benefits of this Convention otherwise accorded to residents
of a Contracting State unless such resident is a "qualified person" as defined in
paragraph 2.

2. A resident of a Contracting State shall be a qualified person for a taxable year
if the resident is:

a) an individual;

b) a Contracting State, or a political subdivision or local authority thereof;

c) a company, if:

i) the principal class of its shares (and any disproportionate class
of shares) is regularly traded on one or more recognized stock
exchanges, and either:

A) its principal class of shares is primarily traded on one or
more recognized stock exchanges located in the Contracting
State of which the company is a resident (or, in the case of a
company resident in Hungary, on a recognized stock exchange
located within the European Union or in any other European
Free Trade Association state or, in the case of a company
resident in the United States, on a recognized stock exchange
located in another state that is a party to the North American
Free Trade Agreement); or

B) the company's primary place of management and control
is in the Contracting State of which it is a resident; or

ii) at least 50 percent of the aggregate vote and value of the shares
(and at least 50 percent of any disproportionate class of shares) in the
company is owned directly or indirectly by five or fewer companies
entitled to benefits under clause i) of this subparagraph, provided that,
in the case of indirect ownership, each intermediate owner is a resident
of either Contracting State;

d) a person described in paragraph 2 of Article 4 (Residence) of this
Convention, provided that, in the case of a person described in subparagraph
a) of that paragraph, more than 50 percent of the person's beneficiaries,
members or participants are individuals resident in either Contracting State; or

e) a person other than an individual, if:

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i) on at least half the days of the taxable year, persons who are
residents of that Contracting State and that are entitled to the benefits
of this Convention under subparagraph a), subparagraph b), clause i)
of subparagraph c), or subparagraph d) of this paragraph own, directly
or indirectly, shares or other beneficial interests representing at least
50 percent of the aggregate voting power and value (and at least 50
percent of any disproportionate class of shares) of the person, provided
that, in the case of indirect ownership, each intermediate owner is a
resident of that Contracting State, and

ii) less than 50 percent of the person’s gross income for the
taxable year, as determined in the person's State of residence, is paid
or accrued, directly or indirectly, to persons who are not residents of
either Contracting State entitled to the benefits of this Convention
under subparagraph a), subparagraph b), clause i) of subparagraph c),
or subparagraph d) of this paragraph in the form of payments that are
deductible for purposes of the taxes covered by this Convention in the
person’s State of residence (but not including arm's length payments in
the ordinary course of business for services or tangible property and
payments in respect of financial obligations to a bank (including, in the
case of Hungary, a credit institution) that is not related to the payor).

3. a) A resident of a Contracting State will be entitled to benefits of the
Convention with respect to an item of income derived from the other State,
regardless of whether the resident is a qualified person, if the resident is
engaged in the active conduct of a trade or business in the first-mentioned
State (other than the business of making or managing investments for the
resident’s own account, unless these activities either are insurance or
securities activities carried on by an insurance company or registered
securities dealer, or, in the case of a resident of the United States, are banking
activities carried on by a bank, or, in the case of a resident of Hungary, are
regulated financial services carried on by a financial institution), and the
income derived from the other Contracting State is derived in connection with,
or is incidental to, that trade or business.

b) If a resident of a Contracting State derives an item of income from a
trade or business activity conducted by that resident in the other Contracting
State, or derives an item of income arising in the other Contracting State from
a related person, the conditions described in subparagraph a) shall be
considered to be satisfied with respect to such item only if the trade or
business activity carried on by the resident in the first-mentioned Contracting
State is substantial in relation to the trade or business activity carried on by the
resident or such person in the other Contracting State. Whether a trade or
business activity is substantial for the purposes of this paragraph will be
determined based on all the facts and circumstances.

c) For purposes of applying this paragraph, activities conducted by
persons connected to a person shall be deemed to be conducted by such

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person. A person shall be connected to another if one possesses at least 50
percent of the beneficial interest in the other (or, in the case of a company, at
least 50 percent of the aggregate vote and value of the company's shares or of
the beneficial equity interest in the company) or another person possesses at
least 50 percent of the beneficial interest (or, in the case of a company, at least
50 percent of the aggregate vote and value of the company's shares or of the
beneficial equity interest in the company) in each person. In any case, a
person shall be considered to be connected to another if, based on all the
relevant facts and circumstances, one has control of the other or both are
under the control of the same person or persons.

4. A company that is a resident of a Contracting State shall also be entitled to the
benefits of the Convention if:

a) at least 95 percent of the aggregate voting power and value of its shares
(and at least 50 percent of any disproportionate class of shares) is owned,
directly or indirectly, by seven or fewer persons that are equivalent
beneficiaries; and

b) less than 50 percent of the company’s gross income, as determined in
the company's State of residence, for the taxable year is paid or accrued,
directly or indirectly, to persons who are not equivalent beneficiaries, in the
form of payments (but not including arm's length payments in the ordinary
course of business for services or tangible property), that are deductible for
the purposes of the taxes covered by this Convention in the company's State of
residence.

5. A person that is a resident of a Contracting State shall also be entitled to all the
benefits of this Convention otherwise accorded to residents of a State if that person
functions as a headquarters company for a multinational corporate group and that
resident satisfies any specified conditions for the obtaining of such benefits other than
those of this Article. A person shall be considered a headquarters company for this
purpose only if:

a) it provides a substantial portion of the overall supervision and
administration of the group, which may include, but can not be principally,
group financing;

b) the corporate group consists of corporations resident in, and engaged in
an active business in, at least five countries, and the business activities carried
on in each of the five countries (or five groupings of countries) generate at
least 10 percent of gross income of the group;

c) the business activities carried on in any one country other than the
Contracting State of residence of the headquarters company generate less than
50 percent of the gross income of the group;

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d) no more than 25 percent of its gross income is derived from the other
Contracting State;

e) it has, and exercises, independent discretionary authority to carry out
the functions referred to in subparagraph a);

f) it is subject to the same income taxation rules in its country of
residence as persons described in paragraph 3; and

g) the income derived in the other Contracting State either is derived in
connection with, or is incidental to, the active business referred to in
subparagraph b).

If the gross income requirements of subparagraphs b), c) or d) of this paragraph are not
fulfilled, they will be deemed to be fulfilled if the required ratios are met when
averaging the gross income of the preceding four years.

6. Notwithstanding the preceding provisions of this Article, where an enterprise
of a Contracting State derives income from the other Contracting State, and that income
is attributable to a permanent establishment which that enterprise has in a third state,
the tax benefits that would otherwise apply under the other provisions of the
Convention will not apply to that income if the profits of that permanent establishment
are subject to a combined aggregate effective rate of tax in the first-mentioned
Contracting State and third state is less than 60 percent of the general rate of company
tax applicable in the first-mentioned Contracting State. Any dividends, interest or
royalties to which the provisions of this paragraph apply shall be subject to tax in the
other Contracting State at a rate that shall not exceed 15 percent of the gross amount
thereof. Any other income to which the provisions of this paragraph apply shall be
subject to tax under the provisions of the domestic law of the other Contracting State,
notwithstanding any other provision of the Convention. The provisions of this
paragraph shall not apply if:

a) in the case of royalties, the royalties are received as compensation for
the use of, or the right to use, intangible property produced or developed by
the permanent establishment itself; or

b) in the case of any other income, the income derived from the other
Contracting State is derived in connection with, or is incidental to, the active
conduct of a trade or business carried on by the permanent establishment in
the third state (other than the business of making, managing or simply holding
investments for the enterprise’s own account, unless these activities are
securities activities carried on by a registered securities dealer, or, in the case
of an enterprise of the United States, are banking activities carried on by a
bank, or, in the case of an enterprise of Hungary, are regulated financial
services carried on by a financial institution).

7. A resident of a Contracting State that is not entitled to benefits pursuant to the
preceding paragraphs of this Article shall, nevertheless, be granted benefits of the

23

Convention, if the competent authority of the other Contracting State determines that
the establishment, acquisition or maintenance of such person and the conduct of its
operations did not have as one of its principal purposes the obtaining of benefits under
this Convention. The competent authority of the Contracting State in which the income
arises will consult with the competent authority of the other Contracting State before
denying the benefits of the Convention under this paragraph.

8. For purposes of this Article:

a) the term "recognized stock exchange" means:

i) the NASDAQ System owned by the National Association of
Securities Dealers, Inc. and any stock exchange registered with the
U.S. Securities and Exchange Commission as a national securities
exchange under the U.S. Securities Exchange Act of 1934;

ii) the stock exchange of Budapest;

iii) the stock exchanges of Amsterdam, Brussels, Frankfurt,
London, Paris, Vienna, Warsaw and Zurich;

iv) any other stock exchange agreed upon by the competent
authorities;

b) the term "principal class of shares" means the ordinary or common
shares of the company, provided that such class of shares represents the
majority of the voting power and value of the company. If no single class of
ordinary or common shares represents the majority of the aggregate voting
power and value of the company, the “principal class of shares” are those
classes that in the aggregate represent a majority of the aggregate voting
power and value of the company;

c) the term "disproportionate class of shares" means any class of shares
of a company resident in one of the Contracting States that entitles the
shareholder to disproportionately higher participation, through dividends,
redemption payments or otherwise, in the earnings generated in the other State
by particular assets or activities of the company;

d) a company's "primary place of management and control" will be in the
Contracting State of which it is a resident only if executive officers and senior
management employees exercise day-to-day responsibility for more of the
strategic, financial and operational policy decision making for the company
(including its direct and indirect subsidiaries) in that State than in any other
state and the staff of such persons conduct more of the day-to-day activities
necessary for preparing and making those decisions in that State than in any
other state;

24

e) the term "equivalent beneficiary" means a resident of a member state
of the European Union or of any other European Free Trade Association state
or of a party to the North American Free Trade Agreement, but only if that
resident:

i) A) would be entitled to all the benefits of a comprehensive
convention for the avoidance of double taxation between any
member state of the European Union or any other European Free
Trade Association state or any party to the North American Free
Trade Agreement and the State from which the benefits of this
Convention are claimed under provisions analogous to
subparagraph a), b), clause i) of subparagraph c) or subparagraph
d) of paragraph 2 of this Article, provided that if such convention
does not contain a comprehensive limitation on benefits article,
the person would be entitled to the benefits of this Convention by
reason of subparagraph a), b), clause i) of subparagraph c) or
subparagraph d) of paragraph 2 of this Article if such person
were a resident of one of the States under Article 4 of this
Convention; and

B) with respect to income referred to in Article 10
(Dividends), 11 (Interest) or 12 (Royalties) of this Convention,
would be entitled under such convention to a rate of tax with
respect to the particular class of income for which benefits are
being claimed under this Convention that is at least as low as the
rate applicable under this Convention; or

ii) is a resident of a Contracting State that is entitled to the benefits
of this Convention by reason of subparagraph a), b), clause i) of
subparagraph c) or subparagraph d) of paragraph 2 of this Article; and

f) with respect to dividends, interest or royalties arising in Hungary and
beneficially owned by a company that is a resident of the United States, a
company that is a resident of a member state of the European Union will be
treated as satisfying the requirements of subparagraph e) i) B) of this
paragraph for purposes of determining whether such United States resident is
entitled to benefits under this paragraph if a payment of dividends, interest or
royalties arising in Hungary and paid directly to such resident of a member
state of the European Union would have been exempt from tax pursuant to
any directive of the European Union, notwithstanding that the income tax
convention between Hungary and that other member state of the European
Union would provide for a higher rate of tax with respect to such payment
than the rate of tax applicable to such United States company under Article
10, 11 or 12 of this Convention.

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Article 23
RELIEF FROM DOUBLE TAXATION

1. In the case of Hungary, double taxation will be relieved as follows:

a) Where a resident of Hungary derives income that, in accordance with the
provisions of this Convention may be taxed in the United States, Hungary
shall, subject to the provisions of subparagraphs b) and c), exempt such
income from tax.

b) Where a resident of Hungary derives items of income that, in accordance
with the provisions of Articles 10 (Dividends) and 11 (Interest), may be taxed
in the United States, Hungary shall allow as a deduction from the tax on the
income of that resident an amount equal to the tax paid in the United States.
Such deduction shall not, however, exceed that part of the tax, as computed
before the deduction is given that is attributable to such items of income
derived from the United States.

c) Where in accordance with any provision of the Convention income derived
by a resident of Hungary is exempt from tax in Hungary, Hungary may
nevertheless, in calculating the amount of tax on the remaining income of
such resident, take into account the exempted income.

d) The provisions of subparagraph a) shall not apply to income derived by a
resident of Hungary where the United States applies the provisions of this
Convention to exempt such income from tax or applies the provisions of
paragraph 2 of Article 10 or paragraph 2 of Article 11 to such income.

2. In accordance with the provisions and subject to the limitations of the law of
the United States (as it may be amended from time to time without changing the general
principle hereof), the United States shall allow to a resident or citizen of the United
States as a credit against the United States tax on income applicable to residents and
citizens:

a) the income tax paid or accrued to Hungary by or on behalf of such
resident or citizen; and

b) in the case of a United States company owning at least 10 percent of
the voting stock of a company that is a resident of Hungary and from which
the United States company receives dividends, the income tax paid or accrued
to Hungary by or on behalf of the payer with respect to the profits out of
which the dividends are paid.

For the purposes of this paragraph, the taxes referred to in paragraphs 3 a) and 4 of
Article 2 (Taxes Covered) shall be considered income taxes.

3. For the purposes of applying paragraph 2 of this Article, an item of gross
income, as determined under the laws of the United States, derived by a resident of the

26

United States that, under this Convention, may be taxed in Hungary shall be deemed to
be income from sources in Hungary.

4. Where a United States citizen is a resident of Hungary:

a) with respect to items of income that under the provisions of this
Convention are exempt from United States tax or that are subject to a reduced
rate of United States tax when derived by a resident of Hungary who is not a
United States citizen, Hungary shall allow as a credit against Hungarian tax,
only the tax paid, if any, that the United States may impose under the
provisions of this Convention, other than taxes that may be imposed solely by
reason of citizenship under the saving clause of paragraph 4 of Article 1
(General Scope);

b) for purposes of applying paragraph 2 to compute United States tax on
those items of income referred to in subparagraph a), the United States shall
allow as a credit against United States tax the income tax paid to Hungary
after the credit referred to in subparagraph a); the credit so allowed shall not
reduce the portion of the United States tax that is creditable against the
Hungarian tax in accordance with subparagraph a); and

c) for the exclusive purpose of relieving double taxation in the United
States under subparagraph b), items of income referred to in subparagraph a)
shall be deemed to arise in Hungary to the extent necessary to avoid double
taxation of such income under subparagraph b).

Article 24
NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in the other Contracting
State to any taxation or any requirement connected therewith that is other or more
burdensome than the taxation and connected requirements to which nationals of that
other State in the same circumstances, in particular with respect to taxation on
worldwide income, are or may be subjected. This provision shall also apply to persons
who are not residents of one or both of the Contracting States.

2. The taxation on a permanent establishment that an enterprise of a Contracting
State has in the other Contracting State shall not be less favorably levied in that other
State than the taxation levied on enterprises of that other State carrying on the same
activities.

3. The provisions of paragraphs 1 and 2 shall not be construed as obliging a
Contracting State to grant to residents of the other Contracting State any personal
allowances, reliefs, and reductions for taxation purposes on account of civil status or
family responsibilities that it grants to its own residents.

27

4. Except where the provisions of paragraph 1 of Article 9 (Associated
Enterprises), paragraph 5 of Article 11 (Interest), or paragraph 4 of Article 12
(Royalties) apply, interest, royalties, and other disbursements paid by an enterprise of a
Contracting State to a resident of the other Contracting State shall, for the purpose of
determining the taxable profits of such enterprise, be deductible under the same
conditions as if they had been paid to a resident of the first-mentioned State. Similarly,
any debts of an enterprise of a Contracting State to a resident of the other Contracting
State shall, for the purpose of determining the taxable capital of such enterprise, be
deductible under the same conditions as if they had been contracted to a resident of the
first-mentioned State.

5. Enterprises of a Contracting State, the capital of which is wholly or partly
owned or controlled, directly or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first-mentioned State to any taxation or
any requirement connected therewith that is other or more burdensome than the
taxation and connected requirements to which other similar enterprises of the
first-mentioned State are or may be subjected.

6. Nothing in this Article shall be construed as preventing either Contracting
State from imposing a tax as described in paragraph 8 of Article 10 (Dividends).

7. The provisions of this Article shall, notwithstanding the provisions of Article 2
(Taxes Covered), apply to taxes of every kind and description imposed by a
Contracting State or a political subdivision or local authority thereof.

Article 25
MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting
States result or will result for such person in taxation not in accordance with the
provisions of this Convention, it may, irrespective of the remedies provided by the
domestic law of those States, present its case to the competent authority of the
Contracting State of which the person is a resident or, if his case comes under
paragraph 1 of Article 24 (Non-Discrimination), to that of the Contracting State of
which he is a national.

2. The competent authority shall endeavor, if the objection appears to it to be
justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case
by mutual agreement with the competent authority of the other Contracting State, with
a view to the avoidance of taxation which is not in accordance with the Convention.
Any agreement reached shall be implemented notwithstanding any time limits or other
procedural limitations in the domestic law of the Contracting States, provided that the
competent authority of the other State has received notice from the first-mentioned
competent authority that such a case exists within six years from the end of the taxable
year to which the case relates.

28

3. The competent authorities of the Contracting States shall endeavor to resolve
by mutual agreement any difficulties or doubts arising as to the interpretation or
application of the Convention. They also may consult together for the elimination of
double taxation in cases not provided for in the Convention.

4. The competent authorities also may agree to increases in any specific dollar
amounts referred to in the Convention to reflect economic or monetary developments.

5. The competent authorities of the Contracting States may communicate with
each other directly, including through a joint commission consisting of themselves or
their representatives, for the purpose of reaching an agreement in the sense of the
preceding paragraphs.

Article 26
EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such
information as is foreseeably relevant for carrying out the provisions of this Convention
or of the domestic laws of the Contracting States concerning taxes of every kind
imposed by a Contracting State to the extent that the taxation thereunder is not contrary
to the Convention, including information relating to the assessment or collection of, the
enforcement or prosecution in respect of, or the determination of appeals in relation to,
such taxes. The exchange of information is not restricted by paragraph 1 of Article 1
(General Scope) or Article 2 (Taxes Covered).

2. Any information received under this Article by a Contracting State shall be
treated as secret in the same manner as information obtained under the domestic laws of
that State and shall be disclosed only to persons or authorities (including courts and
administrative bodies) concerned with the assessment, collection, or administration of,
the enforcement or prosecution in respect of, or the determination of appeals in relation
to, the taxes referred to above, or the oversight of such functions. Such persons or
authorities shall use the information only for such purposes. They may disclose the
information in public court proceedings or in judicial decisions.

3. In no case shall the provisions of the preceding paragraphs be construed so as
to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Contracting State;

b) to supply information that is not obtainable under the laws or in the
normal course of the administration of that or of the other Contracting State;

c) to supply information that would disclose any trade, business,
industrial, commercial, or professional secret or trade process, or information
the disclosure of which would be contrary to public policy (ordre public).

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4. If information is requested by a Contracting State in accordance with this
Article, the other Contracting State shall use its information gathering measures to
obtain the requested information, even though that other State may not need such
information for its own tax purposes. The obligation contained in the preceding
sentence is subject to the limitations of paragraph 3 but in no case shall such limitation
be construed to permit a Contracting State to decline to supply information because it
has no domestic interest in such information.

5. In no case shall the provisions of paragraph 3 be construed to permit a
Contracting State to decline to supply information requested by the other Contracting
State because the information is held by a bank, other financial institution, nominee or
person acting in an agency or a fiduciary capacity or because it relates to ownership
interests in a person.

6. If specifically requested by the competent authority of a Contracting State, the
competent authority of the other Contracting State shall provide information under this
Article in the form of depositions of witnesses and authenticated copies of unedited
original documents (including books, documents, statements, records, accounts, and
writings), to the extent such deposition and documents can be obtained under the laws
and administrative practices of such other State with respect to its own taxes.

Article 27
MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Convention shall affect the fiscal privileges of members of
diplomatic missions or consular posts under the general rules of international law or
under the provisions of special agreements.

Article 28
ENTRY INTO FORCE

1. This Convention shall be subject to ratification in accordance with the
applicable procedures of each Contracting State, and instruments of ratification shall be
exchanged as soon thereafter as possible.

2. This Convention shall enter into force on the date of the exchange of
instruments of ratification and its provisions shall have effect:

a) in respect of taxes withheld at source, for amounts paid or credited on
or after the first day of the second month next following the date on which the
Convention enters into force; and

b) in respect of 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.

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3. 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
February 12, 1979 and the related exchange of letters signed the same day, ("the prior
Convention") shall cease to have effect in relation to any tax from the date on which
this Convention has effect in relation to that tax in accordance with paragraph 2 of this
Article. Notwithstanding the preceding sentence, where any person entitled to benefits
under the prior Convention would have been entitled to greater benefits thereunder than
under this Convention, the prior Convention shall, at the election of such person,
continue to have effect in its entirety with respect to such person’s taxes until
December 31, 2010. The prior Convention shall terminate on the last date on which it
has effect in relation to any tax in accordance with the foregoing provisions of this
paragraph.

4. Notwithstanding the entry into force of this Convention, an individual who
was entitled to benefits of Article 18 (Students and Trainees) and Article 17 (Teachers)
of the prior Convention at the time of the entry into force of this Convention shall
continue to be entitled to such benefits until such time as the individual would cease to
be entitled to such benefits if the prior Convention remained in force.

Article 29
TERMINATION

This Convention shall remain in force until terminated by a Contracting State. Either
Contracting State may terminate the Convention provided that 6-months’ prior notice of
termination has been given through diplomatic channels. In such event, the Convention
shall cease to have effect:

a) in respect of taxes withheld at source, for amounts paid or credited on
or after the first day of January next following the expiration of the 6-months’
period; and

b) in respect of other taxes, for taxable periods beginning on or after the
first day of January next following the expiration of the 6–months’ period.

IN WITNESS WHEREOF, the undersigned, being duly authorized thereto by their
respective Governments, have signed this Convention.

DONE at .............................. in duplicate, in the English and Hungarian languages, both
texts being equally authentic, this .............. day of .............., 2010.

for the Government of for the Government of
the United States of America: the Republic of Hungary: