SCHEDULE IV

(Sections 21 and 22)

SCHEDULE I.1

(Section 2)

PROTOCOL TO THE TAX CONVENTION BETWEEN THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE REPUBLIC OF HUNGARY SIGNED ON APRIL 15, 1992

The Government of Canada and the Government of the Republic of Hungary, desiring to conclude a Protocol modifying the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, signed at Budapest on April 15, 1992 (hereinafter referred to as ``the Convention''), have agreed as follows:

ARTICLE 1

1. Paragraph 2 of Article 10 of the Convention shall be deleted and replaced by the following:

``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 recipient is the beneficial owner of the dividends the tax so charged shall not exceed:

    (a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends;

    (b) notwithstanding sub-paragraph (a), 10 per cent of the gross amount of the dividends if the dividends are paid by a company that is a resident of Canada and a non-resident owned investment corporation to a company that is a resident of the Republic of Hungary that controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividends and is the beneficial owner of such dividends; and

    (c) 15 per cent of the gross amount of the dividends in any other case.

The provisions of this paragraph shall not affect the taxation of the company on the profits out of which the dividends are paid.''

2. Paragraph 6 of Article 10 of the Convention shall be deleted and replaced by the following:

``6. Nothing in this Convention shall be construed as preventing a Contracting State from imposing on the earnings of a company attributable to a permanent establishment in that State, tax in addition to the tax which would be chargeable on the earnings of a company which is a national of that State, provided that any additional tax so imposed shall not exceed 5 per cent of the amount of such earnings which have not been subjected to such additional tax in previous taxation years. For the purpose of this provision, the term ``earnings'' means the profits, including any gains, attributable to a permanent establishment in a Contracting State in a year and previous years after deducting therefrom all taxes, other than the additional tax referred to herein, imposed on such profits by that State.''

ARTICLE 2

1. The Contracting States shall notify each other that the constitutional requirements for the entry into force of this Protocol have been complied with.

2. The Protocol shall enter into force sixty days after the date on which the latter of the notifications referred to in paragraph 1 is received and its provisions shall apply

    (a) in respect of paragraph 1 of Article 1 of the Protocol, to tax withheld at the source on amounts paid or credited on or after the first day of January in the calendar year next following that in which the Protocol enters into force, except that the reference to ``5 per cent'' shall be read, in its application to amounts paid or credited after that first day, after

      (i) 1992 and before 1994, as ``9 per cent'',

      (ii) 1993 and before 1995, as ``8 per cent'',

      (iii) 1994 and before 1996, as ``7 per cent'', and

      (iv) 1995 and before 1997, as ``6 per cent''; and

    (b) in respect of paragraph 2 of Article 1 of the Protocol, for taxation years beginning on or after the first day of January in the calendar year next following that in which the Protocol enters into force, except that the reference to ``5 per cent'' shall be read, in its application to taxation years beginning on or after that first day and ending after

      (i) 1992 and before 1994, as ``9 per cent'',

      (ii) 1993 and before 1995, as ``8 per cent'',

      (iii) 1994 and before 1996, as ``7 per cent'', and

      (iv) 1995 and before 1997, as ``6 per cent''.

ARTICLE 3

This Protocol shall remain in force as long as the Convention between the Republic of Hungary and Canada remains in force.

IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have signed this Protocol.

DONE in duplicate at Budapest, this May 3rd 1994 in the English, French and Hungarian languages, each version being equally authentic.

FOR THE GOVERNMENT OF CANADA:
Rodney Irwin

FOR THE GOVERNMENT OF THE REPUBLIC OF HUNGARY:
Béla Bartfai