The United States and Hungary have signed a new income tax treaty that brings an existing agreement signed by the two countries in 1979 into closer conformity with current U.S. international tax policy.

U.S. Ambassador to Hungary Eleni Tsakopoulos Kounalakis and Hungarian Finance Minister Péter Oszkó signed the document in a ceremony held at the Hungarian Ministry of Finance in Budapest. The new treaty contains a comprehensive limitation-on-benefits provision that is consistent with many recently concluded U.S. tax treaties and ensures that only residents of the United States and Hungary may enjoy the benefits of the treaty.

The agreement maintains the existing treaty's withholding tax exemption on cross-border interest and royalty payments, as well as its reductions in withholding taxes on cross-border dividend payments. The agreement also provides for a new exemption from withholding tax on dividends paid to pension funds.

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