CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED …

1 CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICAAND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE AVOIDANCE OFDOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECTTO TAXES ON income AND CAPITALGENERAL EFFECTIVE DATE UNDER ARTICLE 33: 1 JANUARY 1996 TABLE OF ARTICLESA rticle 1---------------------------------Person al ScopeArticle 2---------------------------------Taxes CoveredArticle 3---------------------------------Genera l DefinitionsArticle 4---------------------------------Reside ntArticle 5---------------------------------Perman ent EstablishmentArticle 6--------------------------------- income From Real PropertyArticle 7---------------------------------Busine ss ProfitsArticle 8---------------------------------Shippi ng and Air TransportArticle 9---------------------------------Associ ated EnterprisesArticle 10--------------------------------Divide ndsArticle 11--------------------------------Intere stArticle 12--------------------------------Royalt iesArticle 13--------------------------------Capita l GainsArticle 14--------------------------------Indepe ndent Personal ServicesArticle 15--------------------------------Depend ent Personal ServicesArticle

2 16--------------------------------Direct ors FeesArticle 17--------------------------------Artist es and SportsmenArticle 18--------------------------------Pensio nsArticle 19--------------------------------Public RemunerationArticle 20--------------------------------Teache rs and ResearchersArticle 21--------------------------------Studen ts and TraineesArticle 22--------------------------------Other IncomeArticle 23--------------------------------Capita lArticle 24--------------------------------Relief From Double TaxationArticle 25--------------------------------Non-Di scriminationArticle 26--------------------------------Mutual Agreement ProcedureArticle 27--------------------------------Exchan ge of InformationArticle 28--------------------------------Assist ance in CollectionArticle 29--------------------------------Miscel laneous ProvisionsArticle 30--------------------------------Limita tion on Benefits of the ConventionArticle 31--------------------------------Diplom atic and Consular OfficersArticle 32--------------------------------Provis ions for ImplementationArticle 33--------------------------------Entry Into ForceArticle 34--------------------------------Termin ationLetter of Submittal---------------------of 9 September, 1994 Letter of Transmittal-------------------of 19 September, 1994 Notes of Exchange---------------------of 31 August, 1994 The Saving Clause -------------------Paragraph 2 of Article 29 MESSAGEFROMTHE PRESIDENT OF THE UNITED STATESTRANSMITTINGCONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICAAND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE AVOIDANCE OFDOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECTTO TAXES ON income AND capital SIGNED AT PARIS ON AUGUST 31,1994,TOGETHER WITH TWO RELATED EXCHANGES OF NOTESLETTER OF SUBMITTALDEPARTMENT OF STATE, Washington, September 9, PRESIDENT,The White House.

3 THE PRESIDENT: I have the honor to submit to you, with a view to its transmission to theSenate for advice and consent to ratification, the CONVENTION BETWEEN the GOVERNMENT of theUnited States of America and the GOVERNMENT of the French Republic for the Avoidance ofDouble Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on income andCapital, signed at Paris on August 31, 1994, together with two related exchanges of notes signedon the same date. The new CONVENTION will replace the existing income tax CONVENTION BETWEEN the UnitedStates and France, which was signed in 1967 and amended by Protocols signed in 1970, 1978,1984, and 1988, and the side letters relating thereto. The new CONVENTION maintains manyprovisions of the existing CONVENTION ; but it also provides certain additional benefits, and itupdates the text to reflect current tax treaty policies. Like all income tax conventions, this CONVENTION provides rules specifying whenincome that arises in one of the countries and is derived by residents of the other country may betaxed by the country in which the income arises (the source country ).

4 Rules are provided foreach category of income , such as business profits, investment income , and personal serviceincome. The CONVENTION confirms that the country of residence will avoid international doubletaxation by providing relief for the tax imposed by the source country. It also provides foradministrative cooperation BETWEEN the tax authorities of the two countries in applying theConvention and the taxes covered by the CONVENTION . The benefits of the CONVENTION are limitedto qualified residents of the two countries. The new CONVENTION confirms that residents of each country include tax-exemptorganizations created for charitable and other not-for-profit purposes or for purposes of providingpension benefits, and extends to them part of the dividend tax credit that France provides in theConvention to other portfolio investors. It also addresses the treatment of dividends paid byregulated investment companies and real estate investment trusts, bringing those provisions intoline with current treaty policy.

5 The new CONVENTION clarifies the scope of the exemption atsource of copyright royalties. An important improvement in the new CONVENTION is the modernization of the limitation onbenefits provisions, designed to ensure that the benefits of the CONVENTION are enjoyed only bythose persons intended to derive such benefits. The compliance aspects of the CONVENTION arealso strengthened by bringing up to date the provisions concerning associated enterprises and theexchange of tax information. The new CONVENTION preserves the special French tax benefits for citizens residing inFrance and for French residents who are partners of partnerships. The exchanges of diplomatic notes accompany the CONVENTION and state the understandingsof the two delegations with respect to the application of the CONVENTION in specified cases. The UNITED States and France will notify each other when their respective constitutional andstatutory requirements for the entry into force of the CONVENTION have been satisfied.

6 TheConvention will enter into force on the date of receipt of the later of those notifications. Theprovisions concerning taxes on dividends, interests, and royalties and the excise tax oninsurance premiums paid to foreign insurers will take effect on the first day of the second monthfollowing the entry into force. The provisions concerning other taxes generally will take effectfor taxable years or taxable events occurring on or after January 1 of the year following the entryinto force. However, certain provisions concerning the availability of the French dividend taxcredit and the application of the copyright royalty exemption will apply for dividends androyalties paid or credited on or after January 1, 1991. The 1967 CONVENTION and the relatedexchanges of letters will cease to have effect as of the date on which the provisions of thisConvention become effective. A technical memorandum explaining in detail the provisions of the CONVENTION will beprepared by the Department of Treasury and will be submitted separately to the SenateCommittee on Foreign Relations.

7 The Department of the Treasury and the Department of State cooperated in the negotiation ofthe CONVENTION . It has the full approval of both Departments. Respectfully submitted,WARREN OF TRANSMITTALTHE WHITE HOUSE, September 19, the Senate of the UNITED States: I transmit herewith for Senate advice and consent to ratification the CONVENTION BETWEEN theGovernment of the UNITED States of America and the GOVERNMENT of the French Republic for theAvoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes onIncome and capital , signed at Paris on August 31, 1994, together with two related exchanges ofnotes. Also transmitted for the information of the Senate is the report of the Department of Statewith respect to the CONVENTION . The CONVENTION replaces the 1967 income tax CONVENTION BETWEEN the UNITED States ofAmerica and the French Republic and the related protocols and exchanges of notes. The newConvention more accurately reflects current income tax treaty policies of the two countries.

8 I recommend that the Senate give early and favorable consideration to the CONVENTION andrelated exchanges of notes and give its advice and consent to J. BETWEEN THE GOVERNMENT OF THE UNITED STATESOF AMERICA AND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THEAVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCALEVASION WITH RESPECT TO TAXES ON income AND capital The GOVERNMENT of the UNITED States of America and the GOVERNMENT of the FrenchRepublic, desiring to conclude a new CONVENTION for the avoidance of double taxation and theprevention of fiscal evasion with respect to taxes on income and capital , have agreed as follows:ARTICLE 1 Personal Scope This CONVENTION shall apply only to persons who are residents of one or both of theContracting States, except as otherwise provided in the 2 Taxes Covered 1. The taxes which are the subject of this CONVENTION are:(a) in the case of the UNITED States:(i) the Federal income taxes imposed by the Internal Revenue Code (butexcluding social security taxes); and(ii) the excise taxes imposed on insurance premiums paid to foreigninsurers and with respect to private foundations(hereinafter referred to as " UNITED States tax").

9 The CONVENTION , however, shall apply tothe excise taxes imposed on insurance premiums paid to foreign insurers only to theextent that the risks covered by such premiums are not reinsured with a person notentitled to exemption from such taxes under this or any other income tax conventionwhich applies to these taxes;(b) in the case of France, all taxes imposed on behalf of the State, irrespective ofthe manner in which they are levied, on total income , on total capital , or on elements ofincome or of capital , including taxes on gains from the alienation of movable orimmovable property, as well as taxes on capital appreciation, in particular:(i) the income tax (1 imp t sur le revenu);(ii) the company tax (l'imp t sur les soci t s):(iii) the tax on salaries (la taxe sur les salaires) governed by the provisionsof the CONVENTION applicable, as the case may be, to business profits or to incomefrom independent personal services; and(iv) the wealth tax (l'imp t de solidarit sur la fortune) (hereinafterreferred to as "French tax").

10 2. The CONVENTION shall apply also to any identical or substantially similar taxes that areimposed after the date of signature of the CONVENTION in addition to, or in place of, the existingtaxes. The competent authorities of the Contracting States shall notify each other of anysignificant changes which have been made in their respective taxation laws and of any officialpublished material concerning the application of the CONVENTION , including explanations,regulations, rulings, or judicial 3 General Definitions 1. For the purposes of this CONVENTION :(a) the term "Contracting State" means the UNITED States or France, as the contextrequires;(b) the term " UNITED States" means the UNITED States of America, but does notinclude Puerto Rico, the Virgin Islands, Guam, or any other UNITED States possession orterritory. When used in a geographical sense, the term " UNITED States" means the statesthereof and the District of Columbia and includes the territorial sea adjacent to thoseStates and any area outside the territorial sea within which, in accordance withinternational law, the UNITED States has sovereign rights for the purpose of exploring andexploiting the natural resources of the seabed and its subsoil and the superjacent waters;(c) the term "France" means the French Republic and, when used in ageographical sense, means the European and Overseas Departments of the FrenchRepublic and includes the territorial sea and any area outside the territorial sea withinwhich, in accordance with international law, the French Republic has sovereign rights forthe purpose of exploring and exploiting the natural resources of the seabed and its subsoiland the superjacent waters;(d) the term "person" includes, but is not limited to, an individual and a company.