Aruba – USA Income Tax Treaty (1948) (Terminated)

ARUBA — U.S.A.
INCOME TAX TREATY
(1948)

Date of Conclusion: 29 April 1948.

Entry into Force: In force.

Effective Date: 1 January 1986.

Termination Date: 1 January 1988; 1 January 1997 (Article VIII).

Note: The treaty between the Netherlands and the U.S. was extended to the Netherlands Antilles through exchanges of notes dated 24 June 1952, 7 August 1952, 15 September 1955 and 4 November 1955, and to Aruba as a separate entity as of 1 January 1986.

Note: The extension of the U.S.–Netherlands treaty of 1948 as applied to Aruba was terminated (except for Article VIII) as of 1 January 1988. According to a notification dated 15 September 1995, the United States terminated the remaining provisions (Article VIII) of the 1948 treaty as extended to Aruba as of 1 January 1997.

Note: The protocol of 15 June 1955 is incorporated into the main text of the treaty.

CONVENTION BETWEEN
THE UNITED STATES OF AMERICA AND ARUBA
WITH RESPECT TO TAXES ON INCOME

Article I
Taxes covered

  1. The taxes which are the subject of the present Convention are:

(a) In the case of the United States: the Federal income taxes.

(b) In the case of the Netherlands Antilles: income taxes and profits taxes.

  1. The present Convention shall apply also to any other taxes of a substantially similar character imposed by either Contracting State subsequently to the date of signature of the present Convention.
  2. In the event of appreciable changes in the fiscal laws of either of the Contracting States the competent authorities of the Contracting States will consult together.

Article II
Definitions

  1. In the present Convention, unless the context otherwise requires:

(a) The term “United States” means the United States of America, and when used in a geographical sense means the States, the Territories of Alaska and of Hawaii, and the District of Columbia.

(b) The term “Netherlands Antilles” means the group of islands off the coast of Venezuela, including Aruba, Bonaire, Curacao, Saba, St. Eustatius and St. Martin (Netherlands part).

(c) The term “United States corporation” means a corporation, association or other organization or juridical entity created in the United States or under the laws of the United States or of any State or territory of the United States.

(d) The term “Netherlands Antilles corporation” means a corporation, association or other organization or juridical entity created in the Netherlands Antilles or under the laws of the Netherlands Antilles.

(e) The terms “corporation of one Contracting State” and “corporation of the other Contracting State” mean a United States corporation or a Netherlands Antilles corporation, as the context requires.

(f) The term “United States enterprise” means an industrial or commercial enterprise or undertaking carried on in the United States by a citizen or resident of the United States or by a United States corporation.

(g) The term “Netherlands Antilles enterprise” means an industrial or commercial enterprise or undertaking carried on in the Netherlands Antilles by a citizen or resident of the Netherlands Antilles or by a Netherlands Antilles corporation.

(h) The terms “enterprise of one of the Contracting States” and “enterprise of the other Contracting State” mean a United States enterprise or a Netherlands Antilles enterprise, as the context requires.

(i) The term “permanent establishment”, when used with respect to an enterprise of one of the Contracting States, means a branch, factory, or other fixed place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of such enterprise or has a stock of merchandise from which he regularly fills orders on behalf of such enterprise. An enterprise of one of the Contracting States shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business dealings in such other Contracting State through a bona fide commission agent, broker or custodian acting in the ordinary course of his business as such. The fact that an enterprise of one of the Contracting States maintains in the other Contracting State a fixed place of business exclusively for the purchase of goods or merchandise shall not of itself constitute such fixed place of business a permanent establishment of such enterprise. When a corporation of one Contracting State has a subsidiary corporation which is a corporation of the other Contracting State or which is engaged in trade or business in such other Contracting State, such subsidiary corporation shall not, merely because of that fact, be deemed to be a permanent establishment of its parent corporation.

(j) The term “competent authority” or “competent authorities” means, in the case of the United States, the Commissioner of Internal Revenue or his duly authorized representative; in the case of the Netherlands Antilles the Administrateur van Financien or his duly authorized representative; and, in the case of any part or territory to which provisions of the present Convention are extended under Article XXVII, the competent authority for the administration in such part or territory of the taxes to which such provisions apply.

  1. In the application of the provisions of the present Convention by either of the Contracting States, any term which is not defined in the present Convention shall, unless the context otherwise requires, have the meaning which that term has under the laws of such Contracting State relating to the taxes which are the subject of the present Convention.

Article III
Permanent establishment

  1. An enterprise of one of the Contracting States shall not be subject to taxation by the other Contracting State in respect of its industrial or commercial profits unless it is engaged in trade or business in the other Contracting State through a permanent establishment situated therein. If it is so engaged the other Contracting State may impose the tax only upon the income of such enterprise from sources within such other State.
  2. Where an enterprise of one of the Contracting States is engaged in trade or business in the other Contracting State through a permanent establishment situated therein, there shall be attributed to such permanent establishment the industrial or commercial profits which it might be expected to derive if it were an independent enterprise engaged in the same or similar activities under the same or similar conditions and dealing at arm’s length with the enterprise of which it is a permanent establishment, and the profits so attributed shall, subject to the law of such other Contracting State, be deemed to be income from sources within such other Contracting State.
  3. In determining the industrial or commercial profits from sources within one of the Contracting States of an enterprise of the other Contracting State, no profits shall be deemed to arise from the mere purchasing of goods or merchandise within the former Contracting State by such enterprise.
  4. The competent authorities of the Contracting States may lay down rules by agreement for the apportionment of industrial or commercial profits.

Article IV
Associated enterprises

Where an enterprise of one of the Contracting States, by reason of its participation in the management, control or capital of an enterprise of the other Contracting State, makes with or imposes on the latter enterprise, in their commercial or financial relations, conditions different from those which would be made with an independent enterprise, any profits which would, but for those conditions, have accrued to one of the enterprises, may be included in the taxable profits of that enterprise.

Article V
Rental and mortgage interest income

Income of whatever nature derived from real property and interest from mortgages secured by real property shall be taxable only in the Contracting State in which the real property is situated.

Article VI
Shipping and air transport income

Income which an enterprise of one of the Contracting States derives from the operation of ships or aircraft registered in that State shall be taxable only in the State in which such ships or aircraft are registered. Income derived by such an enterprise from the operation of ships or aircraft not so registered shall be subject to the provisions of Article III.

Article VII
Dividends 1

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1 See restrictions to Articles VII, VIII, IX in Protocol of October 23, 1963.

 

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  1. The rate of United States tax on dividends derived from a United States corporation by a resident or corporation of the Netherlands Antilles not engaged in trade or business in the United States through a permanent establishment shall not exceed 15 percent: Provided that such rates of tax shall not exceed 5 percent if such Netherlands Antilles corporation controls, directly or indirectly, at least 95 percent of the entire voting power in the corporation paying the dividend, and not more than 25 percent of the gross income of such paying corporation is derived from interest and dividends, other than interest and dividends from its own subsidiary corporation. Such reduction of the rate to 5 percent shall not apply if the relationship of the two corporations has been arranged or is maintained primarily with the intention of securing such reduced rate.
  2. Dividends derived from sources within the Netherlands Antilles by a resident or corporation of the United States not engaged in trade or business in the Netherlands Antilles through a permanent establishment shall be exempt from Netherlands Antilles tax.
  3. Either of the Contracting States may terminate this Article, by giving written notice of termination to the other Contracting State through diplomatic channels, on or before the thirtieth day of June in any year after the first year for which the present Convention becomes effective. In such event this Article shall cease to be effective on and after the first day of January in the year next following that in which such notice is given.

Article VIII
Interest 1

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1 See restrictions to Articles VII, VIII, IX in Protocol of October 23, 1963.

 

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  1. Interest (on bonds, securities, notes, debentures, or on any other form of indebtedness), other than interest referred to in Article V of the present Convention, derived from sources within the United States by a resident or corporation of the Netherlands Antilles not engaged in trade or business in the United States through a permanent establishment, shall be exempt from United States tax; but such exemption shall not apply to such interest paid by a United States corporation to a Netherlands Antilles corporation controlling, directly or indirectly, more than 50 percent of the entire voting power in the paying corporation.
  2. Interest (on bonds, securities, notes, debentures, or on any other form of indebtedness), other than interest referred to in Article V of the present Convention, derived from sources within the Netherlands Antilles by a resident or corporation of the United States not engaged in trade or business in the Netherlands Antilles through a permanent establishment, shall be exempt from Netherlands Antilles tax; but such exemption shall not apply to such interest paid by a Netherlands Antilles corporation to a United States corporation controlling, directly or indirectly, more than 50 percent of the entire voting power in the paying corporation.

Article IX
Royalties 1

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1 See restrictions to Articles VII, VIII, IX in Protocol of October 23, 1963.

 

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Royalties for the right to use copyrights, patents, designs, secret processes and formulae, trade marks, and other analogous property, and royalties, including rentals, in respect of motion picture films or for the use of industrial, commercial or scientific equipment, derived from sources within one of the Contracting States by a resident or corporation of the other Contracting State not engaged in trade or business in the former State through a permanent establishment, shall be exempt from tax imposed by the former State.

Article X
Natural resource royalties

A resident or corporation of one of the Contracting States, deriving from sources within the other Contracting State royalties in respect of the operation of mines, quarries, or natural resources, or rentals from real property, may elect for any taxable year to be subject to the tax of such other Contracting State on such income on a net income basis.

Article XI

[deleted]

Article XII
Dividends and interest of Antilles corporations

Dividends and interest paid by a Netherlands Antilles corporation shall be exempt from United States tax except where the recipient is a citizen, resident, or corporation of the United States.

Article XIII

[deleted]

Article XIV
Adjustment of tax liability

  1. The United States income tax liability for any taxable year beginning prior to January 1, 1936, of any individual (other than a citizen of the United States) resident in the Netherlands Antilles, or of any Netherlands Antilles corporation, remaining unpaid on the effective date of the present Convention, may be adjusted on a basis satisfactory to the United States Commissioner of Internal Revenue: Provided that the amount to be paid in settlement of such liability shall not exceed the amount of the liability which would have been determined if

(a) the United States Revenue Act of 1936 (except in the case of the Netherlands Antilles corporation in which more than 50 percent of the entire voting power was controlled, directly or indirectly, throughout the latter half of the taxable year, by citizens or residents of the United States), and

(b) Article XII of the present Convention, had been in effect for such year. If the taxpayer was not, within the meaning of such Revenue Act, engaged in trade or business in the United States and had no office or place of business therein during the taxable year, the amount of interest and penalties shall not exceed 50 percent of the amount of the tax with respect to which such interest and penalties have been computed.

  1. The United States income tax unpaid on the effective date of the present Convention for any taxable year beginning after December 31, 1935, and prior to the effective date of the present Convention in the case of an individual (other than a citizen of the United States) resident of the Netherlands Antilles, or in the case of any Netherlands Antilles corporation, shall be determined as if the provisions of Article XII of the present Convention had been in effect for such taxable year.
  2. The provisions of paragraph 1 of this Article shall not apply

(a) unless the taxpayer files with the Commissioner of Internal Revenue within a period of two years following the effective date of the present Convention a request that such tax liability be so adjusted and furnishes such information as the Commissioner may require; or

(b) in any case in which the Commissioner is satisfied that any deficiency in tax is due to fraud with intent to evade the tax.

Article XV
Government employees

  1. Wages, salaries and similar compensation, and pensions and life annuities, paid either directly by, or from funds created by, one of the Contracting States or the political subdivisions or territories thereof to individuals in the other Contracting State shall be exempt from taxation in the latter State.
  2. Private pensions and life annuities derived from within one of the Contracting States and paid to individuals in the other Contracting State shall be exempt from taxation in the former State.
  3. The term “pensions” as used in this Article means periodic payments made in consideration for services rendered or by way of compensation for injuries received.
  4. The term “life annuities” as used in this Article means a stated sum payable periodically at stated times during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

Article XVI
Personal services

  1. A resident of the Netherlands Antilles shall be exempt from United States tax upon compensation for labor or personal services performed within the United States if he is temporarily present within the United States for a period or periods not exceeding a total of one hundred eighty-three days during the taxable year and his compensation is received for labor or personal services performed as a worker or employee of, or under contract with, a resident of the Netherlands Antilles, or a Netherlands Antilles corporation, carrying the actual burden of the remuneration.
  2. The provisions of paragraph 1 of this Article shall apply, mutatis mutandis, to a resident of the United States deriving compensation for labor or personal services performed within the Netherlands Antilles.

Article XVII
Professors and teachers

Professors or teachers, residents of one of the Contracting States, who, in accordance with the agreements between the Contracting States or between teaching establishments in the Contracting States for the exchange of professors and teachers, visit the other Contracting State to teach, for a maximum period of two years, in a university, college or other teaching establishment in such other Contracting State, shall not be taxed by such other State with respect to the remuneration which they receive for such teaching.

Article XVIII
Students or trainees

Students or business apprentices of one Contracting State residing in the other Contracting State exclusively for the purposes of study or for acquiring business experience shall not be taxable by the latter State in respect of remittances received by them from abroad for the purpose of their maintenance or studies.

Article XIX
Avoidance of double taxation

  1. Notwithstanding any provisions of the present Convention (other than paragraph 1 of Article XV when applicable in the case of an individual who is deemed by each Contracting State to be a citizen thereof), each of the two Contracting States, in determining the taxes, including all surtaxes, of its citizens or residents or corporations, may include in the basis upon which such taxes are imposed all items of income taxable under its own revenue laws as though this Convention had not come into effect.
  2. As far as may be in accordance with the provisions of the United States Internal Revenue Code, the United States agrees to allow as a deduction from the income taxes imposed by the United States the appropriate amount of taxes paid to the Netherlands, whether paid directly by the taxpayer or by withholding at the tax source.
  3. The Netherlands Antilles shall allow a deduction (or the equivalent thereof) from its tax of the Federal income tax paid to the United States by citizens of the United States resident in the Netherlands Antilles with respect to income of such citizens from sources within the United States, but in an amount not in excess of that proportion of the entire Netherlands Antilles tax which such income tax bears to the entire income subject to such Netherlands Antilles tax.

Article XX

[deleted]

Article XXI
Exchange of information

The competent authorities of the Contracting States shall exchange such information (being information which such authorities have in proper order at their disposal) as is necessary for carrying out the provisions of the present Convention or for the prevention of fraud or the administration of statutory provisions against legal avoidance in relation to the taxes which are the subject of the present Convention. Any information so exchanged shall be treated as secret and shall not be disclosed to any person other than those concerned with the assessment and collection of the taxes which are the subject of the present Convention. No information as aforesaid shall be exchanged which would disclose any trade, business, industrial or professional secret or trade process.

Article XXII
Mutual assistance

  1. The Contracting States undertake to lend assistance and support to each other in the collection of the taxes which are the subject of the present Convention, together with interest, costs, and additions to the taxes and fines not being of a penal character.
  2. In the case of applications for enforcement of taxes, revenue claims of each of the Contracting States which have been finally determined may be accepted for enforcement by the other Contracting State and collected in that State in accordance with the laws applicable to the enforcement and collection of its own taxes. The State to which application is made shall not be required to enforce executory measures for which there is no provision in the law of the State making the application.
  3. Any application shall be accompanied by documents establishing that under the laws of the State making the application the taxes have been finally determined.
  4. The assistance provided for in this Article shall not be accorded with respect to the citizens, corporations, or other entities of the State to which application is made, except as is necessary to insure that the exemption or reduced rate of tax granted under the convention to such citizens, corporations or other entities shall not be enjoyed by persons not entitled to such benefits.

Article XXIII
Limitation of effect of treaty

  1. In no case shall the provisions of Articles XXI and XXII be construed so as to impose upon either of the Contracting States the obligation

(a) to carry out administrative measures at variance with the regulations and practice of either Contracting State, or

(b) to supply particulars which are not procurable under its own legislation or that of the State making application.

  1. The State to which application is made for information or assistance shall comply as soon as possible with the request addressed to it. Nevertheless, such State may refuse to comply with the request for reasons of public policy or if compliance would involve violation of a trade, business, industrial or professional secret or trade process. In such case it shall inform, as soon as possible, the State making the application.

Article XXIV
Double taxation claims

Where the action of the revenue authorities of the Contracting States has resulted or will result in double taxation contrary to the provisions of the present Convention, the taxpayer shall be entitled to lodge a claim with the State of which he is a citizen or subject or, if he is not a citizen or subject of either of the Contracting States, with the State of which he is a resident, or, if the taxpayer is a corporation, with the State in which it is created or organized. Should the claim be upheld, the competent authority of such State shall undertake to come to an agreement with the competent authority of the other State with a view to equitable avoidance of the double taxation in question.

Article XXV
Mutual agreement

  1. The provisions of the present Convention shall not be construed to restrict in any manner any exemption, deduction, credit or other allowance accorded by the laws of one of the Contracting States in the determination of the tax imposed by such State.
  2. Should any difficulty or doubt arise as to the interpretation or application of the present Convention, the competent authorities of the Contracting States shall undertake to settle the question by mutual agreement.
  3. The citizens or subjects of one of the Contracting States shall not, while resident in the other Contracting State, be subjected therein to other or more burdensome taxes than are the citizens or subjects of such other Contracting State residing in its territory. The term “citizens” or “subjects” as used in this Article includes all legal persons, partnerships and associations deriving their status from, or created or organized under the laws in force in, the respective Contracting States. In this Article the word “taxes” means taxes of every kind or description whether national, federal, state, provincial or municipal.

Article XXVI
Regulations

  1. The authorities of each of the Contracting States, in accordance with the practices of that State, may prescribe regulations necessary to carry out the provisions of the present Convention.
  2. With respect to the provisions of the present Convention relating to exchange of information and mutual assistance in the collection of taxes, the competent authorities may, by common agreement, prescribe rules concerning matters of procedure, forms of application and replies thereto, conversion of currency, disposition of amounts collected, minimum amounts subject to collection, and related matters.

Article XXVII
Territorial extension

  1. Either of the Contracting States may, at the time of exchange of instruments of ratification or thereafter while the present Convention continues in force, by a written notification of extension given to the other Contracting State through diplomatic channels, declare the desire of the government of any overseas part of the Kingdom (in the case of the Netherlands) or overseas territory (in the case of the United States), which imposes taxes substantially similar in character to those which are the subject of the present Convention, that the operation of the present Convention, either in whole or as to such provisions thereof as may be deemed to have special application, shall extend to such part or territory.
  2. In the event that a notification is given by one of the Contracting States in accordance with paragraph (1) of this Article, the present Convention, or such provisions thereof as may be specified in the notification, shall apply to any part or territory named in such notification on and after the first day of January immediately preceding the date of a written communication through diplomatic channels addressed to such Contracting State by the other Contracting State, after such action by the latter State as may be necessary in accordance with its own procedures stating that such notification is accepted in respect of such part or territory. In the absence of such acceptance, none of the provisions of the present Convention shall apply to such part or territory.
  3. At any time after the expiration of one year from the effective date of an extension made by virtue of paragraphs 1 and 2 of this Article, either of the Contracting States may, by a written notice of termination given to the other Contracting State through diplomatic channels, terminate the application of the present Convention to any part or territory to which the Convention, or any of its provisions, has been extended. In that case, the present Convention, or the provisions thereof specified in the notice of termination, shall cease to be applicable to the part or territory named in such notice of termination on and after the first day of January following the expiration of a period of six months after the date of such notice; provided, however, that this shall not affect the continued application of the Convention, or any of the provisions thereof, to the United States, to the Netherlands, or to any part or territory (not named in the notice of termination) to which the Convention, or such provision thereof, applies.
  4. For the application of the present Convention in relation to any part or territory to which it is extended by notification given by the United States or the Netherlands, references to the “United States” or to “the Netherlands” or to one or the other Contracting State, as the case may be, shall be construed to refer to such part or territory.

Article XXVIII
Entry into force and termination

  1. The present Convention shall be ratified and the instruments of ratification shall be exchanged at Washington as soon as possible.
  2. The present Convention shall become effective on the first day of January in the year last preceding the year in which the exchange of instruments of ratification takes place. It shall continue effective for a period of five years beginning with that date and indefinitely after that period, but may be terminated by either of the Contracting States at the end of the five-year period or at any time thereafter, provided that at least six months’ prior notice of termination has been given, the termination to become effective on the first day of January following the expiration of the six-month period.

Done at Washington, in duplicate, in the English and Dutch languages, the two texts having equal authenticity, this 29th day of April, 1948.