Exchange of Notes (1967)



Paris, 28 July 1967


In connection with the recently negotiated Income Tax Convention between the United States and France, which has been signed today, certain questions arose with respect to which it was deemed appropriate that there be an exchange of Notes recording the agreement reached by the delegations from our two countries.

  1. It is understood that the notes, minutes and arrangements relating to income taxes which were entered into between the French Government and the United States Government in connection with the prior tax Conventions and their Protocols are considered abrogated, including in particular those of 1955 relating to American motion picture companies. In response to a question raised by the United States delegation as to whether this abrogation would change the present French tax treatment of American motion picture companies, particularly with respect to the operations presently effected through an authorized agent, the French delegation replied that the motion picture companies would be taxed in accordance with French tax law and the rules laid down by the Convention, and that the abrogation of the arrangements would not entail any important tax consequences.
  2. The French delegation noted that the Income Tax Convention applies only to taxes imposed by the national governments. Consequently, it raised the question of whether the provisions relating to the reciprocal exemption of airlines and shipping companies should not provide for complete exemption from tax which both sides would agree would apply with respect to airlines and shipping companies. Individual States in the United States have independent tax systems and one of them may decide to levy an income tax on French airlines or shipping companies. The United States delegation pointed out that this has not occurred despite the long history of tax conventions concluded by the United States. It seems that there were one or two attempts by a State government to tax shipping companies covered by a convention, but the United States Government intervened with the State tax authorities and no tax was levied. The United States delegation gave its assurance that if a State government should seek to levy a tax on the profits of French shipping and airline companies the United States Government would do its best to persuade the State involved not to levy any tax. It was agreed that the license tax (“patente”) levied in France on behalf of local authorities would not apply to United States airlines and shipping companies if French airlines and shipping companies are not subject to State income taxes in the United States.
  3. The Income Tax Convention between France and the United States is based on the principle that no provision of the Convention may be construed so as to deprive a resident of one of the signatory countries of any of the exemptions, credits, or other benefits conferred upon him by law. It is understood that, in accordance with French law, when an income tax convention recognizes the right of France to establish a tax which is not levied pursuant to French laws, the treaty provisions take precedence over the domestic law. However, the French delegation stated that it is not the intent of the French Government to levy taxes on residents of the United States or of France which would not have been levied in the absence of a tax convention.
  4. It is understood that when an insurance company of one of the Contracting States has a permanent establishment in the other Contracting State, the reinsurance premiums received shall be taken into account for the determination of taxable profits only in the Contracting State of which the company is a resident.
  5. The French delegation called attention to a ruling of the Internal Revenue Service (published March 23, 1964), to the effect that professors and teachers would not be exempt from tax in the United States under Article 10 of the 1939 Convention, in order to bring the United States interpretation of that Article into conformity with the interpretation placed upon it by France. The French delegation stated that, under the interpretation that France now gives to Article 10, American teachers and professors in France are exempt from the French tax. Accordingly, the United States delegation has agreed that the ruling referred to above, to the extent that it applied to professors and teachers, will be cancelled as of March 23, 1964, on the basis of reciprocity.

I have the honor to propose to you that the present Note and Your Excellency’s reply thereto constitute the agreement of our two Governments on these various points.

Please accept, etc

Hervé Alphand

His Excellency Mr. Charles E.Bohlen

United States Ambassador



Paris, July 28, 1967

Dear Mr. Ambassador:

I have the honor to refer to your Note of today’s date, which reads as follows:

[see I]

I have the honor to confirm to you that my Government is in agreement with the statements in Your Excellency’s Note.

Please accept, dear Mr. Ambassador, the assurances of my highest consideration.

Charles E. Bohlen

His Excellency,

Hervé Alphand,

Ambassador of France,

Secretary General of the Ministry of Foreign Affairs,