France – USA Income and Capital Tax Treaty (1967) (as amended by 1984 Protocol)

FRANCE — U.S.A.
INCOME AND CAPITAL TAX TREATY
(1967)
(as amended by 1984 Protocol)
Date of Conclusion: 28 July 1967.

Entry into Force: 11 August 1968.

Effective Date: 1 January 1967 (see Article 31).

Termination Date: 1 January 1996.

Note: A protocol and exchange of notes signed on 12 October 1970 entered into force on 21 February 1972 and are effective as of 1 January 1970. The protocol and exchange of notes are incorporated into the main text of the treaty.

Note: A second protocol and exchange of notes signed on 24 November 1978 entered into force on 27 September 1979 and is effective as of 1 January 1979. The protocol is incorporated into the main text of the treaty. For the text of the exchange of notes, see below.

Note: A third protocol signed on 17 January 1984 entered into force on 1 October 1985 and is effective as of 1 January 1982 (wealth tax) and 1 October 1985. The protocol is incorporated into the main text of the treaty.
CONVENTION BETWEEN
THE UNITED STATES OF AMERICA AND
THE FRENCH REPUBLIC
WITH RESPECT TO TAXES ON INCOME AND PROPERTY
Article 1
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 imposed by the Internal Revenue Code and the excise tax on insurance premiums paid to foreign insurers. The excise tax imposed on insurance premiums paid to foreign insurers, however, is covered only to the extent that the foreign insurer does not reinsure such risks with a person not entitled to exemption from such tax under this or another Convention;

(b) in the case of France:

(i) the income tax, the corporation tax, including any withholding tax, prepayment (précompte) or advance payment with respect to the aforesaid taxes; and

(ii) the tax on Stock Exchange transactions;

(iii) the wealth tax.

  1. The Convention shall also apply to any documentary taxes on sales or transfers of shares or certificates of stock or bonds which are subsequently imposed.
  2. The Convention shall also apply to any identical or substantially similar taxes which are subsequently imposed in addition to, or in place of, the existing taxes.
  3. For the purpose of Article 24 (Non-discrimination), this Convention shall also apply to taxes of every kind and to those imposed at the national, State, and local level.

Article 2
General definitions

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

(a) the term “United States” means the United States of America and, when used in a geographical sense, includes the States thereof and the District of Columbia. Such term also includes any area outside the States and the District of Columbia which is, in accordance with international law, an area within which the United States may exercise rights with respect to the natural resources of the seabed and sub-soil.

The term “France” means the French Republic and, when used in a geographical sense, means the European and Overseas departments of the French Republic. Such term also includes any area outside those departments which is, in accordance with international law, an area within which France may exercise rights with respect to the natural resources of the seabed and sub-soil.

(b) the terms “a Contracting State” and “the other Contracting State” mean the United States or France, as the context requires;

(c) the term “person” comprises an individual or a corporation, or any other body of individuals or persons;

(d)(i) the term “United States corporation” or “corporation of the United States” means a corporation, or any entity treated as a corporation for United States tax purposes, which is created or organized under the laws of the United States or any State thereof or the District of Columbia; and

(ii) the term “French corporation” or “corporation of France” means any body corporate or any entity which is treated as a body corporate under French tax law, which is resident within France for French tax purposes;

(e) the term “international traffic” means any transport by a ship or aircraft, except where such transport is solely between places in the other Contracting State;

(f) the term “competent authority” means:

(i) in the case of the United States, the Secretary of the Treasury or his delegate, and

(ii) in the case of France, the Minister of Economy and Finance or his delegate.

  1. As regards the application of the Convention by a Contracting State any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes which are the subject of the Convention.

Article 3
Fiscal domicile

  1. The term “resident of France” means:

(a) a French corporation, and

(b) any person (other than a body corporate or any entity which under French law is treated as a body corporate) who is resident in France for purposes of its tax.

  1. The term “resident of the United States” means:

(a) a United States corporation, and

(b) any person (other than a corporation or an entity treated under United States law as a corporation) who is resident in the United States for purposes of its tax, but in the case of a person acting as a partner or fiduciary only to the extent that the income derived by such person in that capacity is taxed as the income of a resident.

  1. An individual who is a resident in both Contracting States shall be deemed a resident of that Contracting State in which he maintains his permanent home. If he has a permanent home in both Contracting States or in neither of the Contracting States, he shall be deemed a resident a resident of that Contracting State with which his personal and economic relations are closest (center of vital interests). If the Contracting State in which he has his center of vital interests cannot be determined, he shall be deemed a resident of that Contracting State in which he has an habitual abode. If he has an habitual abode in both Contracting States or in neither of the Contracting States, the competent authorities of the Contracting States shall settle the question by mutual agreement. For purposes of this Article, a permanent home is the place in which an individual dwells with his family. An individual who is deemed to be a resident of one Contracting State and not a resident of the other Contracting State by reason of the provisions of this paragraph shall be deemed a resident only of the former State for all purposes of this Convention (including Article 22).

Article 4
Permanent establishment

  1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which a resident of one of the Contracting States engages in industrial or commercial activity.
  2. The term “permanent establishment” shall include especially:

(a) a seat of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f) a warehouse;

(g) a mine, quarry, or other place of extraction of natural resources;

(h) a building site or construction or assembly project which exists for more than twelve months.

  1. Notwithstanding paragraph 1 of this Article, a permanent establishment shall not include a fixed place of business used only for one or more of the following activities:

(a) the use of facilities for the purpose of storage, display, or delivery of goods or merchandise belonging to the resident;

(b) the maintenance of a stock of goods or merchandise belonging to the resident for the purpose of storage, display, or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the resident for the purpose of processing by another person;

(d) the maintenance of a fixed place of business for the purpose of purchasing goods or merchandise, or for collecting information, for the resident;

(e) the maintenance of a fixed place of business for the purpose of advertising, for the supply of information, for scientific research, or for similar activities which have a preparatory or auxiliary character, for the resident.

  1. A person acting in a Contracting State on behalf of the other Contracting State — other than an agent of an independent status to whom paragraph 5 applies — shall be deemed to be a permanent establishment in the first-mentioned State if such person:

(a) has, and habitually exercises in that State, an authority to conclude contracts in the name of that resident, unless the exercise of such authority is limited to the purchase of goods or merchandise for that resident, or

(b) maintains substantial equipment or machinery within the first-mentioned State for a period of twelve months or more.

  1. A resident of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because such resident carries on business in that other State through a broker, general commission agent, or any other agent of an independent status, where such persons are acting in the ordinary course of their business.
  2. The fact that a resident of one of the Contracting States is a related person, as defined in Article 8 of this Convention, with respect to a resident of the other Contracting State or with respect to a person which engages in industrial or commercial activity in that other Contracting State (whether through a permanent establishment or otherwise) shall not be taken into account in determining whether that resident of the first Contracting State has a permanent establishment in the other Contracting State.
  3. An insurance company of one of the Contracting States shall be considered as having a permanent establishment in the other Contracting State if, through a representative other than one described in paragraph 5, such company receives premiums from or insures risks in the territory of that other Contracting State.

Article 5
Income from real property

  1. Income from real property and royalties in respect of the operations of mines, quarries or other natural resources (not including interest on debts secured by mortgages or other encumbrances on such real property or royalty interests but including gains derived from the sale or exchange of such property or the right giving rise to such royalties) shall be taxable by the Contracting State in which such property, mines, quarries, or other natural resources are situated.
  2. The provisions of paragraph 1 shall apply to income derived from the usufruct, direct use, letting, or use in any other form of real property.

Article 6
Business profits

  1. Industrial or commercial profits of a resident of one of the Contracting States shall be taxable only in that State unless such resident is engaged in industrial or commercial activity in the other Contracting State through a permanent establishment situated therein. If such resident is so engaged, tax may be imposed by such other State on the industrial or commercial profits of such resident but only on so much of them as are attributable to the permanent establishment.
  2. Where a resident of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the industrial or commercial profits which would be attributable to such permanent establishment if such permanent establishment were an independent entity engaged in the same or similar activities under the same or similar conditions and dealing at arm’s length with the resident of which it is a permanent establishment.
  3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are reasonably connected with such profits including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere.
  4. A partner shall be considered to have realized income or incurred deductions to the extent of his ratable share of the profits or losses of the partnership. For this purpose, the character of any item of income or deduction accruing to a partner shall be determined as if it were realized or incurred from the same source and in the same manner as realized or incurred by the partnership. A partner will be considered to have realized or incurred a proportionate share of each item of income and deduction of the partnership, except to the extent that his share of the profits depends on the source of the income.
  5. No profits shall be attributed to a permanent establishment merely by reason of the purchase of goods or merchandise by that permanent establishment, or by the resident of which it is a permanent establishment, for the account of that resident.
  6. The term “industrial or commercial profits of a resident” includes income derived from manufacturing, mercantile, agricultural, fishing, or mining activities, from the operation of ships or aircraft, from the furnishing of personal services, from the rental of tangible personal property, and from insurance activities and rents or royalties derived from motion picture films, films or tapes of radio or television broadcasting. It also includes income derived from real property and natural resources and dividends, interest, royalties (as defined in paragraphs 3 and 4 of Article 11), and capital gains but only if the right or property giving rise to such income, dividends, interest, royalties, or capital gains is effectively connected with a permanent establishment which the recipient, being a resident of one Contracting State, has in the other Contracting State. It does not include income received by an individual as compensation for personal service either as an employee or in an independent capacity.

Article 7
Shipping and air transport

  1. Notwithstanding Articles 6 and 12:

(a) Where a resident of the United States derives income from the operation in international traffic of ships or aircraft, or gains from the sale, exchange or other disposition of ships or aircraft used in international traffic by such resident, such income or gains shall be taxable only in the United States.

(b) Where a resident of France derives income from the operation in international traffic of ships or aircraft, or gains from the sale, exchange or other disposition of ships or aircraft used in international traffic by such resident, such income or gains shall be taxable only in France.

  1. The provisions of this Article shall also apply to the proportionate share of income derived by a resident of a Contracting State from participation in a pool, a joint business or an international operating agency. The proportionate share shall be treated as derived directly from the operation in international traffic of ships or aircraft.
  2. In the case of a corporation, the provisions of paragraphs 1 and 2 shall apply only if more than 50 percent of the capital of such corporation is owned, directly or indirectly:

(a) by individuals who are residents of the Contracting State in which such corporation is resident or of a State with which the other Contracting State has a convention which exempts such income; or

(b) by such Contracting State.

However, if more than 50 percent in value of the shares of a corporation or of its parent are listed on one or more recognized securities exchanges in a Contracting State, and there is substantial trading activity in those shares on such exchange or exchanges, then the provisions of paragraphs 1 and 2 shall apply if it can be shown that 20 percent or more of the capital of such corporation is owned, directly or indirectly, by individuals and the Contracting State specified in this paragraph.

  1. For the purposes of this Article, income derived from the operation in international traffic of ships or aircraft includes:

(a) profits derived from the rental on a full or bareboat basis of ships or aircraft if operated in international traffic by the lessee or if such rental profits are incidental to other profits described in paragraph 1, or

(b) profits of a resident of a Contracting State from the use or maintenance of containers (including trailers, barges and related equipment for the transport of containers) used for the transport in international traffic of goods or merchandise if such income is incidental to other profits described in paragraph 1.
Article 8
Related persons

  1. Where a resident of a Contracting State and a resident of the other Contracting State are related and where such related persons make arrangements or impose conditions between themselves which are different from those which would be made between independent persons, then any income which would, but for those arrangements or conditions, have accrued to the resident of the first Contracting State but, by reason of those arrangements or conditions, has not so accrued, may be included in the income of the resident of the first Contracting State for purposes of the present Convention and taxed accordingly.

2.

(a) A person other than a corporation is related to a corporation in such person participates directly or indirectly in the management, control, or capital of the corporation.

(b) A corporation is related to another corporation if either participate directly or indirectly in the management, control, or capital of the other, or if any person or persons participate directly or indirectly in the management, control, or capital of both corporations.
Article 9
Dividends

  1. Dividends derived from sources within a Contracting State by a resident of the other Contracting State may be taxed in that other State.
  2. Dividends derived from sources within a Contracting State by a resident of the other Contracting State may also be taxed by the former Contracting State but the tax imposed on such dividends shall not exceed:

(a) 15 percent of the amount actually distributed; or

(b) when the recipient is a corporation, 5 percent of the amount actually distributed if:

(i) during the part of the paying corporation’s taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least ten percent of the outstanding shares of the voting stock of the paying corporation was owned by the recipient corporation, and

(ii) not more than 25 percent of the gross income of the paying corporation for such prior taxable year (if any) consisted of interest and dividends (other than interest derived in the conduct of a banking, insurance, or financing business and dividends or interest received from subsidiary corporations, 50 percent or more of the outstanding shares of the voting stock of which was owned by the paying corporation at the time such dividends or interest were received).

  1. Paragraphs 2 and 6 of this Article and, in the case of dividends derived by a resident of France, paragraph 1 of this Article, shall not apply if the recipient of the dividends has a permanent establishment in the other Contracting State and the shares with respect to which the dividends are paid are effectively connected with the permanent establishment. In such a case, the provisions of Article 6 shall apply.

4.

(a) Except as provided in subparagraph (b), dividends paid by a corporation of one of the Contracting States shall be treated as income from sources within that Contracting State, and dividends paid by any other corporation shall be treated as income from sources outside that Contracting State.

(b) Dividends paid by a corporation other than a United States corporation shall be treated as dividends from sources within the United States if such corporation had a permanent establishment in the United States and more than 80 percent of its gross income was taxable to such permanent establishment for a three-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such portion of that period as the corporation has been in existence).

  1. When the prepayment (précompte) is levied by reason of dividends paid by a French corporation to a resident of the United States, who is not entitled to the payment described in paragraph 6 with respect to such dividends, such resident shall be entitled to the refund of that prepayment, subject to deduction of the withholding tax with respect to the refunded amount in accordance with paragraph 2 of this Article.

6.

(a) A resident of the United States who receives a dividend from a French corporation which, if received by a resident of France would entitle such resident to a tax credit (avoir fiscal), shall be entitled to a payment from the French Treasury equal to such credit (avoir fiscal), subject to the deduction from such payment of withholding tax in the amount provided for in paragraph 2(a) of this Article.

(b) The provisions of subparagraph (a) shall be applicable to the following residents of the United States:

(i) an individual or other person (other than a corporation or an entity treated under United States law as a corporation) who is a resident of the United States;

(ii) a corporation which is not a regulated investment company and which, within the meaning of the provisions of the United States Internal Revenue Code providing a credit for taxes paid by a foreign corporation, owns less than 10 percent of the voting stock of the French corporation referred to in subparagraph (a); or

(iii) a corporation which is a regulated investment company owning less than 10 percent of the voting stock of the French corporation referred to in subparagraph (a) and which has less than 20 percent of its shares owned by persons who are neither citizens nor residents of the United States.

(c) The payment provided for under subparagraph (a) shall be deemed to be a distribution by the French corporation.

(d) The competent authorities may prescribe regulations to implement the provisions of this paragraph and further define and determine the terms and conditions under which any payment provided for in paragraph (a) may be made. 1

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1 In accordance with the Exchange of Notes to the 1970 Protocol: “The Protocol to the income tax Convention is designed to extend the French tax credit (avoir fiscal) to persons who make portfolio investments in stock of French corporations, including persons who make their investments through United States regulated investment companies. The provisions of the Protocol are not intended to apply to a United States corporation which has a substantial interest, i.e., 10 percent or more of the stock, in a French corporation. Accordingly, it is understood that the tax credit (avoir fiscal) may not be extended indirectly to a United States corporation which would indirectly hold shares in a French corporation in excess of the specified limit. In other words, if a United States corporation holds indirectly an interest in a French company in excess of 10 percent through its total or partial ownership of the stock in one or more related corporations which in turn own stock in the French corporation, the French corporation may refuse to extend the French tax credit (avoir fiscal) to that or these related corporations.”

 

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Article 10
Interest

  1. Interest derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State.
  2. Notwithstanding that under Article 3 of the Convention a permanent establishment in one of the Contracting States of an enterprise of the other Contracting State is not a resident of the first-mentioned State, a permanent establishment in the United States of a French bank or financial or credit institution shall be treated by France solely for purposes of paragraph 1 of this Article for purposes of French taxes as if it were a resident of the United States, provided that the indebtedness in respect of which the interest is paid is effectively connected with such permanent establishment in the ordinary course of its business.
  3. The term “interest” as used in this Convention means income from indebtedness of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities, and income from bonds or debentures, including premiums or prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purposes of the Convention.
  4. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated herein, or performs in that other State independent personal services from a fixed base situated therein, and the interest is attributable to such permanent establishment or fixed base. In such case the provisions of Article 6 or Article 14, as the case may be, shall apply.
  5. Interest shall be deemed to arise in a Contracting State when the payor is that State itself or a political subdivision, local authority, or resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness in respect of which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
  6. Where, by reason of a special relationship between the payor and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payor and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of the Convention.
  7. A Contracting State may not impose any tax on interest paid by a resident of the other Contracting State, except insofar as:

(a) the interest is paid to a resident of the first-mentioned State;

(b) the interest is attributable to a permanent establishment or a fixed base of the beneficial owner of the interest situated in the first-mentioned State; or

(c) the interest arises in the first-mentioned State and is not paid to a resident of the other State.
Article 11
Royalties

  1. Royalties derived from sources within one Contracting State by a resident of the other Contracting State may be taxed in that other State.
  2. Except as provided in paragraph 3, royalties derived from sources within a Contracting State by a resident of the other Contracting state may also be taxed by the former Contracting State but the tax imposed on such royalties shall not exceed 5 percent of the gross amount paid.
  3. Royalties derived from copyrights of literary, artistic, or scientific works (including gain from the sale or exchange of property giving rise to such royalties) by a resident of one Contracting State shall be taxable only in that Contracting State.
  4. The term “royalties” as used in paragraph 1 of this Article means:

(a) any royalties, rentals, or other amounts paid as consideration for the use of, or the right to use, patents, designs or models, plans, secret processes or formulae, trademarks, or other like property or rights, or for knowledge, experience, or skill (know-how), and

(b) gains derived from the sale or exchange of any such right or property, if payment of the amounts realized on such sale or exchange is contingent, in whole or in part, on the productivity, use or disposition of such right or property. If the amounts derived from the sale or exchange of any such right or property are not so contingent, the provisions of Article 12 shall apply.

  1. Paragraphs 2 and 3 of this Article, and, in the case of royalties derived by a resident of France, paragraph 1 of this Article, shall not apply if the recipient of the royalty, being a resident of one of the Contracting States, has in the other Contracting State a permanent establishment and the right or property giving rise to the royalties is effectively connected with such permanent establishment. In such a case, the provisions of Article 6 shall apply.
  2. Royalties paid for the use of, or the right to use, property described in paragraph 4 in a State shall be treated as income from sources within that State.
  3. Where, owing to a special relationship between the payer and the recipient, or between both of them and some other person, the amount of the royalties paid exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall only apply to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

Article 12
Capital gains

  1. A resident of one of the Contracting States shall be taxable only in that State on gains from the sale or exchange of capital assets.
  2. Paragraph 1 of this Article shall not apply if:

(a) the gain is received by a resident of one of the Contracting States and arises out of the sale or exchange of property described in Article 5 (Income from real property) located within the other Contracting State or of the sale or exchange of shares of comparable interests in a real property cooperative or of a corporation whose assets consist principally of such property;

(b) the recipient of the gain, being a resident of one of the Contracting States, has a permanent establishment in the other Contracting State and the property giving rise to the gain is effectively connected with such permanent establishment, or

(c) the recipient of the gain, being an individual resident of one of the Contracting States:

(i) maintains a fixed base in the other Contracting State and the property giving rise to such gain is effectively connected to such fixed base, or

(ii) is present in the other Contracting State for a period or periods exceeding in the aggregate 183 days during the taxable year.

  1. In the case of gains described in paragraph 2(b), the provisions of Article 6 shall apply.

Article 13
Branch profits

1.

(a) Dividends paid by a French corporation to a person other than a citizen, resident, or corporation of the United States shall be exempt from tax by the United States unless such French corporation had a permanent establishment in the United States and more than 80 percent of its gross income was taxable to such permanent establishment for a 3-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such portion of that period as the corporation has been in existence).

(b) The United States may impose its personal holding company tax and accumulated earnings tax as if this Convention had not come into effect. However:

(i) a French corporation shall be exempt from the United States personal holding company tax in any taxable year if all of its stock is owned by one or more individual residents of France in their individual capacities for that entire year;

(ii) a French corporation shall be exempt from the United States accumulated earnings tax in any taxable year unless such corporation is engaged in trade or business in the United States through a permanent establishment at any time during such year.

2.

(a) A United States corporation which maintains a permanent establishment in France shall remain subject therein to the withholding tax in accordance with provisions of French internal law but:

(i) the base on which such tax shall be levied will be reduced by 1/3 and

(ii) the rate of such tax shall not exceed 15 percent.

(b) Profits realized by a French permanent establishment of a United States corporation and incorporated in its capital shall not be subject in France to the “droit d’apport majore”.
Article 14
Independent personal services

  1. Income derived by a resident of a Contracting State in respect of independent activities shall be taxable only in that State unless such activities were performed in the other Contracting State. Income in respect of independent activities performed within such other State may be taxed by such other State.
  2. Notwithstanding the provisions of paragraph 1, income derived by a resident of a Contracting State in respect of independent activities performed in the other Contracting State shall not be taxable in such other State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, and

(b) the recipient does not maintain a fixed base in the other State for a period or periods exceeding in the aggregate 183 days in such year.

  1. The term “independent activities” means all the activities — other than commercial, industrial, or agricultural activities — carried on on his own account independently by a person who receives the proceeds or bears the losses arising from these activities.
  2. Article 6, paragraph 4, shall apply by analogy. In no event, however, shall that provision result in France exempting under Article 23 more than 50 percent of the earned income from a partnership accruing to a resident of France. The amount of such a partner’s income which is not exempt under Article 23 solely by reason of the preceding sentence shall reduce the amount of partnership earned income from sources within France on which France can tax partners who are not residents of France.

Article 15
Dependent personal services

  1. Salaries, wages, and other similar remuneration paid to a resident of a Contracting State for labor or personal services shall be taxable only in that State unless such labor or personal services were performed in the other Contracting State. Remuneration received for labor or personal services performed within such other State may be taxed by such other State.
  2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall not be taxable in such other State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned,

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
(c) the remuneration is not borne by a permanent establishment which the employer has in the other State.

  1. Notwithstanding the preceding provisions of this Article, remuneration derived by a resident of a Contracting State in respect of employment as a member of the regular complement of a ship or aircraft operated in international traffic may be taxed only in that State.

Article 15A
Artistes and athletes

  1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio, or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State, except where the amount of the gross receipts derived by such entertainer or athlete, including expenses reimbursed to him or borne on his behalf, from such activities does not exceed ten thousand United States dollars ($10,000) or its equivalent in French francs for the taxable year concerned.
  2. Where income in respect of activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete but to another person, that income of that other person may, notwithstanding the provisions of Articles 6 and 14, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised, unless it is established that neither the entertainer or athlete nor persons related thereto participate directly or indirectly in any profits of that other person in any manner, including the receipt of deferred remuneration, bonuses, fees, dividends, partnership distributions, or other distributions.

Article 16
Governmental functions

  1. Remuneration, including pensions, paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to any individual who is national of that State in respect of services rendered to that State or a subdivision or local authority thereof in the discharge of functions of a governmental nature shall be taxable only in that Contracting State.
  2. The provisions of Articles 15, 19 and 20 shall apply to remuneration or pensions in respect of services rendered in connection with any industrial or commercial activity carried on by one of the Contracting States or a political subdivision or a local authority thereof.
  3. In the case of an individual who is a national of both Contracting States, the provisions of Article 22, paragraph 4, shall apply to remuneration described in paragraph 1 but such remuneration shall be treated as income from sources within the Contracting State from which such individual receives such remuneration.

Article 17
Teachers

  1. An individual who is a resident of one of the Contracting States at the beginning of his visit to the other Contracting State and who, at the invitation of the Government of the other Contracting State or of a university or other accredited educational or research institution situated in the other Contracting State, visits the latter Contracting State for the primary purpose of teaching or engaging in research, or both, at a university or other accredited institution shall be exempt from tax by the latter Contracting State on his income from personal services for teaching or research at such educational or research institution, or at other such institutions, for a period not exceeding 2 years from the date of his arrival in the latter Contracting State.
  2. This Article shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons.

Article 18
Students and trainees

1.

(a) An individual who is a resident of one of the Contracting States at the beginning of his visit to the other Contracting State and who is temporarily present in the other Contracting State for the primary purpose of:

(i) studying at a University or other accredited educational institution in that other Contracting State, or

(ii) securing training required to qualify him to practice a profession or professional speciality, or

(iii) studying or doing research as a recipient of a grant, allowance, or award from a governmental, religious, charitable, scientific, literary, or educational organization,

shall be exempt from tax by that other Contracting State with respect to amounts described in subparagraph (b).

(b) The amounts referred to in subparagraph (a) include:

(i) gifts from abroad for the purposes of his maintenance, education, study, research, or training;

(ii) the grant, allowance, or award; and

(iii) income from personal services performed in the other Contracting State in an amount not in excess of $2,000 or its equivalent in francs for any taxable year.

(c) The benefits under this paragraph shall only extend for such period of time as may be reasonably or customarily required to effectuate the purpose of the visit, but in no event shall any individual have the benefits of this Article and Article 17 for more than a total of five taxable years.

  1. A resident of one of the Contracting States who is present in the other Contracting States as an employee of, under contract with, a resident of the former State, for the primary purpose of:

(a) acquiring technical, professional, or business experience from a person other than that resident of the former State or a corporation 50 percent or more of the voting stock of which is owned by that resident of the former State, or

(b) studying at a university or other accredited educational institution in that other Contracting State,

shall be exempt from tax by that other Contracting state for one taxable year with respect to his income from personal services in an amount not in excess of $5,000 or its equivalent in francs.
Article 19
Private pensions and annuities

  1. Except as provided in Article 16, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that Contracting State.
  2. Alimony and annuities paid to a resident of a Contracting State shall be taxable only in that Contracting State.
  3. The term “annuities,” as used in this Article, means a stated sum paid 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 (other than services rendered).
  4. The term “pensions,” as used in this Article, means periodic payments made after retirement in consideration for, or by way of compensation for injuries received in connection with, past employment.

5.

(a) Contributions paid by, or on behalf of, an individual resident of a Contracting State, who is not a citizen of that State, to pension, profit-sharing, and other retirement plans that are recognized for tax purposes in the other Contracting State will be treated in the same way for tax purposes in the first-mentioned State as contributions paid to pension, profit-sharing and other retirement plans that are recognized for tax purposes in that first-mentioned State, provided that the competent authority of the first-mentioned State agrees that the plans correspond to pension, profit-sharing or other retirement plans recognized for tax purposes by that State.

(b) Payments received by the beneficiary in respect of the plans referred to in (a) will be included in income for tax purposes of the State of residence, to the extent that they are not exempt under Article 23, when and to the extent that such payments are considered gross income by the other Contracting State.
Article 20
Social security payments

Social security payments (whether representing employee or employer contributions or accretions thereto) paid by one of the Contracting States to an individual who is a resident of the other Contracting State or a citizen of the United States shall be taxable only in the former Contracting State.
Article 21
Rules applicable to personal income Articles

  1. Articles 14 through 18 shall apply to reimbursed travel expenses, but such expenses shall not be taken into account in computing the maximum amount of exemptions specified in Article 18.
  2. An individual who qualifies for benefits under more than one of the provisions of Articles 14 through 18 may apply that provision most favorable to him, but shall not be entitled to the benefits of more than one provision in any taxable year.

Article 22
General rules of taxation

  1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.
  2. A resident of one of the Contracting States shall be taxed by the other Contracting State only on:

(a) commercial or industrial profits attributable to a permanent establishment located in that other Contracting State, and

(b) income from sources within that other Contracting State,

in accordance with the limitations set forth in the present Convention.

  1. The provisions of the present Convention shall not be construed to restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded:

(a) by the laws of one of the Contracting States in the determination of the tax imposed by that State, or

(b) by any other agreement between the Contracting States.

4.

(a) The United States may tax its citizens and residents as if the present Convention had not come into effect. For this purpose the term “citizen” shall include a former citizen whose loss of citizenship had as one of its principal purposes the avoidance of income tax, but only for a period of 10 years following such loss.

(i) This provision shall not affect the rules laid down in Article 20 (Social security payments), Article 23 (Relief from double taxation), and Article 24 (Non-discrimination).

(ii) This provision shall not affect the rules laid down in Articles 17, 18, and 21 (Students, Teachers, Rules applicable thereto) when applicable to individuals who are not citizens of the United States and who do not have immigrant status in the United States.

(iii) This provision shall not affect the rules laid down in Articles 16 and 21 (Governmental functions, Rules applicable thereto) when they apply to:

— an individual who is not a citizen of the United States and who does not have immigrant status in the United States;

— an individual who, having immigrant status in the United States, has elected to claim the benefits of these Articles; in that case, such person must agree that any calendar year or portion of a calendar year for which Articles 16 and 21 apply shall not be counted as a period during which he has resided or has been physically present in the United States in the calculation of periods of residence or presence in the United States required for naturalization pursuant to the immigration and nationality laws of the United States.

(b) [deleted].

  1. Any transaction in which an order for the purchase, sale or exchange of stocks, securities or commodities originates in one of the Contracting States and is executed through a stock or commodities exchange in the other State shall be exempt by the former State from stamp or like tax otherwise arising with respect to such transaction.

Article 22A
Capital

  1. Capital represented by real property or interests in real property or by shares or rights in a corporation or a body corporate the assets of which consist principally of real property or interests in real property may be taxed in the Contracting State where such real property is situated. For the purposes of this provisions, real property pertaining to the industrial, commercial or agricultural operation of such corporation or body corporate or to the performance of independent personal services shall not be taken into account.
  2. Capital represented by furniture and fixtures may be taxed in the Contracting State in which they are situated.
  3. Capital represented by movable property forming part of the assets of a permanent establishment of a business or pertaining to a fixed base used for the performance of independent personal services may be taxed in the Contracting State where the permanent establishment or the fixed base is situated.
  4. Capital of a resident of a Contracting State represented by ships and aircraft operated in international traffic and movable property pertaining to the operation of such ships and aircraft shall be taxable only in that State.
  5. Capital represented by shares or rights forming part of a substantial interest in the capital of a corporation which is a resident of a Contracting State may be taxed in that State. A person is considered to have a substantial interest if he or she owns, alone or with related persons, directly or indirectly, shares or rights the total of which gives right to at least 25 percent of the corporate earnings.
  6. All other elements of capital of a resident of a Contracting State are taxable only in that State.
  7. Notwithstanding the provisions of the preceding paragraphs of this Article, for the purposes of taxation with respect to the wealth tax referred to in subparagraph 1(b)(iii) of Article 1 of an individual resident of France who is a citizen of the United States and not a French national, the assets situated outside of France that such a person owns on the first of January of each of the five years following the calendar year in which he becomes a resident of France shall be excluded from the base of assessment of the taxes referred to in subparagraph 1(b)(iii) of Article 1 relating to each of those five years. If such an individual loses the status of resident of France for a duration of at least three years and then again becomes a resident of France, the assets situated outside of France that such a person owns on the first of January of each of the five years following the calendar year in which he again becomes a resident of France shall be excluded from the base of assessment of the taxes referred to in subparagraph 1(b)(iii) of Article 1 relating to each of those five years.

Article 23
Relief from double taxation

  1. In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a citizen or a resident of the United States as a credit against the United States income tax:

(a) the income tax paid to France by or on behalf of such citizen or resident; and

(b) in the case of a United States corporation owning at least 10 percent of the voting stock of a corporation which is a resident of France and from which the United States corporation receives dividends, the income tax paid to France by or on behalf of the distributing corporation with respect to the profits out of which the dividends are paid.

For the purposes of this paragraph, the taxes referred to in subparagraph 1(b)(i) and paragraph 3 of Article 1 shall be considered income taxes.

  1. In the case of France:

(a) income referred to below derived by a resident of France shall be exempt from the French taxes mentioned in subparagraph 1(b)(i) of Article 1:

(i) income (other than income referred to in paragraph 2(b) of this Article) which is taxable in the United States under this Convention other than by reason of the citizenship of the taxpayer; and

(ii) in the case of an individual who is a citizen of the United States:

(a) income which would be exempt from United States tax under Articles 17 or 18 if the recipient were not an individual who is a citizen of the United States; and

(b) income dealt with in paragraph 1 of Article 19 to the extent attributable to services performed while his principal place of employment was in the United States, and alimony and annuities dealt with in paragraph 2 of Article 19.

(b) As regards income taxable in the United States under Articles 9, 11, or 15A, France shall allow to a resident of France a tax credit corresponding to the amount of tax levied by the United States under this Convention other than by reason of citizenship. Such tax credit, not to exceed the amount of French tax levied on such income, shall be allowed against taxes mentioned in subparagraph 1(b)(i) and paragraph 3 of Article 1 of the Convention in the bases of which such income is included.

(c) Notwithstanding the provisions of subparagraphs (a) and (b), French tax may be computed on income chargeable in France by virtue of this Convention at the rate appropriate to the total of the income chargeable in accordance with French law.

(d) As regards capital taxable in the United States under Article 22A that is also taxable in France, France shall allow to a resident of France a tax credit corresponding to the amount of tax levied by the United States on such capital. Such tax credit, not to exceed the amount of French tax levied on such capital, shall be allowed against the wealth tax referred to in subparagraph 1(b)(iii) of Article 1 of the Convention in the bases of assessment of which such capital is included.

  1. In the case of an individual who is both a resident of France and a citizen of the United States:

(a) The amount of the tax credit referred to in subparagraph (b) of paragraph 2 shall be equal to the amount of tax which the United States would be entitled to levy in respect of the item of income if the individual deriving the income were not a citizen of the United States, but shall not exceed the amount of French tax levied on such item of income.

(b) The United States shall allow as a credit against United States tax the income tax paid to France after the credit referred to in paragraph 2(b). However, the credit so allowed against United States tax shall not reduce that portion of the United States tax that is creditable against French tax in accordance with paragraph 2(b).

(c) Income referred to in paragraph 2 and income that, but for the citizenship of the taxpayer, is exempt from United States tax under the Convention, shall be considered income from sources within France to the extent necessary to give effect to the provisions of paragraph 3(b). This provision shall apply only to the extent that an item of income is included in gross income for purposes of determining French tax. No provision of this paragraph 3(c) relating to source of income shall apply in determining credits against United States tax for foreign taxes other than those referred to in subparagraph 1(b)(i) and paragraph 3 of Article 1.

  1. If for any taxable year a partnership of which an individual member is a resident of France so elects, for United States tax purposes:

(a) any income which solely by reason of paragraph 4 of Article 14 is not exempt from French tax under this Article shall be considered income from sources within France; and

(b) the amount of income to which subparagraph (a) applies shall reduce (but not below zero) the amount of partnership earned income from sources outside the United States which would otherwise be allocated to partners who are not residents of France. For this purpose the reduction shall apply first to income from sources within France and then to other income from sources outside the United States.

If the individual member of the partnership is both a resident of France and a citizen of the United States, this provision shall not result in a reduction of United States tax below that which the taxpayer would have incurred without the benefit of deductions or exclusions available solely by reason of his presence or residence outside the United States.

  1. A resident of a Contracting State who maintains one or several abodes in the territory of the other Contracting State shall not be subject in that other State to an income tax according to an “imputed” income based on the rental of that or those abodes.

Article 24
Non-discrimination

  1. A citizen of one of the Contracting States who is a resident of the other Contracting State shall not be subjected in that other Contracting State to more burdensome taxes than is a citizen of that other Contracting State who is a resident thereof.
  2. The taxation on a permanent establishment which a resident of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on a resident of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowance, reliefs, and reductions for taxation purposes an account of civil status or family responsibilities which it grants to its own residents. The provisions of this paragraph shall not be construed to prevent the application of the provisions of Article 13 (Branch profits) of the Convention nor to prevent the United States from imposing a comparable tax burden on the income of a permanent establishment maintained by a resident of France in the United States.
  3. A corporation of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which a corporation of that first-mentioned Contracting State carrying on the same activities, the capital of which is wholly owned by one or more residents of that first-mentioned State, is or may be subjected.

Article 24A
Limitation on benefits

  1. A person (other than an individual) which is a resident of one of the Contracting States shall not be entitled under this Convention to relief from taxation in the other Contracting State unless:

(a) more than 50 percent of the beneficial interest in such person (or, in the case of a corporation, more than 50 percent of the number of shares of each class of the corporation’s shares) is owned, directly or indirectly, by any combination of one or more of:

(i) individuals who are residents of the United States;

(ii) citizens of the United States;

(iii) individuals who are residents of France;

(iv) corporations as described in subparagraph (b); and

(v) the Contracting States;

(b) it is a corporation in whose principal class of shares there is substantial and regular trading on a recognized stock exchange in one of the Contracting States; or

(c) the establishment, acquisition and maintenance of such person and the conduct of its operations did not have as one of its principal purposes the purpose of obtaining benefits under the Convention.

  1. For the purposes of paragraph 1(b), the term “a recognized stock exchange” means:

(a) any stock exchange registered with the Securities and Exchange Commission as a national securities exchange for the purposes of the Securities Exchange Act of 1934 and the NASDAQ system owned by the National Association of Securities Dealers Inc.;

(b) the French stock exchanges (Bourses de Valeurs); and

(c) any other stock exchange agreed upon by the competent authorities of the Contracting States.
Article 25
Mutual agreement procedure

  1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with this Convention, he may, notwithstanding the remedies provided by the national laws of those States, present his case to the competent authority of the Contracting State of which he is a resident.
  2. The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the application of the Convention. In particular, the competent authorities of the Contracting States may consult together to endeavor to agree:

(a) to the same attribution of industrial or commercial profits to a resident of one of the Contracting States and its permanent establishment situated in the other Contracting State;

(b) to the same allocation of income between a resident of one of the Contracting States and any related person, provided for in Article 8; or

(c) to the same determination of the source of particular items of income.

  1. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. When it seems advisable for the purpose of reaching agreement, the competent authorities may meet together for an oral exchange of opinions.
  2. In the event that the competent authorities reach such an agreement, taxes shall be imposed on such income, and refund or credit of taxes shall be allowed, by the Contracting States in accordance with such agreement. Any agreement reached shall be implemented notwithstanding any time limits or other procedural limitations in the domestic law of the Contracting States.

Article 26
Exchange of information

  1. The competent authorities of the Contracting States shall exchange such information as is pertinent to carrying out the provisions of this Convention or preventing fraud or fiscal evasion in relation to the taxes which are the subject of this Convention. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those (including a court or administrative body) concerned with the assessment, collection, or administration of, or the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the Convention.
  2. In no case shall the provisions of paragraph 1 be construed so as to impose on one of the Contracting States the obligation:

(a) to carry out administrative measures at variance with the laws or the administrative practice of that or the other Contracting State;

(b) to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

(c) to supply information which would disclose any trade, business, industrial, commercial, or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

  1. The exchange of information shall be either on a routine basis or on request with reference to particular cases. The competent authorities of the Contracting States shall agree on the list of information which shall be furnished on a routine basis.

Article 27
Assistance in collection

  1. The two Contracting States undertake to lend assistance and support to each other in the collection of the taxes to which the present Convention relates, together with interest, costs, and additions to the taxes and fines not being of a penal character according to the laws of the State requested, in the cases where the taxes are definitively due according to the laws of the State making the application.
  2. In the case of an application for enforcement of taxes, revenue claims of each of the Contracting States which have been finally determined will be accepted for enforcement by the State to which application is made and collected in that State in accordance with the laws applicable to the enforcement and collection of its own taxes.
  3. The application will be accompanied by such documents as are required by the laws of the State making the application to establish that the taxes have been finally determined.
  4. If the revenue claim has not been finally determined, the State to which application is made will take such measures of conservancy (including measures with respect to transfer of property of nonresident aliens) as are authorized by its laws for the enforcement of its own taxes.
  5. The assistance provided for in this Article shall not be accorded with respect to citizens, corporations, or other entities of the State to which application is made.

Article 28
Diplomatic and consular officers

Nothing in the present Convention shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements.
Article 29
Territorial extension

  1. This Convention may be extended, either in its entirety or with any necessary modifications, to the Overseas Territories of the French Republic which impose taxes substantially similar in character to those to which the Convention applies. Any such extension shall take effect from such date and subject to such modifications and conditions, as may be specified and agreed between the Contracting States in notes to be exchanged through diplomatic channels or in any other manner in accordance with their constitutional procedure.
  2. At any time after the expiration of a period of 1 year from the effective date of an extension made by virtue of paragraph 1 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 provisions in respect to any territory to which such application has been extended, in which case the provisions shall cease to be applicable to such territory on and after the first day of January following the date of such notice; provided, however, that this shall not affect the continued application of such provisions to the United States, to France, or to any other territory to which such provisions apply and which is not named in the notice of termination.
  3. Unless otherwise agreed by both Contracting States, the termination of the Convention by one of the Contracting States under Article 32 shall also terminate the application of the Convention to any territory to which it has been extended under this Article.

Article 30
Exchange of official information

  1. The competent authorities of the Contracting States shall notify each other of any amendments of the tax laws referred to in Article 1(1), and of the adoption of any taxes referred to in Article 1(2), by transmitting the texts of any amendments or new statutes at least once a year.
  2. The competent authorities of the Contracting States shall exchange the texts of all published material interpreting the present Convention under their respective laws, whether in the form of regulations, rulings, or judicial decisions.
  3. Where, by a reason of any change made in the taxation laws of one of the Contracting States, it seems advisable to adjust some provisions of this Convention without affecting its general principles, the necessary adjustments may be agreed between the Contracting States by notes to be exchanged through diplomatic channels or in any other manner in accordance with their respective constitutional procedure.

Article 31
Entry into force

  1. This Convention shall be ratified and instruments of ratification shall be exchanged at Washington. It shall enter into force one month after the date of exchange of the instruments of ratification. Its provisions shall for the first time have effect:

(a) in the case of France:

(i) as respects withholding taxes, to any proceeds payable and transactions completed on or after the date on which this Convention enters into force;

(ii) as respects other income taxes, to taxes which are levied for the assessment year 1967; and

(iii) as respects the tax on stock exchange transactions, the date on which this Convention enters into force;

(b) in the case of the United States:

(i) as respects the rate of withholding tax, to amounts received on or after the date on which this Convention enters into force;

(ii) as respects other income taxes, to taxable years beginning on or after January 1, 1967.

  1. Upon the coming into effect of this Convention, there shall terminate:

(a) the Convention of July 25, 1939, relating to income and other taxes

(b) the Convention of October 18, 1946, the supplementary Protocol of May 17, 1948, and the Convention of June 22, 1956, insofar as they concern taxes on income, on capital and tax on stock exchange transactions.

The provisions of those Conventions and of that Protocol will cease to have effect from the date on which the corresponding provisions of the present Convention shall for the first time have effect according to the subparagraph 1 above-mentioned [sic].
Article 32
Termination

This Convention shall remain in force until denounced by one of the Contracting States. Either Contracting State may denounce the Convention, through diplomatic channels, by giving notice of termination at least 6 months before the end of any calendar year after the year 1969. In such event, the Convention shall cease to have effect:

(1) in the case of France:

(a) as respects withholding taxes, on January 1 of the year following the year in which notice is given.

(b) as respects other income taxes, for any year of assessment beginning on or after January 1 of the year next following the year in which notice is given; and

(c) as respects the tax on stock exchange transactions, for any transactions occurring on or after January 1 of the year following the year in which notice is given;

(d) as regards the wealth tax, to capital owned on the first of January of the calendar year following the year in which notice is given.

(2) in the case of the United States:

(a) as respect withholding taxes, on January 1 of the year following the year in which notice is given;

(b) as respects other income taxes, for any taxable year beginning on or after January 1 of the year following the year in which notice is given; and

(c) as respects taxes referred to in paragraph 2 of Article 1, for any transactions occurring on or after January 1 of the year following the year in which notice is given.

In witness whereof, the respective plenipotentiaries have signed the present Convention.

Done at Paris in duplicate, in the English and French languages, each text being equally authentic, this 28th day of July, 1967.