Iceland-United States: Income and Capital Tax Treaty and Supplementary Notes (2007)
This Treaty was signed on May 7, 1975 and entered into force on December 26, 1975.
MESSAGE FROM THE PRESIDENT OF THE UNITED STATES THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ICELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL, SIGNED AT REYKJAVIK ON MAY 7, 1975
LETTER OF SUBMITTAL
DEPARTMENT OF STATE, Washington,
June 21, 1975.
The White House.
I have the honor to submit to you, with a view to its transmission to the Senate for advice and Consent to ratification the Convention between the Government of the United States of America and the Government of the Republic of Iceland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, signed at Reykjavik on May 7, 1975. There is presently no such treaty in force between the United States and Iceland.
The treaty provides for reciprocal exemption from withholding tax in the source country on interest and royalties. Dividends are subject to tax at the source generally at a 15 percent rate, except that dividends paid by a subsidiary to a parent corporation will be charged at a maximum rate of five percent.
The proposed treaty with Iceland is essentially like other treaties entered into by the United States in recent years, such as those with Belgium, Japan, and Norway. In general, the provisions dealing with the taxation of business and personal service income and the administrative provisions are the same as those in our other recent treaties. There are, however, a few provisions which should be noted.
A special rule is provided in the nondiscrimination article under which Iceland will allow its deduction for dividends paid with respect to the income of a United States permanent establishment in Iceland.
The provision which reciprocally exempts shipping and air transport profits has been expanded to provide that incidental income from the lease of ships or aircraft or from the use or lease of containers will be treated as income from international traffic, and will be exempt from tax. While this has not appeared in previous treaties, it is established policy which has previously been reflected in exchanges of notes.
A provision has been included to deal with certain treaty abuse situations, which provides that under appropriate circumstances, when a corporation furnishes the services of others, the income of that corporation will not be considered as industrial and commercial profits. The host country, therefore, can tax the income of such corporation whether or not the corporation has a permanent establishment there.
A technical memorandum explaining in detail the provisions and effect of the Convention is being prepared by the Department of the Treasury and will be submitted to the Senate Foreign Relations Committee for consideration in connection with the Convention.
Upon entry into force, this Convention will be effective with respect to income and capital of calendar years or taxable years beginning (or in the case of taxes payable at the source, payments made) on or after January 1, of the year following the year in which the instruments of ratification were exchanged. Once entered into force, the Convention would remain in effect for a minimum period of five years and indefinitely thereafter subject to the right of either party to terminate it by giving a six-month notice for that purpose.
The Department of the Treasury, with the cooperation of the Department of State, was primarily responsible for the negotiation of this Convention. It has the approval of both Departments.
ROBERT S. INGERSOLL.
LETTER OF TRANSMITTAL
THE WHITE HOUSE, July 8, 1975.
I transmit herewith, for Senate advice and consent to ratification, the Convention signed at Reykjavik on May 7, 1975 between the Government of the United States of America and the Government of the Republic of Iceland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital.
There is no convention on this subject presently in force between the United States and Iceland.
The Convention follows generally the form and content of most conventions of this type recently concluded by this government. Its primary purpose is to clearly identify the tax interests of the two countries so as to avoid double taxation and make difficult the illegal evasion of taxation.
I also transmit, for the information of the Senate, the report of the Department of State with respect to the Convention.
Conventions such as this one are an important element in promoting closer economic cooperation between the United States and other countries. I urge the Senate to act favorably on this Convention at an early date and give its advice and consent to ratification.
GERALD R. FORD.
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA:
The Convention between the United States of America and the Republic of Iceland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect toTaxes on Income and Capital was signed at Reykjavik on May 7, 1975, the text of which Convention, in the English and Icelandic languages, is hereto annexed;
The Senate of the United States of America by its resolution of November 18, 1975, two-thirds of the Senators present concurring therein, gave its advice and consent to ratification of the Convention;
The Convention was ratified by the President of the United States of America on November 24, 1975, in pursuance of the advice and consent of the Senate, and was ratified on the part of the Republic of Iceland on November 17, 1975;
It is provided in Article 31 of the Convention that the Convention shall enter into force one month after the date of the exchange of instruments of ratification;
The instruments of ratification of the Convention were exchanged at Washington on November 26, 1975, and accordingly the Convention enters into force on December 26, 1975;
Now, THEREFORE, I, Gerald R. Ford, President of the United States of America, proclaim and make public the Convention, to the end that it shall be observed and fulfilled with good faith on and after December 26, 1975, by the United States of America and by the citizens of the United States of America and all other persons subject to the jurisdiction thereof.
IN TESTIMONY WHEREOF, I have signed this proclamation and caused the Seal of the United States of America to be affixed.
DONE at the city of Washington this twelfth day of December in the year of our Lord one thousand nine hundred seventy-five and of the Independence of the United States of America the two hundredth.
By the President:
GERALD R. FORD
ROBERT S. INGERSOLL
Acting Secretary of State