Denmark – USA Transport Tax Agreement (1987)

Transportation Tax Agreement (1987)

This Treaty was signed on July 6, 1987 and entered into force on July 6, 1987.

[AGREEMENT BETWEEN THE KINGDOM OF DENMARK AND THE UNITED STATES OF AMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION OF INCOME FROM SHIPPING AND AIR TRANSPORT] 1

The Department of State proposes to the Embassy of Denmark that the Government of the United States of America and the Government of the Kingdom of Denmark conclude an agreement amending the Exchange of Notes between the Government of the United States of America and the Government of the Kingdom of Denmark relating to relief from double income tax on shipping profits, signed at Washington, May 22, August 9 and 18, October 24, 25 and 28, and December 5 and 6, 1922, to exempt from income tax, on a reciprocal basis, income derived by residents of the other country from the international operation of ships and aircraft. The terms of the agreement are as follows:

The Government of the United States of America, in accordance with sections 872(b) and 883(a) of the Internal Revenue Code, agrees to exempt from tax gross income derived from the international operation of ships or aircraft by individuals who are residents of Denmark (other than U.S. citizens) and corporations organized in Denmark. This exemption is granted on the basis of equivalent exemptions granted by Denmark to citizens of the United States (who are not residents of Denmark) and to corporations organized in the United States (which are not subject to tax by Denmark on the basis of residence).

In the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions:

• (1) More than 50 percent of the value of the corporation’s stock is owned, directly or indirectly, by individuals who are residents of Denmark or of another country which grants a reciprocal exemption to U.S. citizens and corporations; or

• (2) The corporation’s stock is primarily and regularly traded on an established securities market in Denmark, or is wholly owned by a corporation whose stock is so traded and which is also organized in Denmark.

For purposes of the exemption from U.S. tax, subparagraph (1) will be considered to be satisfied if the corporation is a “controlled foreign corporation” under the Internal Revenue Code.

Gross income includes all income derived from the international operation of ships or aircraft, including income from the rental of ships or aircraft on a full (time or voyage) basis and income from the rental of containers and related equipment which is incidental to the international operation of ships or aircraft. It also includes income from the rental on a bareboat basis of ships and aircraft used for international transport.

The Department of State considers that this note, together with the Embassy’s reply note confirming that the Government of the Kingdom of Denmark agrees to these terms, constitutes an agreement amending the Exchange of Notes between the Government of the United States of America and the Government of the Kingdom of Denmark relating to relief from double income tax on shipping profits, signed at Washington, May 22, August 9 and 18, October 24, 25 and 28, and December 5 and 6, 1922. This agreement shall not affect the provisions of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, dated May 6, 1948. This agreement shall enter into force on the date of the Embassy’s reply note and shall have effect with respect to taxable years beginning on or after January 1, 1987.

Either Government may terminate this agreement by giving written notice of termination through diplomatic channels.

Department of State, Washington, July 6, 1987

The Embassy of Denmark presents its compliments to the Department of State and has the honor to acknowledge receipt of the Department’s note of today’s date proposing the terms of a reciprocal exemption from income tax of income derived from the international operation of ships and aircraft.

The Government of the Kingdom of Denmark agrees to exempt from tax gross income derived from the international operation of ships or aircraft by U.S. citizens (who are not residents of Denmark) and corporations organized in the United States (other than corporations which are subject to tax by Denmark on the basis of residence).

In the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions:

• (1) More than 50 percent of the value of the corporation’s stock is owned, directly or indirectly, by individuals who are citizens of the United States or of another country which grants a reciprocal exemption to Danish residents and corporations; or

• (2) the corporation’s stock is primarily and regularly traded on an established securities market in the United States, or is wholly owned by a corporation whose stock is so traded and which is also organized in the United States.

Gross income includes all income derived from the international operation of ships or aircraft, including income from the rental of ships or aircraft on a full (time or voyage) basis and income from the rental of containers and related equipment which is incidental to the international operation of ships or aircraft. It also includes income from the rental on a bareboat basis of ships and aircraft used for international transport.

The Embassy is pleased to confirm that the Department of State’s note and this reply note constitute an agreement amending the Exchange of Notes between the Government of the United States of America and the Government of the Kingdom of Denmark double income tax on shipping profits, signed at Washington, May 22, August 9 and 18, October 24, 25 and 28, and December 5 and 6, 1922. This agreement shall not affect the provisions of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, dated May 6, 1948. This agreement shall enter into force on today’s date and shall have effect with respect to taxable years beginning on or after

Either Government may terminate this agreement by giving written notice of termination through diplomatic channels.

The Embassy of Denmark takes this opportunity to renew to the Department of State the assurances of its highest consideration. Royal Danish Embassy, Washington D.C., July 6, 1987.

29. September 1987
Anders Fogh Rasmussen

1 The source from which this document was obtained did not include its formal title. This title has been drafted by the editors for readers’ ease of reference.