El Salvador – USA Transport Tax Agreement (1987)

Transportation Tax Agreement (1987)

This Treaty was signed on December 17, 1987 and entered into force on December 17, 1987.

The American Embassy to the Ministry of Foreign Affairs of El Salvador

No. 722

The Embassy of the United States of America presents its compliments to the Ministry of Foreign Affairs of El Salvador and has the honor to propose that the two governments conclude an agreement to exempt from income tax, on a reciprocal basis, income derived by residents of the other country from the operation of 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 the taxes imposed by Subtitle A of the Internal Revenue Code gross income derived from the operation of aircraft by individuals who are residents of El Salvador (other than U.S. citizens) and corporations organized in El Salvador. This exemption is granted on the basis of equivalent exemptions granted by El Salvador to citizens of the United States (who are not residents of El Salvador) and to corporations organized in the United States.

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 El Salvador 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 El Salvador or is wholly owned (directly or indirectly) by a corporation whose stock is so traded and which is also organized in El Salvador.

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 means all income derived from the operation of aircraft, and all income from rental of aircraft, maintenance of aircraft, and gains from the alienation of aircraft, if the aircraft is operated in, or rented for use in, international traffic, or if such income is incidental to income from the international operation, or rental for international operation, of aircraft. It also includes income from the rental of containers and related equipment which is incidental to income from the international operation of aircraft.

The Embassy of the United States of America considers that this note, together with the Ministry’s reply note confirming that the Government of El Salvador agrees to these terms, constitutes an agreement between the two governments. This agreement shall enter into force on the date of the Ministry’s reply note and shall have effect with respect to the taxable years beginning on or after January 1, 1987.

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

The Embassy of the United States of America takes this opportunity to renew to the Ministry of Foreign Affairs of El Salvador the assurances of its highest consideration.

Embassy of the United States of America
San Salvador, December 17, 1987

The Ministry of Foreign Affairs of El Salvador to the American Embassy

Ministry of Foreign Affairs
Republic of El Salvador, C.A.
Department of State
Office of the Legal Advisor
No. AJ/13715

The Ministry of Foreign Affairs of the Republic of El Salvador presents its compliments to the Embassy of the United States of America and avails itself of this opportunity to acknowledge receipt of its note verbale No. 722, dated December 17, 1987, proposing to the Government of El Salvador an agreement to exempt from income tax, on a reciprocal basis, income derived by residents of the other country from the operation of aircraft.

The Ministry of Foreign Affairs informs the Embassy of the United States that the Government of the Republic of El Salvador fully accepts the terms of the above-mentioned agreement and considers that Note No. 722, together with this note in reply, constitute an agreement.

The Ministry of Foreign Affairs avails itself of this opportunity to renew to the Embassy of the United States of America the assurances of its highest consideration.

San Salvador, December 17, 1987
[Signature]
[Ministry stamp]