US And Sweden Sign Protocol To Income Tax Treaty

by Glen Shapiro, LawAndTax-News.com, New York

05 October 2005

The US Treasury Department on Monday announced that Assistant Secretary of State for Economic and Business Affairs, E. Anthony Wayne and Swedish Ambassador, Gunnar Lund have signed a new Protocol to amend the existing bilateral income tax treaty, concluded in 1994, between the two countries.

The Protocol was signed on Friday afternoon, and significantly reduces tax-related barriers to trade and investment flows between the United States and Sweden. It also modernizes the treaty to take account of changes in the laws and policies of both countries since the current treaty was signed.

The Protocol brings the tax treaty relationship with Sweden into closer conformity with US treaty policy, with the most important aspect of the agreement dealing with the taxation of cross-border dividend payments.

The Protocol is one of a few recent US tax agreements to provide an elimination of the withholding tax on dividends arising from certain direct investments. It also strengthens the treaty's provisions preventing so-called treaty shopping, which is the inappropriate use of a tax treaty by third-country residents.

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