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United States And Netherlands Update Income Tax Treaty

by Mike Godfrey, Tax-News.com, Washington

10 March 2004

The United States and the Netherlands have signed a protocol amending their existing bilateral income tax treaty, it emerged this week.

Speaking at the signing ceremony on Monday, US Treasury Secretary, John Snow observed that:

"The new agreement that we are signing today is just the latest chapter in a long history of close relations between the United States and the Netherlands."

He continued:

"It is hard to imagine a country that is more outwardly-focused than the Netherlands. As a result, the Netherlands has been an international leader in bringing down barriers to cross-border trade and investment. The first tax-related agreement between our two countries was a shipping agreement that entered into force in 1926. Since that time we have entered into a series of tax treaties and protocols, each of which has helped further improve the environment for international trade and investment."

Going on to draw attention to the fact that the original tax treaty between the US and the Netherlands was one of the first bilateral agreements to include provisions preventing non-residents of either country from exploiting the tax benefits of the agreement, the Treasury Secretary outlined the ways in which the newly signed protocol improves upon the existing agreement. These include:

  • Modernising the provisions preventing inappropriate exploitation of the treaty to take into account economic developments and changes in treaty practices over the past decade. The new rules are simpler, clearer and more effective;
  • Providing for exclusive residence-country taxation of certain intercompany dividends. This elimination of withholding taxes removes a remaining barrier to investment between our two countries in both directions;
  • Providing clear rules regarding the treatment of investments made through partnerships, allowing flexibility in business form; and
  • Further coordinating the two countries' tax rules relating to pensions, allowing individuals to take up employment opportunities in either country without concerns about unintended tax effects on their retirement benefits.

The full text of the protocol amending the US-Netherlands DTA can be found in the Tax-News Resources section.

 

 






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