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US And Barbados Exchange Amended Tax Treaty Ratification Instruments

by Leroy Baker, Tax-News.com, New York

22 December 2004


US Treasury Deputy Secretary Samuel Bodman, and the Honorable Michael King, Ambassador to the United States from Barbados, on Tuesday exchanged documents bringing into force the amended income tax treaty between the United States and Barbados.

"This protocol reflects important improvements to the US-Barbados tax treaty, demonstrating the commitments of our respective governments to keeping the provisions of the treaty up to date in light of economic developments," commented Mr Bodman.

"We are pleased that our two countries were able to work together to make the changes necessary to preserve and enhance the tax treaty relationship,” he added.

The protocol, signed by both countries in July 2004 and approved by Congress in October, amends the existing tax treaty, which dates back to 1984. The amendments seek to ensure that the treaty is used for its intended purpose of addressing double taxation, and not used inappropriately to eliminate taxation altogether.

The modifications reflected in the protocol prevent the potential for exploitation of the treaty by US corporations to facilitate inappropriate US tax reductions in connection with a corporate inversion transaction.

The protocol also provides that the treaty's reductions in US withholding taxes do not apply in the case of entities that are not subject to the generally applicable Barbados tax system and that benefit instead from a preferential tax regime.

The protocol generally will be effective for taxable years beginning on or after January 1, 2005, with the provisions relating to withholding taxes effective for amounts paid or credited on or after February 1, 2005.

A comprehensive report in our Intelligence Report series looking at offshore and onshore corporate structures and their tax implications is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report7.asp

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