U.S. Income Tax Treaties — Benefits Provided by a Country to Its Own Residents and Citizens (Portfolio 6875)

This Portfolio, 6875 T.M., U.S. Income Tax Treaties — Benefits Provided by a Country to Its Own Residents and Citizens, covers the benefits granted under a bilateral income tax treaty by one of the parties to the treaty to its own residents and citizens. To view this Portfolio, visit Bloomberg Tax for a free trial.

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Description

This Portfolio, 6875 T.M., U.S. Income Tax Treaties — Benefits Provided by a Country to Its Own Residents and Citizens, covers the benefits granted under a bilateral income tax treaty by one of the parties to the treaty to its own residents and citizens. Among these benefits are: (1) elimination or reduction of the tax liabilities of a country's residents and citizens in order to provide relief from double taxation that would otherwise arise from the other country's imposition of tax on the same items of income, with a focus on treaty and Code resourcing provisions; (2) elimination or reduction of the tax liabilities of a country's residents and citizens with respect to specific types of income for which the treaty assigns primary taxing jurisdiction to the other country (e.g., compensation for government employment, benefits from and contributions to pensions and retirement plans, and alimony and child support); (3) correlative adjustments in the case of transfer pricing adjustments involving associated enterprises; (4) the Mutual Agreement Procedure, under which a person may invoke a procedure for bilateral negotiations to relieve double taxation not otherwise resolved by the treaty's provisions; and (5) non-discrimination, under which Contracting States cannot discriminate against each other's nationals or residents in matters of taxation.

This Portfolio may be cited as Kellar and Browne Jr., 6875 T.M., U.S. Income Tax Treaties — Benefits Provided by a Country to Its Own Residents and Citizens.

Authors

Karl L. Kellar, Esq.

Karl L. Kellar, B.A. (summa cum laude ), University of Houston; J.D. (magna cum laude), Harvard Law School; member, District of Columbia Bar; member, American Bar Association, Tax Section; Branch Chief, Acting Director, Advance Pricing Agreement Program, Internal Revenue Service (1996–2000).

Patrick J. Browne Jr., Esq.

Patrick J. Browne Jr., B.S.M. (cum laude), Tulane University; J.D., Tulane University Law School; LL.M. (Taxation, with distinction), Georgetown University Law Center; member, District of Columbia Bar; member, Louisiana Bar; member, American Bar Association, Tax Section.

Table of Contents

Detailed Analysis
I. Introduction
Introductory Material
A. Scope of this Portfolio
B. Role of Tax Treaties
C. Model Treaties
1. Model Treaties Drafted by International Bodies
2. U.S. Model Treaties
II. The Saving Clause
A. Purpose and Effect of the Saving Clause
B. Application of the Saving Clause
C. Exceptions to the Saving Clause
III. Relief from Double Taxation
Introductory Material
A. Methods of Double Tax Relief
1. In General
2. The Credit Method
3. The Exemption Method
4. Policy Considerations: Credit Method Versus Exemption Method
B. U.S. Treaty Practice
1. U.S. Model Treaty Approach
a. U.S. Credit for Tax Paid to Treaty Partner
b. Treaty Partner Relief for Taxes Paid to the United States
2. Variations Among Treaties in Force
C. Taxes Covered
D. Re-Sourcing
1. General Re-Sourcing Issue
2. Additional Source-Mismatch Examples
3. The 1981 U.S. Model Treaty
4. The 1996 U.S. Model Treaty
5. The 2006 U.S. Model Treaty
6. The 2016 U.S. Model Treaty
7. U.S. Citizens Resident in the Other Contracting State
8. Hybrid Entities and Re-Sourcing
E. Code Provisions Related to Re-Sourcing
1. Source Maintenance Rules Under §904(h)
2. Code Re-Sourcing for Gain from Sales of Foreign Stock and Intangibles
F. Variations in Treaties in Force
IV. Residence Country Benefits for Employees of the Other Contracting State
Introductory Material
A. Remuneration for Government Service
B. Government Pensions
V. Other Residence Country Benefits Specifically for Individuals
A. Private Pensions
1. General Rule
2. Limitation on the General Rule
3. Pensions Eligible for Treaty Benefit
4. Periodic Versus Lump Sum Payments
5. U.S. Pension Plans
a. Qualifying Plans and Distributions
b. Rollovers from U.S. Plans to IRAs
6. Qualifying Pensions and Distributions from Non-U.S. Plans
7. Deduction and Exclusion of Cross-Border Contributions, Earnings, and Rollovers
a. Cross-Border Contributions, Earnings, and Rollovers Under the 1996 U.S. Model Treaty
b. Cross-Border Contributions, Earnings, and Rollovers Under the 2006 U.S. Model Treaty
c. Cross-Border Contributions, Earnings, and Rollovers Under the 2016 U.S. Model Treaty
8. Annuity Payments
B. Social Security Benefits
C. Alimony and Child Support
D. Students and Trainees
VI. Associated Enterprises
VII. Mutual Agreement Procedure
VIII. Non-Discrimination

Working Papers

Table of Worksheets
Worksheet 1 1981 U.S. Model Treaty
Worksheet 2 1996 U.S. Model Treaty
Worksheet 3 1996 Purpose of Model Convention and Technical Explanation
Worksheet 4 2006 U.S. Model Treaty
Worksheet 5 2006 Technical Explanation
Worksheet 6 Comparison of the 1996 and 2006 U.S. Model Treaties
Worksheet 7 Re-Sourcing Provisions from Selected U.S. Income Tax Treaties