Current income tax treaty developments.

The past year was another exciting one in the foreign relations area; six new income tax treaties and one new protocol were signed. This article provides highlights of the income tax treaty activity occurring in late 1996 and 1997, and focuses on the salient aspects of the new treaty with Ireland and new protocol with Canada.

U.S. tax treaty negotiators were very busy in 1997, as six new treaties and one new protocol became effective, including a new treaty with Ireland and a new protocol with Canada. In the ratification process, the treaties faced opposition from the real estate investment trust (REIT) lobby(1) and were nearly delayed until next year. However, a compromise was reached and the ratification process was completed. This article reviews the past year's activity in this area.

Treaties and Protocols Taking Effect In 1997

Austria

New treaty replacing the 1956 agreement signed May 31, 1996; approved by the Senate Oct. 31, 1997; entered into force Feb. 1, 1998. Reduced withholding rates apply for payments after March 31, 1998; otherwise, the treaty is generally effective for fiscal periods beginning after Dec. 31, 1998. Taxpayers may elect to apply the existing Austrian treaty for the first year the new treaty is in effect.

Canada

Fourth protocol amending the 1980 treaty signed July 29, 1997; approved by the Senate Oct. 31, 1997; entered into force Dec. 16, 1997. Provisions have varied effective dates (see below).

Ireland

New treaty replacing the 1949 agreement signed July 28, 1997; approved by the Senate Oct. 31, 1997; entered into force Dec. 17, 1997. The treaty is generally effective for payments and tax periods beginning after Dec. 31, 1997. Taxpayers may elect to apply the existing Irish treaty for the first year the new treaty is in effect. Certain provisions in the limitation on benefits article may be deferred for the first three years the new treaty is in effect.

South Africa 

New treaty signed Feb. 17, 1997. There has been no income tax treaty in force between the U.S. and South Africa since July 1, 1987, when the 1946 agreement was terminated in accordance with the Anti-Apartheid Act. The new treaty was approved by the Senate on Oct. 31, 1997, entered into force Dec. 28, 1997, and is generally effective for payments and tax periods beginning after Dec. 31, 1997.

Switzerland

New treaty replacing the 1951 treaty signed Oct. 2, 1996; approved by the Senate Oct. 31, 1997; entered into force Dec. 19, 1997. Reduced withholding rates are effective for payments after Jan. 31, 1998; otherwise, the treaty is generally effective for tax periods beginning after Dec. 31, 1997. Taxpayers may elect to apply the existing Swiss treaty for the first 12 months that the new treaty is in effect.

Thailand

New treaty signed Nov. 26, 1996, replacing an unratified 1965 agreement; approved by the Senate Oct. 31, 1997; entered into force Dec. 15, 1997. Reduced withholding rates are effective for payments after May 31, 1998; otherwise, the treaty is generally effective for tax periods beginning after Dec. 31, 1997.

Turkey

First-ever treaty signed March 28, 1996; approved by the Senate Oct. 31, 1997; entered into force Dec. 19, 1997. The treaty is generally effective for payments and tax periods beginning after Dec. 31, 1997.

Treaties Approved in 1997, But Not Yet in Force

Luxembourg

New treaty replacing the 1962 treaty signed April 13, 1996; approved by the Senate Oct. 31, 1997. This treaty has yet to enter into force. The Senate attached a declaration to its Resolution of Advice and Consent to Ratification that prohibits the treaty from entering into force until the treaty on Mutual Legal Assistance in Criminal Matters between Luxembourg and the U.S. enters into force.(2) That agreement will not be brought before the Senate for ratification until later this year. Once in force, the income tax treaty will generally be effective for payments and tax periods beginning after December 31 of the year of entry into force (e.g., after Dec. 31, 1998 if the treaty enters into force in 1998). Taxpayers may elect to apply the existing Luxembourg treaty for the first year the new treaty is in effect.

Ukraine

First-ever treaty and protocol signed March 4, 1994; approved by the Senate Aug. 11, 1995. Bank secrecy problems continue to delay entry into force.

Treaties Signed in 1998,

Estonia, Latvia, Lithuania

On Jan. 15, 1998, Treasury announced the signing of these three treaties, all of which had been initialed in May 1997. The U.S. does not currently have a treaty in force with any of these countries; none of these treaties is currently in force.

Other Agreements

Austria

Supplementary Agreement Amending the Agreement Between the U.S. and Austria on Social Security. This agreement was signed Oct. 5, 1995 and became effective on Jan. 1, 1997; the original agreement was signed July 13, 1990. The primary purpose of the supplementary agreement is to introduce a new method of computing Austrian benefits under the agreement. The new computation method replaces a provision in the original agreement that would have resulted in reduced Austrian social security benefits for certain individuals who have divided their careers between the U.S. and Austria. The supplementary agreement also makes a number of revisions to the original agreement necessary to take into account changes that have occurred in U.S. and Austrian law in recent years.

Canada

Second Supplementary Agreement Amending the Agreement Between the U.S. and Canada on Social Security. This agreement was signed May 28, 1996 and became effective on Oct. 1, 1997; the original agreement was signed March 11, 1981 and amended on May 10, 1983. The primary purpose of the supplementary agreement is to take into account changes in the U.S. and Canadian law that have occurred since the original agreement was signed and to conform it more closely to later social security agreements the U.S. and Canada have concluded with other countries. The supplementary agreement also adds a provision authorizing the U.S. and Canadian social security agencies to establish a program of mutual administrative assistance.

U.K.

Supplementary Agreement Amending the Agreement Between the U.S. and the U.K. on Social Security. This agreement was signed June 6,1996 and became effective on Sept. 1, 1997; the original agreement was signed Feb. 13, 1984. The primary purpose of the supplementary agreement is to remove certain restrictions in the original agreement on the payment of U.K. disability benefits to U.S. residents. Other amendments take into account changes in the U.S. and U.K. law and update and clarify several provisions of the agreement.

Malta

Exchange of Notes Between Malta and the U.S. Providing, a Reciprocal Exemption From Income Tax of Income Derived From the International Operation of Ships and Aircraft. On Dec. 26, 1996 and March 11, 1997, in accordance with Secs. 872(b) and 883(a), diplomatic notes were exchanged to provide for a reciprocal exemption from income tax for income derived from the international operation of ships and aircraft. The reciprocal exemption is effective for income derived after Dec. 31, 1996. The U.S.-Malta income tax treaty terminated on Jan. 1, 1997.

Treaties and Protocols Signed in 1997

All of the new treaties generally follow the U.S. and Organization for Economic Cooperation and Development models. The summaries below generally discuss the withholding provisions in each agreement and highlight some of the more significant departures from the models as to non-withholding issues.(3)

Canada

Other provisions

[] Gains: The protocol(4) limits the application of the Canadian tax on capital gains. In 1995, Canada proposed an amendment to its law that would have required Canadian tax on gain derived by a nonresident of Canada from the sale of stock in a non-Canadian corporation when most of the value of its shares is attributable to Canadian real estate or resource property. Under the protocol, Canada agreed not to tax U.S. residents on such gains,(5) Similarly, the U.S. agreed that it will not include shares of corporations that are not resident in the U.S. for purposes of the Foreign Investment in Real Property Tax Act of 1980.(6)

[] Pensions and annuities: Prior to 1996, social security benefits were taxable exclusively by the recipient's country of residence, not by the country that made the payments. Further, taxation in the country of residence was limited to one-half of the benefit payment; the other half was paid tax-free. Under the 1995 protocol, the rules on taxation of social security benefits were changed to allow taxation only by the country that paid the benefit.

Under this rule, Canadian benefits paid to a U.S. resident were subject to 25% withholding tax; however, the U.S. resident was then allowed to file a return under the Canadian graduated tax system, applying the withholding as a payment against the tax calculated. In many instances, this resulted in little or no tax on the benefits paid. On the other hand, Canadians receiving U.S. social security benefits were subject to 25.5% withholding tax and were not permitted to file a U.S. income tax return to claim the benefit of the U.S. lower graduated rates.

The new protocol returns to the country of residence the exclusive right to tax social security benefits.(7) Under this rule, Canadian benefits paid to a U.S. resident are taxable only in the U.S.; U.S. benefits paid to a Canada resident are taxable only in Canada. The IRS recently provided guidance in Notice 98-23(8) regarding the various changes to the taxation of cross-border social security benefits under the treaty. According to the notice, Canadian benefits paid to U.S. residents will be taxable in the U.S. in the same manner as U.S. benefits paid to a U.S. resident, i.e., the portion of the benefits subject to U.S. taxation will depend on the recipient's income level. Similarly, U.S. benefits paid to a Canadian resident will be taxable in Canada in the same manner as Canadian benefits paid to a Canadian resident, i.e., 85% of the benefits received will be subject to Canadian tax. The notice also provides information for determining entitlement to a refund, as well as procedures for requesting refunds and reporting benefits on income tax returns.

[] Effective dates: The amendment as to the taxation of certain real property gains is effective as of April 26, 1995.(9) The amendment as to the taxation of social security benefits is generally effective retroactively for payments after 1995.(10) Excess tax collected under the prior rule will be refunded (without interest) to social security recipients in both countries.(11) Certain procedural rules apply when requesting refunds.(12)

Ireland

Withholding rates

[] Dividends: Under the existing treaty, dividends paid by a U.S. corporation to an Irish resident subject to Irish tax on such dividends and not engaged in a U.S. trade or business are subject to 15% U.S. withholding tax. The rate is reduced to 5% if (1) 95% of the payer's voting stock is owned (directly or indirectly) by a corporation resident in Ireland; (2) no more than 25% of the payer's gross income is derived from interest and dividends from a nonsubsidiary; and (3) the relationship between the two companies was not arranged or maintained primarily to secure the reduced rate. Dividends paid by an Irish corporation to a U.S. resident subject to U.S. tax on such dividends and not engaged in a trade or business in Ireland are exempt from Irish tax.(13)

Under the new treaty, the rate on dividends remains at 15% (for portfolio dividends) or 5% (for direct investment dividends. The 5% rate applies when the beneficial owner is a company that owns directly at least 10% of the payer's voting stock).(14)

Similar to the system in the U.K., Ireland generally does not impose withholding tax on dividends paid by Irish corporations to nonresidents. Ireland operates an imputation system designed to reduce partially the incidence of double taxation on shareholders. Relief takes the form of an imputed tax credit, which is granted to shareholders for taxes paid by the company. The imputed tax credit attaches to dividends paid by resident companies to resident individuals and companies; nonresident shareholders are entitled to this credit only when a treaty so provides.

As long as Ireland continues to allow a credit for dividends paid by an Irish-resident corporation, the new treaty provides special rules. Dividends paid by a company resident in Ireland to a U.S. resident may be taxed in the U.S. When a U.S. resident is entitled to an Irish tax credit for the dividend, the dividend may also be taxed in Ireland, at a rate not exceeding 15% on the sum of the dividend and the tax credit. When a U.S. resident is not entitled to the Irish credit, the dividend will be exempt from Irish tax. A U.S. resident who receives dividends from an Irish-resident company and who is the beneficial owner of such dividends is entitled to the tax credit in respect of such dividend to which an Irish individual resident would be entitled and to the payment of any excess of such tax credit over his liability for Irish tax. This tax credit is treated for U.S. foreign tax credit (FTC) purposes as a dividend. These tax credit rules do not apply if the beneficial owner of the dividend is (or is associated with) a company which, either alone or together with associated companies, controls (directly or indirectly) at least 10% of the voting power of the dividend-paying company. For this purpose, two companies are associated if one is controlled (directly or indirectly) by the other or both are controlled (directly or indirectly) by a third company.(15)

Under the new treaty, the 15% rate applies when the payer is a regulated investment company (RIC). The 15% rate applies to dividends paid by a REIT if the beneficial owner is an individual owning a less-than-10% interest in the REIT; otherwise, the U.S. statutory rate (30%) applies.(16)

[] Pending revisions for REIT dividends: The Senate attached a declaration to its Resolution of Advice and Consent to Ratification on the treatment of dividends paid by a REIT. According to the declaration, the U.S. will use its best efforts to negotiate a protocol to provide that the 15% rate will apply whether or not the beneficial owner of the dividend is an individual, if (1) the beneficial owner holds a 5%-or-less interest in each class of REIT stock and the dividends are paid with respect to a class of REIT stock that is publicly traded or (2) the beneficial owner holds a 10%-or-less interest in the REIT and the REIT is diversified.

[] Branch tax: Each Contracting State (CS) can impose a branch profits tax at a rate not exceeding 5%. The tax may be imposed only on certain gains from dispositions of real property interests and income attributable to a permanent establishment (PE) in that CS.(17)

[] Interest: Under the existing treaty, interest derived from sources in a CS by a resident of the other CS generally is not taxable in the first CS unless paid to a corporation controlling (directly or indirectly) more than 50% of the corporation paying the interest.(18) Under the new treaty, the exemption for interest is generally retained, without the limitation on interest paid to a controlling shareholder. The exemption does not apply to (1) contingent interest that is not portfolio interest or (2) an excess inclusion with respect to a real estate mortgage investment conduit; these are subject to the U.S. 30% statutory rate.(19)

[] Royalties: The exemption for royalties is retained.(20)

Other provisions

[] Taxes covered: Like the Luxembourg and Switzerland treaties, the treaty applies to the U.S. excise tax on insurance premiums paid to foreign insurers for insurance other than reinsurance only to the extent the risks covered by such premiums are not reinsured with persons ineligible for a similar exemption under this treaty or any other that provides a similar exemption.(21)

[] Resident: As with the Swiss treaty, tax-exempt pension trusts created in a CS by a resident, as well as tax-exempt charitable organizations that use their assets consistent with their exempt purpose, are treated as residents of that CS.(22) RICs, REITs and Irish Collective Investment Undertakings (and any similar investment entity agreed on by the competent authorities) are also residents.(23) Income from immovable property (real property): The protocol provides for a net basis taxation election for income from real property derived by a resident of a CS from property located in the other CS.(24)

[] Offshore exploration and exploitation activities: Although treaties with Norway, the Netherlands and the U.K. also have provisions dealing with offshore activities, Art. 21 is unique to the Irish treaty. Notwithstanding any other provision, activities carried on offshore in connection with the exploration or exploitation of the sea bed and subsoil and the natural resources situated in a CS will be taxable under these rules. Exploration or exploitation activities conducted in a CS by an enterprise of the other CS is deemed to constitute a PE unless those activities are conducted in the first CS for no more than 120 days within any 12-month period. Similar rules apply to exploration or exploitation activities consisting of professional services or other independent activities and to salaries, wages and other remuneration derived by a resident of a CS from employment with an enterprise conducting exploration or exploitation activities. Activities conducted by related parties are aggregated for purposes of determining whether the threshold is met.

[] Limitation on benefits: Similar to provisions in the Luxembourg and Swiss agreements, the treaty contains a very detailed limitation on benefits article. With certain exceptions, treaty benefits are only allowed to "qualified persons"(25), i.e., a resident of a CS who is:

1. An individual;

2. A qualified governmental entity(26),;

3. A person other than an individual that meets a 50% ownership test (the last owners in a chain of companies must meet the test) and 50% base erosion test(27);

4. A person other than an individual or a company if (1) its principal class of units is substantially and regularly traded on one or more recognized stock exchanges or (2) at least 50% of the beneficial interests in that person is owned (directly or indirectly) by such publicly traded person or by a publicly traded company(28);

5. A company (1) whose principal class of shares is substantially and regularly traded on one or more recognized stock exchanges or (2) 50% owned (directly or indirectly) by any combination of such a publicly traded company and/or a qualified governmental entity(29);

6. A tax-exempt pension trust or charitable organization, if more than half of its beneficiaries, members or participants are qualified persons;

7. A person engaged in the active conduct of a substantial trade or business in a CS (other than the business of making or managing investments, unless conducted by a bank or insurance company), and the income derived from the other CS is connected with (or incidental to) that business(30); or

8. A person deriving income referred to in Art. 8 (Shipping and Air Transport) if at least 50% is owned (directly or indirectly) by (1) qualified persons or citizens of the U.S. or (2) individuals who are residents of a third state or a company (or combination of companies) publicly traded on an established securities market in the third state, if such state grants an exemption under similar terms.(31)

Derivative benefits test: Treaty benefits are extended to a resident of a CS whose shareholders reside in certain other countries. A corporation that is a resident of a CS and meets a special base erosion test and does not otherwise qualify for treaty benefits may nevertheless be entitled to benefits if at least 95% of the aggregate vote and value of all of the company's shares are ultimately owned by no more than seven residents of a CS that is a party to the North American Free Trade Agreement (NAFTA) or a member of the European Union (EU) (95% ownership test).(32) Further, the reduced withholding rates provided in the dividend, interest and royalties articles (Arts. 10-12) are allowed only to the extent the 95% ownership test is met and there is a treaty between the NAFTA or EU member country and the CS of residence that provides for at least an equivalent benefit. This latter test will not be in effect for the first 36 months that the new treaty is in effect.(33)

Triangular rule: Like the treaties with Luxembourg, South Africa and Switzerland, a 15% withholding tax is imposed when an Irish enterprise derives dividends, interest or royalties from the U.S. attributable to a PE in a third jurisdiction, and the profits of that PE are subject to an aggregate effective rate in Ireland and the third jurisdiction that is less than 18% (i.e., 50% of the general rate of 36% company tax applicable in Ireland). Income other than dividends, interest or royalties is subject to tax in the U.S. The triangular rule does not apply to income derived in connection with (or incidental to) the active conduct of a trade or business carried on by the PE in the third jurisdiction (other than the business of making or managing investments, unless conducted by a bank or insurance company).(34)

Definition of "resident of a member state of the EU": This term is defined to include a person that would be entitled to benefits under an income tax treaty between any EU member state and the CS from which benefits are claimed; if that treaty does not contain a comprehensive limitation on benefits article, the person would be entitled to treaty benefits applying the qualified person concept as if that person were a resident of a CS.(35)

[] Relief from double taxation: As was discussed above, under Art. 10, U.S. resident individuals are allowed certain tax credits or refunds for dividends paid by Irish corporations and are subject to 15% withholding tax on the combined amount of the dividend and the credit. The withholding tax will be treated as an income tax imposed on the dividend recipient; thus, a Sec. 901 FTC may be available.(36)

Ireland will allow a credit to a U.S. citizen who is resident in Ireland only to the extent the U.S. can tax the income under the treaty. Thus, if an income item is exempt from U.S. tax (i.e., interest), Ireland will not allow a credit. If the U.S. citizen receives U.S.-source portfolio dividends, the FTC granted by Ireland would be limited to 15%, even though the U.S. citizen will be subject to U.S. tax at graduated rates. On the other hand, the U.S. will allow a credit for income tax paid to Ireland on such income. Special rules re-source some of the income to Ireland so that the U.S. citizen can credit the Irish tax.(37)

Under the Irish remittance system of taxation, persons who are resident in Ireland, but not domiciled there, are not subject to Irish tax on non-Irish source income if such income is not remitted to the Irish resident. Under the treaty, the income must actually be received for the reduced withholding rates to apply; thus, if an Irish resident not domiciled in Ireland maintains a brokerage account in the U.K. that earns $100 in U.S.-source dividends, the U.S. may withhold at the 30% statutory rate. If the brokerage account is maintained in Dublin, the U.S. will apply the 15% withholding rate.(38)

[] Mutual agreement procedure: Like the Switzerland treaty, binding arbitration is available when the competent authorities cannot reach a compromise; this provision is not effective until procedures are agreed to in a future exchange of diplomatic notes.(39)

(1) See News Notes, "Tax Treaties," 28 The Tax Adviser 336 (June 1997).

(2) Treaty Between the Government of the United States of America and the Government of the Grand Duchy of Luxembourg on Mutual Legal Assistance in Criminal Matters, Signed at Washington on March 13, 1997.

(3) For summaries of the Austria, Luxembourg, South Africa, Switzerland, Thailand and Turkey treaties, see Dichter, "Current Income Tax Treaty Developments (Part II)," 28 The Tax Adviser 306 (May 997).

(4) protocol Amending the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital Signed at Washington on September 26, 1980, As Amended by the Protocols Signed on June 14, 1983, March 28, 1984 and March] 7, 1995 (hereinafter, "Fourth Protocol").

(5) Fourth Protocol, Art. 1(2).

(6) Fourth Protocol, Art. 1(1).

(7) Fourth Protocol, Art. 2(2).

(8) Notice 98-23, IRB 1998-18, 9.

(9) Fourth Protocol, Art. 3(2)(a).

(10) Fourth Protocol, Art. 3(2)(b).

(11) Fourth Protocol, Art. 3(4).

(12) Fourth Protocol, Art. 3(3).

(13) Art. VI, Convention Between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income Signed at Dublin on September 13, 1949 (hereinafter, "Old Irish Treaty").

(14) Art. 10(2), Convention Between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains Signed at Dublin on July 28, 1997 (hereinafter, "New Irish Treaty"), and the Protocol Signed at Dublin on July 28, 1997 (hereinafter, "Irish Protocol").

(15) New Irish Treaty Art. 10(3); see also Joint Committee on Taxation Explanation of Proposed Income Tax Treaty and Proposed Protocol Between the United States and Ireland, re: Art. 10.

(16) New Irish Treaty, Art. 10(4).

(17) New Irish Treaty, Art. 10(7) and (8).

(18) Old Irish Treaty, Art. VII(1).

(19) New Irish Treaty, Art. 11.

(20) New Irish Treaty, Art. 12.

(21) New Irish Treaty, Art. 2(1)(a).

(22)New Irish Treaty, Art. 4(1)(c).

(23) New Irish Treaty, Art. 4(1)(d).

(24) Irish Protocol, Point 3.

(25) New Irish Treaty, Art. 23(1).

(26) A qualified governmental entity generally includes the government of a CS (or a political subdivision or local authority thereof), a person owned (directly or indirectly) by a CS (or a political subdivision or local authority thereof), or a pension trust or fund established by a CS (or a political subdivision or local authority thereof); see New Irish Treaty, Art. 3(1)(j).

(27) To meet the 50% base erosion test, no more than 50% of the person's gross income may be used (directly or indirectly) to make payments to persons that are neither qualified persons nor U.S. residents or citizens that are deductible for income tax purposes in the person's state of residence. Such disqualified payments do not include arm's-length payments in the ordinary course of business for (1) services or tangible property and (2) financial obligations to a bank (if the bank is not a resident of either CS, such payment is attributable to a PE of such bank and the PE is located in either CS); see New Irish Treaty Art. 23(2)(c)(ii).

(28) The term "a recognized stock exchange" means the National Association of Securities Dealers Automated Quotation System and any stock exchange registered with the U.S. Securities and Exchange Commission as a national securities exchange for purposes of the U.S. securities laws; the Irish Stock Exchange and the stock exchanges of Amsterdam, Brussels, Frankfurt, Hamburg, London, Madrid, Milan, Paris, Stockholm, Sydney, Tokyo, Toronto, Vienna and Zurich; see New Irish Treaty, Art. 23(8)(b).

(29) Shares are substantially and regularly traded if there is more than a de minimis number of trades each quarter and the aggregate number of shares or units traded during the previous year is at least 6% of the average number of shares or units outstanding in that class during that year; see Irish Protocol, Point. 9(a)(i).

(30) New Irish Treaty, Art. 23(3). Whether a trade or business is substantial is based on the facts and circumstances; a trade or business is deemed substantial if, for the preceding year (or for the average of the three preceding years) the asset value, gross income and payroll expense related to such trade or business are at least 7.5% of the resident's (and any related parties') proportionate share of those items related to the activity that generated the income in the other CS, and the average of the three ratios exceeds 10%. Activities conducted by a partnership in which the person is a partner and activities conducted by persons connected to such person are deemed to be conducted by such person. A person is connected to another if one possesses at least 50% of the beneficial interest in the other or another person possesses (directly or indirectly) at least 50% of the beneficial interest in each person; see Irish Protocol, Point 9(b)(i)(B) and (ii).

(31) New Irish Treaty, Art. 23(4).

(32) New Irish Treaty, Art. 23(5)0).

(33) New Irish Treaty, Art. 29(5).

(34) New Irish Treaty, Art 23(7).

(35) New Irish Treaty, Art. 23(8)(e).

(36) New Irish Treaty, Art. 24(2).

(37) New Irish Treaty, Art. 24(3).

(38) New Irish Treaty, Art. 24(6) and Treasury Technical Explanation of the Convention Between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income and Capital Gains Signed at Dublin on July 28, 1997 and the Protocol Signed at Dublin on July 28, 1997, re: Art. 24.

(39) New Irish Treaty, Art. 26(5).

RELATED ARTICLE: EXECUTIVE SUMMARY

* Supplementary social security agreements were signed with Austria, Canada and the U.K.

* A novel provision in the treaty with Ireland states that certain offshore activities will be subject to taxation.

* The protocol with Canada limits application of that country's capital gains tax.

Author's note: The author wishes to thank Mike Hayes and Stacey Katsoff, Deloitte & Touche LLP, Miami, FL, and Mike Difronzo and Stan Torgersen, Deloitte & Touche LLP, Washington, D.C., for their helpful comments and suggestions.