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“The avoidance of tax may be lawful, but it is not yet a virtue .”

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News

The U.S. Treasury Department releases its new model Income Tax Treaty

Date:
17 November 2006

On 15 November 2006, the U.S. Treasury Department released its new model U.S. income tax treaty. The text reflects changes made during the last decade to U.S. tax treaty policy. Treasury uses the model as a "starting point" in bilateral tax treaty negotiations.  The U.S. model income tax treaty had not been updated since September 1996.

Tne new Model Income Tax Treaty was eagerly awaited in Belgium, since Belgium and the U.S. have just agreed on the text of a new treaty. Signature of the new treaty is expected in the next weeks. 

The new model includes a rewritten limitation on benefits article. The dividends article of the new model does not provide for the elimination of source-country withholding tax on intercompany dividends. Instead, the new model, like the 1996 model, provides for a 5 percent withholding tax rate on direct dividends. 

At the same time Treasury also released a new technical explanation to the U.S. model to help interpret the bilateral U.S. income tax treaties.

 

 


 

 

 

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