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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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