26.4- United States Tax Treaty with Azerbaijan

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The meeting discusses the ratification and implications of a tax convention between the United States and the Union of Soviet Socialist Republics aimed at promoting economic and cultural relations by eliminating tax barriers.

Convention on Taxation Between USA and USSR

The Convention aims to eliminate tax barriers and promote economic and cultural relations between the United States and the Soviet Union.

• Signed on June 20, 1973, and entered into force on January 29, 1976.

• Ratified by both countries, with the USA's ratification occurring on December 17, 1975.

• Effective for income derived on or after January 1, 1976.

• Aims to avoid double taxation and facilitate trade and cooperation.

Key Articles of the Convention

The Convention includes various articles that define taxation rules and exemptions.

• Article I covers taxes covered by the Convention, including All-Union taxes and U.S. Internal Revenue Code taxes.

• Article II provides general definitions, including terms like "resident" and "competent authorities."

• Article III outlines income subject to tax, specifying categories of income exempt from taxation in the source country.

• Article IV discusses taxation of income from representation activities.

• Article V provides exemptions for shipping and aircraft operations.

• Article VI details special exemptions for government employees, teachers, students, and trainees.

Exemptions and Non-Discrimination Clauses

The Convention includes provisions for exemptions and non-discrimination in taxation.

• Exemptions apply to various income types, including royalties, technical services, and certain personal services.

• Non-discrimination clause ensures citizens of one state are not taxed more heavily than citizens of the other state.

• Exemptions for individuals present in the host state for less than six months, with specific categories like teachers and students eligible for longer exemptions.

Mutual Agreement and Information Exchange

The Convention establishes procedures for mutual agreement and information exchange between the two countries.

• Article XI allows residents to present cases to competent authorities if they face taxation not in accordance with the Convention.

• Article XII mandates annual notifications of tax legislation amendments between the two countries.

Termination and Duration of the Convention

The Convention outlines its duration and termination procedures.

• Remains in force for three years, then indefinitely unless terminated by either country with six months' notice.

• Specific provisions can be terminated separately after three years, affecting exemptions and transactions.

Status of Brokers and Agents

The agreement clarifies the tax status of brokers and agents working for Soviet foreign trade organizations in the USA.

• A firm acting as a broker for a Soviet organization is not considered independent if controlled by a Soviet entity.

• Brokers with no income other than commissions will be taxed solely on commission income.

Exemptions for Living Expenses

The agreement outlines specific exemptions for living expenses for individuals under certain conditions.

• Exemption under subparagraph 1.(e) is capped at $10,000 or its equivalent in rubles.

• Exemption under subparagraph 1.(d) will generally apply to a lesser amount, determined on a case-by-case basis.

Tax Jurisdiction for Journalists

The agreement addresses tax jurisdiction over journalists and correspondents on foreign assignments.

• Both Contracting States maintain tax jurisdiction over journalists and correspondents.

• Exemption under subparagraph 1.(c)(1) applies for a two-year period, regardless of invitation by a governmental agency.

• Exemption granted by the host country applies only to compensation received from abroad.

Customs Duties Clarification

The agreement specifies the treatment of customs duties in relation to taxes.

• Customs duties are not classified as taxes for the purposes of Article IX and paragraph 3 of Article X.