Technical Explanation PDF

information for its tax purposes. Also,
if specifically requested, a country
must supply information in authen­
ticated form.
The present treaty contains a pro­
vision that provides that information
exchanged is to be treated as secret
except that it may be disclosed to any
person concerned with or made a part
of a public record with respect to the
assessment or collection, or litigation
concerning, the taxes to which the
treaty applies. The Committee under­
stands that there is a question as to
whether, under the language in the
treaty, the Congress, in the exercise
of its oversight responsibilities, could
obtain the information exchanged
under the treaty. The Committee be­
lieves that such access is permitted,
and is recommending that the pro­
tocol to the treaty be approved sub­
ject to an understanding that such ac­
cess is permitted.
Article XIII. Entry into Force
The proposed protocol will enter
into force on the date of exchange of
instruments of ratification. Once in
force, the provisions in Article I of
the proposed protocol, dealing with
the foreign tax credit, will apply ret­
roactively to the 6 years preceding
January 1 of the year in which the
protocol enters into force. The other
provisions apply only after the pro­
tocol has entered into force.
[20] IX. TEXT OF THE
RESOLUTION OF
RATIFICATION
Resolved, (two-thirds of the Sena­
tors present concurring therein), That
the Senate advise and consent to the
ratification of the Protocol Amending
the Tax Convention with the King­
dom of Norway (signed at Oslo on
December 3, 1971), which Protocol
was signed at Oslo on September 19,
1980. (Ex. Z, 96th Cong., 2nd Ses­
sion), subject to the understanding that
appropriate Congressional commit­
tees and the General Accounting Of­
fice shall be afforded access to the
information exchanged under this
treaty where such access is necessary
to carry out their oversight respon­
sibilities, subject only to the limita­
tions and procedures of the Internal
Revenue Code.
Technical Explanation1 of the
Protocol, signed on September
19, 1980, 2 Amending the
Convention between the United
States and Norway with Respect
to the Avoidance of Double
Taxation and the Prevention of
Fiscal Evasion with Respect to
Taxes on Income and Property,
Signed on December 3, 1971
1 It is the practice of the Treasury Depart­
ment to prepare for the use of the Senate and
other interested persons a Technical Expla­
nation of the tax conventions which are sub­
mitted to the Senate for its advice and consent
to ratification.
A Protocol amending the 1971 Income Tax
Convention with Norway was signed on Sep­
tember 19, 1980, and submitted by the Presi­
dent to the Senate on December 2, 1980. On
September 24, 1981, the Senate Committee on
Foreign Relations held hearings and this Tech­
nical Explanation was presented. The Senate
voted its advice and consent on November 18,
1981, and instruments of ratification were ex­
changed on December 15, 1981.
2 Page 440; Senate Report 97-32, page 444;
Senate Executive Z is not published.
INTRODUCTION
In this technical explanation of the
Protocol signed on September 19, 1980
(“the Protocol”), references are made
to the Convention between the United
States of America and the Kingdom
of Norway for the Avoidance of Dou­
ble Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes
on Income and Property signed on
December 3, 1971 [1973-1 C. B. 669]
(the “1971 Convention”). The term
“the Convention” means the 1971
Convention as amended by the Pro­
tocol. The references to the 1971
Convention are intended to put var­
ious provisions of the Protocol into
context. The technical explanation
does not, however, provide a com­
plete comparison between the Pro­
tocol and the provisions of the 1971
Convention amended by the Proto­
col. Moreover, neither the Protocol
nor the technical explanation is in­
tended to have implications for the
interpretation of the 1971 Conven­
tion.
The technical explanation is an of­
ficial guide to the 1971 Convention as
amended by the Protocol. It reflects
policies behind particular provisions
as well as understandings reached with
respect to the interpretation and ap­
plication of the Convention.
Article I
Article I of the Protocol amends
two Articles of the 1971 Conven­
tion—Article 1 (Taxes Covered) and
Article 23 (Relief from Double Tax­
ation)—relevant to U.S. foreign tax
credits for certain payments to Nor­
way.
These amendments take account of
certain changes made in Norwegian
law in 1975. Pursuant to the Act of
June 13, 1975, Norway adopted a new
revenue raising measure (the “special
tax”) with respect to income from
submarine petroleum resources in
Norway. The special tax is imposed
on income from, among other activ­
ities, exploration or exploitation of
submarine oil or gas. The rate of the
special tax, as provided in 1980 leg­
islation which amended the Act of June
13, 1975, is 35 percent. The special
tax is not deductible in computing li­
ability for the Norwegian national and
municipal taxes on income. Losses or
deficits with respect to offshore activ­
ities and up to 50 percent of losses or
deficits attributable to activities other
than offshore petroleum activities are
taken into account in determining li­
ability for the national and municipal
taxes on income.
The special tax allows for the de­
duction of expenses attributable to oil
and gas operations and provides a
special “uplift” deduction. No losses
or deficits arising in a year from other
activities are deductible in computing
liability for the special tax. The gross
income and value of stocks of petro­
leum subject to the special tax are
generally assessed according to a norm
price stipulated retroactively by the
King of Norway. The norm price for
a period applies to transactions be­
tween related and unrelated persons
and is based on the price at which

petroleum could have been sold be­
tween independent parties in a fair
market. In this regard, realized and
quoted prices for contemporaneous
sales of petroleum of the same or cor­
responding types are taken into ac­
count along with necessary adjust­
ments for quality variations and other
relevant factors. Before a norm price
is stipulated, Norway notifies affected
parties and gives them an opportunity
to issue statements and, if necessary,
pursue administrative and judicial ap­
peals on the issue of whether the norm
price, as it applies to all persons, has
been properly determined.
The special tax was enacted after
the 1971 Convention was signed, did
not replace any comparable Norwe­
gian measure in effect in 1971 and
contains several features different from
the 1971 Norwegian taxes specifically
covered by the 1971 Convention. The
Protocol amends the 1971 Conven­
tion to assure treaty coverage of the
special tax. The Protocol also re­
moves any doubt about coverage of
the Norwegian national and munici­
pal taxes on income, as affected by
enactment of the special tax.
Thus, paragraph (1) of Article I of
the Protocol amends paragraph (2) of
Article 1 of the 1971 Convention to
specify that the Norwegian taxes which
are the subject of the Convention in­
clude the following taxes, as in effect
on September 19, 1980, and any taxes
substantially similar to such taxes en­
acted after that date: the national and
municipal taxes on income (including
contributions to the tax equalization
fund); the special tax administered
under section 5 of the Act of June
13, 1975, No. 35, relating to the tax­
ation of submarine petroleum re­
sources. The taxes imposed by Nor­
way and specified in subparagraph (b)
of paragraph (1) of Article 1 of the
1971 Convention, and any taxes sub­
stantially similar to those taxes im­
posed in addition to, or in place of
those taxes after December 31, 1971,
are also the subject of the Conven­
tion.
New subparagraph (b) of para­
graph (2) of Article 1 assures that the
term “Norwegian tax”, which is used
in paragraph (1) of Article 6 (Ship­
ping and Air Transport) and, with
modifications, in new paragraph (1)
of Article 23, includes both the taxes
described in new paragraph (2) of Ar­
ticle 1 and those described in existing
subparagraph (b) of paragraph (1) of
Article 1.
Paragraph (2) of Article I of the
Protocol amends paragraph (1) of Ar­
ticle 23 of the 1971 Convention. New
paragraph (1) of Article 23 provides
that the United States shall allow to
a resident or a citizen of the United
States as a credit against U.S. tax on
income the appropriate amount of in­
come taxes imposed by Norway. In
addition, in the case of a U.S. com­
pany owning at least 10 percent of the
voting stock of a company which is a
resident of Norway and from which
the U.S. company receives dividends
in any taxable year, the United States
agrees by way of new paragraph (1)
to allow as a credit against the United
States tax on income the appropriate
amount of income taxes imposed by
Norway on the company which is a
resident of Norway and with respect
to the profits out of which the divi­
dends are paid.
For purposes of applying the United
States foreign tax credit in relation to
taxes paid or accrued to Norway, new
paragraph (1) of Article 23 provides
that the Norwegian taxes referred to
in subparagraph (b) of paragraph (1)
and new paragraph (2) of Article 1
are considered to be income taxes and
are allowed as credits against U.S. tax
on income, subject to the rules of par­
agraph (1) of Article 23. New para­
graph (1) of Article 23 does not cover
as income taxes the Norwegian na­
tional and municipal taxes on capital,
the municipal tax on real property, or
any
taxes substantially similar to such
taxes on capital and real property im­
posed after December 3, 1971.
New subparagraph (b) of para­
graph (1) of Article 23 provides that
the appropriate amount allowed as a
credit pursuant to new subparagraph
(a) of paragraph (1) of Article 23 is
based upon the amount of income
taxes paid or accrued to Norway.
Whether an amount is paid or ac­
crued is determined under the Inter­
nal Revenue Code of 1954 (“the
Code”). Subparagraph (b) provides
further that direct and deemed paid
credits allowed under the Convention
by the United States pursuant to par­
agraph (1) shall not exceed the limi­
tations provided by the Code for the
taxable year. Thus, as is generally the
case under U.S. income tax conven­
tions, provisions such as Code sec­
tions 901(c), 904, 905, 907, 908 and
911 apply for purposes of computing
the allowable credit under paragraph
(1).
New subparagraph (b) also pro­
vides Convention limitations on the
U.S. foreign tax credit allowed under
the Convention in the case of persons
subject to the Norwegian special tax
or to a substantially similar revenue
measure imposed by Norway. The
credit allowed under the Convention
with respect to such persons is limited
by subparagraph (b) to the amount of
income taxes paid or accrued to Nor­
way attributable to Norweigan source
income, as determined under the
Convention. Subparagraphs (b)(i) and
(iii) impose three limitations on the
credit allowed with respect to such
persons under the Convention:
(1) with respect to income taxes paid
or accrued to Norway on oil and gas
extraction income from oil or gas wells
in Norway, the amount allowed as a
credit for a taxable year shall not ex­
ceed the maximum U.S. statutory
corporate tax rate for the taxable year
times the amount of oil and gas ex­
traction income from oil or gas wells
in Norway;
(2) with respect to income taxes paid
or accrued to Norway on Norwegian
source oil related income, other than
oil and gas extraction income from oil
or gas wells in Norway, the amount
allowed as a credit for a taxable year
shall not exceed the maximum U.S.
statutory corporate tax rate for the
taxable year times the amount of such
Norwegian source oil related income;
(3) with respect to income taxes paid
or accrued to Norway on other Nor­
wegian source income (other than
Norwegian oil and gas extraction in­
come from oil or gas wells in Norway

and other Norwegian source oil re­
lated income), the amount allowed as
credit for a taxable year shall not ex­
ceed the maximum U.S. statutory
corporate rate for the taxable year
times the amount of such other Nor­
wegian source income.
The amount of Norwegian taxes at­
tributable to oil and gas extraction in­
come from oil or gas wells in Norway
is determined under the principles of
section 907(c)(5) of the Code. Such
U.S. principles are then used to de­
termine the amount of Norwegian
taxes attributable to other Norwegian
source oil related income and other
Norwegian source income. This at­
tribution is necessary because neither
the national tax, the municipal tax nor
the special tax is imposed exclusively
on what is, under U.S. rules, extrac­
tion income, other oil related income,
or other income. And, the special tax
is imposed on only part of the income
subject to the national and municipal
taxes.
New subparagraph (b) provides for
a carryover of foreign tax credits with
respect to income taxes paid or ac­
crued to Norway on oil and gas ex­
traction income from oil or gas wells
in Norway. The carryover credits are
limited by subparagraph (b)(ii) to the
lesser of the amount of taxes paid or
accrued to Norway on oil and gas ex­
traction income from oil or gas wells
in Norway that is not allowed as a
credit under subparagraph (b)(i), or
two percent of such taxable income
for the taxable year. These credits may
be carried to the two preceding or five
succeeding taxable years, to the ex­
tent such credits are not deemed paid
or accrued in a prior taxable year.
The carryover credits are allowable
in the year in which deemed paid or
accrued subject to the extraction tax
limitation of subparagraph (b)(i) and
any relevant limitations provided by
the Code, such as sections 904(a) and
907.
Similarly, subparagraph (b)(iii)
provides for carryovers under the
Convention for the amount of income
taxes paid or accrued to Norway on
Norwegian source oil related income
(other than income described in sub­
paragraph (b)(i)) and on other Nor­
wegian source income. These car­
ryover credits are allowable in the year
in which deemed paid or accrued sub­
ject to the respective Convention lim­
itations in subparagraphs (b) (ii) and
(iii) of paragraph (1) and relevant
Code limitations such as those of sec­
tions 904(a) and 907(b).
If the provisions of the Convention
are relied upon to claim a foreign tax
credit for Norwegian income taxes paid
by a person subject to the special tax,
and any such payments would not
otherwise be creditable under the
Code then: the limitations of the third
sentence of new subparagraph (b) ap­
ply, whether or not the special tax is
paid in the taxable year; all such Nor­
wegian income taxes must be treated
as provided in the Convention.
If the taxes paid or accrued to Nor­
way by a person subject to the special
tax are creditable under the Code, and
such taxes exceed the proportion of
U.S. tax that taxable income attrib­
utable to Norwegian sources (as de­
termined under the Convention) bears
to entire income, such taxes are cred­
itable under the Code against U.S.
tax with respect to income from other
foreign sources on the same basis as
other creditable taxes and subject to
the limitations of the Code. More­
over, if a person subject to the special
tax chooses in a year not to rely upon
the provisions of the Convention rel­
evant to a claim for a foreign tax credit
for any amounts paid to Norway, then
the Convention limitations contained
in the thrid sentence of subparagraph
(b) of new paragraph (1) would not
apply in that year and, pursuant to
the current overall foreign tax credit
limitation of the Code, Norwegian
taxes creditable under the Code and
creditable taxes paid to any other
country can offset U.S. tax on income
from Norwegian and other foreign
sources.
As stated above, Norway’s domes­
tic law uses the norm price in calcu­
lating petroleum income for purposes
of Norwegian tax liability. The Gov­
ernment of Norway takes the position
that under Norwegian law producers
may appeal this price only on the is­
sue of its accuracy for the producers
as a group. It is the position of the
United States that the provisions of
the Protocol are not intended to have
any
implications for whether the pro­
visions of the Con vention (or the 1971
Convention) provide a basis for an
appeal of the norm price as it applies
to an individual producer.
Pursuant to paragraph (2)(a) of Ar­
ticle XIII of the Protocol, the amend­
ments to Articles 1 and 23 made by
Article I of the Protocol have effect
beginning with the sixth taxable year
preceding January 1 of the year in
which the Protocol enters into force.
Thus, if the United States and Nor­
way exchange instruments of ratifi­
cation of the Protocol on or before
December 31, 1981, a calendar year
U.S. taxpayer may claim the benefits
of the amendments to Articles 1 and
23 beginning with his taxable year be­
ginning on January 1, 1975.
Article II
Article II of the Protocol amends
the 1971 Convention to provide spe­
cial rules with respect to the taxation
of business profits and wages attrib­
utable to certain offshore activities.
Article II adds a new Article 4A
(Offshore Activities) to the Conven­
tion. Paragraph (1) of new Article 4A
overrides the provisions of Article 4
(Permanent Establishment) and Ar­
ticle 13 (Independent Personal Serv­
ices) to provide that a resident of a
Contracting State carrying on activi­
ties in the other Contracting State in
connection with the exploration or
exploitation of the seabed and subsoil
and the natural resources is deemed
to be carrying on, in respect of those
activities, a business in that State
through a permanent establishment.
This paragraph is not intended to ap­
ply to activities, such as leasing, which
are passive.
Paragraph (2) of new Article 4A
provides that the right to tax at source
provided in paragraph (1) does not
apply where the activities are carried
on for 30 days or less, in the aggre­
gate, in any period of 12 months. If,
however, two or more related per­
sons carry on substantially similar ac­

tivities in a Contracting State, their
activities are aggregated for purposes
of determining whether the 30 day
threshold has been crossed.
Paragraph (3) assures that the source
basis exemption provided in Article
6 (Shipping and Air Transport) ap­
plies to profits from the operation in
international traffic of ships or air­
craft where the transportation is to a
location where activities are being
carried on in connection with the ex­
ploration or exploitation of the seabed
and subsoil and their natural re­
sources. The reference to transpor­
tation by a ship or aircraft in inter­
national traffic encompasses the use
of tugboats and other similar vessels
in international traffic in connection
with exploration or exploitation ac­
tivities.
Paragraph (4) of new Article 4A
provides special rules with respect to
the taxation of wages, salaries and
other similar remuneration derived
from labor or personal services per­
formed in connection with the explo­
ration or exploitation of the seabed.
Paragraph (4) provides that such re­
muneration is not taxable by a Con­
tracting State to the extent attribut­
able to labor or personal services
performed in that State for a period
of 60 days in the taxable year by an
individual resident in the other Con­
tracting State even if the person has
performed services in that State for
more than 60 days in that year and is
taxable by that State by reason of Ar­
ticle 14 (Dependent Personal Serv­
ices).
In addition, if the labor or personal
services are performed in Norway, the
remuneration is not taxable by Nor­
way if the services are performed on
behalf of an employer who is a resi­
dent of the United States, the services
are performed with respect to a pe­
troleum reservoir which extends be­
tween Norway and any other State
with which Norway has an agreement
for joint exploitation of the reservoir
and the exploitation is performed si­
multaneously in Norway and that other
State. This limitation on Norway’s
right to tax on a source basis comes
into force only by way of a separate
agreement between the competent
authorities of the United States and
Norway. This agreement could be en­
tered into force under the authority
of Article 27 (Mutual Agreement
Procedure).
Paragraph (5) of new Article 4A
assures that a resident of a Contract­
ing State performing services aboard
a ship or aircraft covered by para­
graph (3) of Article 4A receives the
same tax treatment in the other Con­
tracting State as do other employees
performing services aboard ships and
aircraft in international traffic. (See,
in this regard, Article 14 (Dependent
Personal Services). ) Thus, wages, sal­
aries and similar remuneration of a
resident of a Contracting State per­
forming such services are taxable in
the other Contracting State if:
(1) the individual is a member of
the regular complement of a ship or
aircraft covered by paragraph (3) of
Article 4A and such ship or aircraft
is operated by a resident of such other
State; or
(2) the individual’s wages are not
exempt from tax in that other State
pursuant to paragraph (2) of Article
14.
Article III
Article III of the Protocol amends
the rules of the 1971 Convention with
respect to taxation by Norway of in­
come from the operation in interna­
tional traffic of ships or aircraft.
Article III replaces paragraph (1)
of Article 6 (Shipping and Air Trans­
port) with a new paragraph (1) which
provides that income which a resident
of the United States derives from the
operation in international traffic of
ships or aircraft is exempt from Nor­
wegian tax. Thus, new paragraph (1)
drops the requirement of the 1971
Convention that exemption from
Norwegian tax depends, in part, upon
where the ship or aircraft is regis­
tered. By deleting this requirement,
the rules of paragraph (1) become
generally parallel to these of para­
graph (2).
Article IV
Article IV of the Protocol amends
the provisions of the 1971 Convention
to change both the maximum rate of
tax that may be imposed by a Con­
tracting State on certain dividends paid
to a resident of the other Contracting
State and the circumstances in which
one State may impose tax on divi­
dends paid to a resident of the other
Contracting State.
Article IV of the Protocol replaces
paragraph (2) of Article 8 (Divi­
dends) with a new paragraph which
provides that dividends derived from
within one Contracting State by a res­
ident of the other Contracting State
may not be taxed by the first-men­
tioned State at a rate of tax exceeding
15 percent of the gross amount ac­
tually distributed. Thus, new para­
graph (2) deletes the provision of the
1971 Convention which limited the rate
of tax imposed on certain dividends
to 10 percent.
This amendment reflects certain re­
ductions in Norway’s corporate tax
burden and Norway’s desire to achieve
a consistent rate of tax of 15 percent
on dividends paid by Norwegian cor­
porations. Norway has also renego­
tiated its income tax conventions with
other countries to obtain this result.
It was agreed that if the Government
of Norway were to substantially in­
crease its corporate tax burden by al­
tering the rates of its split-rate cor­
porate tax, or by taking other measures
such as increasing the Norwegian cor­
porate reserve requirement, Norway
would consent to a renegotiation of
the rates of withholding on dividends.
Article IV also amends paragraph
(4) of Article 8. New paragraph (4)
provides that dividends paid by a cor­
poration of one of the Contracting
States are exempt from tax by the other
Contracting State except if the recip­
ient of the dividends is a resident of
the second-mentioned State; or, the
recipient of the dividends has a per­
manent establishment in the second-
mentioned State and the dividends are
attributable to such permanent estab­
lishment.
In addition, where a corporation of
Norway pays dividends out of profits
attributable to one or more perma­
nent establishments which the cor­

poration had in the United States, the
United States may tax such dividends
provided that the profits are attrib­
utable to such permanent establish­
ment(s) and constitute at least 50 per­
cent of the corporation’s gross income
from all sources for the taxable year.
If such a dividend is derived by a res­
ident of Norway, other than a citizen
of the United States, and the dividend
is not attributable to a United States
permanent establishment of the res­
ident, the U.S. tax on the dividend is
limited to 15 percent of the gross
amount actually distributed, as pro­
vided in new paragraph (2) of Article
8. If such a dividend is derived by a
resident of a State other than Nor­
way, then the U.S. tax on the divi­
dend is not limited by the provisions
of the Convention. Also, new sub­
paragraph (b) of paragraph (4) pro­
vides that a dividend paid by a Nor­
wegian corporation to a citizen of the
United States is taxable by the United
States whether or not the citizen is a
resident of Norway. Subparagraph (b)
of paragraph (4) reflects the general
rule that the United States may tax
its
citizens as if the Convention had
not come into effect. See paragraph
(3) of Article 22 (General Rules of
Taxation).
Article V
Article V of the Protocol replaces
Article 9 (Interest) of the 1971 Con­
vention to provide new rules with re­
spect to the taxation of interest de­
rived within one Contracting State by
a resident of the other Contracting
State.
New Article 9 provides that inter­
est derived from sources within one
Contracting State by a resident of the
other Contracting State is exempt from
tax by the first-mentioned State in any
calendar year in which the domestic
law of either Contracting State ex­
empts such interest from tax. Thus,
so long as Norway continues to ex­
empt from Norwegian tax interest de­
rived from within Norway (not attrib­
utable to a permanent establishment
in Norway) by persons not resident
in Norway, the provisions of para­
graph (1) of new Article 9 would ex­
empt a resident of Norway from U.S.
tax on interest income derived from
sources within the United States (not
attributable to a permanent establish­
ment in the United States). Also, if
the Code were changed, for example,
to exempt from U.S. tax U.S. source
interest (not effectively connected with
the conduct of a trade or business
within the United States) paid to a
person not resident in the United
States, paragraph (1) would exempt
from any future Norwegian tax inter­
est (not attributable to a Norwegian
permanent establishment) derived
from Norway by a resident of the
United States.
In the event that for a calendar year
neither the domestic law of Norway
nor the Code exempts, for example,
interest paid to nonresidents, then
pursuant to paragraph (1) of new Ar­
ticle 9 such interest derived from
sources within one of the Contracting
States by a resident of the other Con­
tracting State may be taxed by both
Contracting States. Pursuant to par­
agraph (2) of new Article 9, however,
the rate of tax imposed by a Con­
tracting State on interest derived from
sources within that State by a resident
of the other Contracting State is lim­
ited to 10 percent of the gross amount
of the interest. Moreover, there are
five circumstances where, notwith­
standing the general right to tax at 10
percent, interest derived from sources
within a Contracting State by a resi­
dent of the other Contracting State is
exempt from tax in the first-men­
tioned State:
(1) the interest is beneficially owned
by, or is paid by, a Contracting State,
a political subdivision or local au­
thority thereof or an instrumentality,
subdivision or authority of a Con­
tracting State which is not subject to
tax by that State;
(2) the interest is beneficially owned
by a resident of Norway or the United
States, as the case may be, with re­
spect to debt obligations guaranteed
or insured by that State, a political
subdivision or local authority of such
State or an instrumentality, subdivi­
sion or authority of such State which
is not subject to tax by that State;
(3) the interest is paid by a pur­
chaser to a seller, who is a resident
of the other Contracting State, in con­
nection with a commercial credit re­
sulting from deferred payments for
goods, merchandise or services;
(4) the interest is paid with respect
to a loan of any nature made by a
bank;
(5) the interest is paid with respect
to an obligation outstanding on Sep­
tember 19, 1980.
Paragraph (4) defines the term “in­
terest” for purposes of the Conven­
tion. The term “interest” as used in
the Convention means income from
bonds, debentures, government se­
curities, notes or other evidences of
indebtness, whether or not secured,
and debt-claims of every kind, as well
as other income which, under the tax­
ation law of the Contracting State in
which the income has its source, is
assimilated to income from money
lent. The deletion from the definition
of interest of the phrase “whether or
not secured and whether or not car­
rying a right to participate in profits
... ”, which appears in the definition
of “interest” in Article 9 of the 1971
Convention, is not intended to change
the substance of the definition of in­
terest in the 1971 Convention.
Paragraph (5) of new Article 9 clar­
ifies the relationship between provi­
sions of Article 9 and those of Article
5 (Business Profits). Paragraph (5)
provides that if a resident of one of
the Contracting States is the benefi­
cial owner of interest derived from
sources within the other Contracting
State and he has a permanent estab­
lishment in that other State to which
the interest is attributable, then such
income is taxable in that other State
as “industrial or commercial profits”
pursuant to paragraph (3)(a) of Ar­
ticle 5.
New paragraph (6) parallels para­
graph (4) of Article 9 of the 1971 Con­
vention. Pursuant to paragraph (6) the
provisions of new Article 9 do not
apply to any interest paid between re­
lated persons that exceeds amounts
which would have been paid to an unre­
lated person. Any such excess pay­
ment may be taxed by Norway and

the United States, each according to
its own law, including the provisions
of the Convention where applicable.
Paragraph (7) sets forth the general
rule that a Contracting State may not
impose tax on interest paid by a res­
ident of the other Contracting State
to a person not resident in the first-
mentioned State. Paragraph (7) pro­
vides further, however, that the first-
mentioned State retains the right to
tax interest where:
(1) the interest is treated as income
from sources within the first-men­
tioned State pursuant to paragraph (2)
of Article 24 (Source of Income);
(2) the interest is attributable to a
permanent establishment in the first-
mentioned State which belongs to the
recipient of the interest;
(3) the first-mentioned State is the
United States and the interest is paid
by a Norwegian corporation to a cit­
izen of the United States resident in
any
State.
The provisions of paragraph (7) of
new Article 9 parallel the provisions
of paragraph (5) of Article 9 of the
1971 Convention.
Pursuant to subparagraph (b) of
paragraph (2) of Article XIII of the
Protocol, the 10 percent tax that could
be imposed by the State of source
pursuant to new Article 9 could only
be imposed on amounts paid on or
after the first day of the sixth month
next following the date on which the
exchange of instruments of ratifica­
tion of the Protocol takes place. As
explained above, however, such tax
could not be imposed in any calendar
year in which, for example, either
Norway or the United States exempts
from tax under its domestic law in­
terest paid to nonresidents.
Article VI
Article VI of the Protocol revises
the rules of the 1971 Convention con­
cerning the taxation of capital gains.
Paragraph (1) of Article VI was ne­
gotiated in anticipation of amend­
ments to the Code authorizing more
effective source basis taxation of gains
attributable to real property in the
United States.
Paragraph (1) of Article VI adds
two provisions to paragraph (1) of
Article 12 (Capital Gains) to broaden
the existing exceptions to the general
rule of paragraph (1) of Article 12.
That general rule is that a resident of
one of the Contracting States is ex­
empt from tax by the other Contract­
ing State on gains from the sale or
exchange or other disposition of cap­
ital assets. The first provision, new
subparagraph (b) of paragraph (1) of
Article 12, authorizes the other Con­
tracting State to tax income from the
sale or exchange or other disposition
of capital assets if the income is de­
rived from the sale or exchange or
other disposition of stock of a cor­
poration the property of which con­
sists principally of real property sit­
uated within the other Contracting
State, or an interest in a partnership,
trust or estate the property of which
consists principally of real property
situated within the other Contracting
State. For the purposes of this pro­
vision the term “real property” in­
cludes stock of a corporation the
property of which consists principally
of real property situated within the
other Contracting State or an interest
in a partnership, trust or estate the
property of which consists principally
of real property situated within the
other Contracting State.
It should be noted that the provi­
sions of Article 26 (Nondiscrimina­
tion) are not intended to override the
right of the United States to impose
the tax provided in Code section 897
under new subparagraph (b) of par­
agraph (1) of Article 12.
The second provision, new subpar­
agraph (c) of paragraph (1) of Article
12, authorizes the other Contracting
State to tax income from the sale, ex­
change or other disposition of stock
of a corporation which is a resident
of that State. Such income may be
taxed by that State, however, only if
two requirements are met:
(1) the recipient of the gain owns
within the 12 months preceding such
sale, exchange or other disposition
more than 25 percent of the stock of
that corporation; and
(2) more than 50 percent of the fair
market value of the gross assets of
that corporation used in its trade or
business are physically located in that
State on the last day of each of the
three taxable years preceding the sale,
exchange or other disposition (or if
the corporation has been in existence
for less than 3 years, on the last day
of each preceding taxable year of the
corporation).
Paragraph (2) of Article VI makes
conforming amendments to Article 12
to reflect changes made by Article VI
of the Protocol to paragraph (1) of
Article 12. Thus, paragraph (3) of Ar­
ticle 12 of the 1971 Convention is de­
leted and the cross references in ex­
isting paragraph (4) of Article 12 are
modified and incorporated in new
paragraph (3).
Paragraph (3) of Article VI con­
forms and expands a cross reference
to Article 12 in Article 24 (Source of
Income). New paragraph (8) of Ar­
ticle 24 provides that income from
gains described in paragraph (1) of
Article 12 derived by a resident of a
Contracting State and which may be
taxed by the other Contracting State
is treated as income from sources
within that other Contracting State for
the purposes of the Convention. This
source rule, like the other source rules
of Article 24, is relevant for purposes
of applying the United States credit
in relation to taxes paid to Norway
under the Convention. See paragraph
(1) of Article 23 (Relief from Double
Taxation).
Article VII
Article VII makes two changes to
the 1971 Convention with respect to
the taxation of services income of ar­
tistes and athletes.
Paragraph (1) of Article VII amends
subparagraph (c) of paragraph (2) of
Article 13 (Independent Personal
Services) of the 1971 Convention. New
subparagraph (c) provides that when
an artiste or athlete performs services
in an independent capacity in a Con­
tracting State and such person is a
resident of the other Contracting State,
the first-mentioned State may tax the
income derived from such services if
the artiste or athlete is present in the
first mentioned State more than a to-

tal of 90 days during the taxable year
or such income exceeds, in the ag­
gregate, $10, 000 (or its equivalent in
Norwegian Kroner) during the taxa­
ble year. In comparison subpara­
graph (c) of Article 13 of the 1971
Convention allows source basis tax­
ation if the income from such services
exceeds in the aggregate $3,000 U.S.
dollars (or its equivalent in Norwe­
gian Kroner) during the taxable year.
As provided in the 1971 Convention,
income from such services is also tax­
able by the State in which the services
are performed if the individual is pres­
ent in that State for a period or pe­
riods aggregating 183 days or more in
the taxable year or the individual
maintains a fixed base in that State
for a period or periods aggregating
183 days or more in a taxable year.
See subparagraphs (a) and (b) of par­
agraph (2) of Article 13.
Paragraph (2) of Article VII adds
a new Article 14A (Artistes and Ath­
letes) which concerns taxation of in­
come in respect of activities exercised
by an entertainer or an athlete in his
capacity as such which accrues to a
person other than the entertainer or
athlete. New Article 14A provides that
in these circumstances such income is
taxable in the Contracting State in
which the activities of the entertainer
or athlete are exercised, notwith­
standing the provisions of Article 5
(Business Profits), Article 13 (Inde­
pendent Personal Services) or Article
14 (Dependent Personal Services).
New Article 14A provides that in­
come of an entertainer or athlete is
deemed not to accrue to another per­
son if it is established by the enter­
tainer or athlete that neither the en­
tertainer or athlete nor any persons
related thereto participate directly or
indirectly in the profits of such other
person in any manner, including the
receipt of deferred remuneration, bo­
nuses, fees, dividends, partnership
distributions or other distributions.
Article VIII
Article VIII amends the provisions
of the 1971 Convention concerning the
taxation of social security payments.
Article VIII changes existing Ar­
ticle 19 to provide that a citizen of the
United States receiving social security
payments and other public pensions
paid by Norway is taxable only by
Norway whether the citizen resides in
the United States or in any other State.
New Article 19 retains the rule of the
1971 Convention that social security
payments and other public pensions
paid by one of the Contracting States
to an individual who is a resident of
the other Contracting State are tax­
able only in the first-mentioned State.
Article 19 does not apply to payments
described in Article 17 (Governmen­
tal Functions).
Article IX
Article IX of the Protocol amends
paragraph (3) of Article 22 (General
Rules of Taxation) to assure that the
United States may tax as a citizen a
former citizen whose loss of citizen­
ship has as one of its principal pur­
poses the avoidance of income tax.
The authority to impose U.S. tax with
respect to such former citizens is lim­
ited by new paragraph (3) to a period
of 10 years following the loss of citi­
zenship.
Article X
Article X of the Protocol amends
provisions of the 1971 Convention
concerning relief from double taxa­
tion granted in Norway with respect
to income derived from U.S. sources.
Paragraph (2) of Article X amends
subparagraph (c) of paragraph (2) of
Article 23 (Relief from Double Tax­
ation) which obligates Norway to al­
low a foreign tax credit in a case where
a Norwegian corporation receives
dividends from a U.S. corporation in
which it owns 10 percent or more of
the stock. Under new subparagraph
(c) Norway will continue to be obli­
gated to give a credit against the tax
otherwise payable by the Norwegian
corporation for U.S. tax imposed on
the U.S. corporation. The credit in
Norway shall, however, be for that
part of the United States tax imposed
on the profits of the United States
corporation out of which the divi­
dends were paid in the proportion that
the dividends received bear to the ac­
cumulated profits of the United States
corporation in excess of such United
States tax. Subparagraph (c) re­
quires, moreover, that the Norwegian
corporation claiming a credit against
its Norwegian tax with respect to such
United States tax must recognize as
income in the year in which the div­
idend is received an amount equal to
such credit. New subparagraph (c) also
provides that the Norwegian credit
shall not exceed the part of the Nor­
wegian tax, as computed before the
credit is given, which is appropriate
to the income derived from sources
in the United States under rules set
forth in Article 24 (Source of In­
come).
Paragraph (3) of Article X of the
Protocol adds a new subparagraph (d)
to paragraph (2) of Article 23. New
subparagraph (d) provides that in the
case of a resident of Norway who de­
rives income from offshore activities
which may be taxed in the United
States, Norway may also tax such in­
come. Norway shall allow, however,
as a credit against the tax in Norway
on such income an amount equal to
the tax paid in the United States. This
credit allowed in Norway shall not,
however, exceed that part of the Nor­
wegian tax, as computed before the
credit is given, which is attributable
to the income which may be taxed in
the United States.
Paragraph (1) of Article X of the
Protocol amends subparagraph (a) of
paragraph (2) of Article 23 to assure
that the provisions of new subpara­
graphs (c) and (d), as well as the pro­
visions of existing subparagraph (b),
override the general rule of subpar­
agraph (a) of paragraph (2). Under
the general rule, Norway is committed
to an exemption (with progression)
with respect to certain income that
may be taxed by or is exempt in the
United States.
Article XI
Article XI makes two changes to
Article 27 (Mutual Agreement Pro­
cedure). First, Article XI amends
paragraph (4) of Article 27 to clarify
that any agreement reached under
Article 27 may be implemented not­

withstanding any time limits in the
domestic law of a Contracting State.
Thus, with this amendment to Article
27, it will be clear that the United
States competent authority can grant
refunds of U.S. tax under Article 27
even if under the Code such refund
would otherwise be barred by the U.S.
statute of limitations.
Second, Article XI adds to Article
27 a rule found in several recent United
States income tax conventions. This
rule, which is in new paragraph (5) of
Article 27, authorizes the competent
authorities to agree to adjust upward,
in light of economy developments, any
amounts specified in the Convention
in terms of currency.
Article XII
Article XII of the Protocol amends
paragraph (3) of Article 28 (Ex­
change of Information) to clarify the
means to be taken by a Contracting
State in responding to a request from
the other Contracting State for such
information as is pertinent to carrying
out the provisions of the Convention
and of the domestic laws of the Con­
tracting State concerning the taxes
covered by the Convention. New par­
agraph (3) provides that if informa­
tion is requested by a Contracting State
in accordance with Article 28, the
other Contracting State shall obtain
the information to which the request
relates in the same manner and to the
same extent as if the tax of the re­
questing State were the tax of the re­
quested State and were being im­
posed by the requested State. In
addition, the competent authority of
the requested State shall, if so re­
quested, provide information under
Article 28 in the form of depositions
of witnesses and authenticated copies
of unedited original documents (in­
cluding books, papers, statements,
records, accounts or writings) to the
same extent such depositions and
documents can be obtained under the
laws and administrative practices of
the requested State with respect to
its own taxes.
Article XIII
Article XIII of the Protocol pro­
vides rules with respect to ratifica­
tion, entry into force, and effective
dates of the Protocol. The Protocol
enters in force upon the exchange in­
struments of ratification. The provi­
sions of the Protocol have effect at
three different times:
(1) in respect of credits against U.S.
tax allowed pursuant to Article I of
the Protocol, as of the sixth taxable
year preceding January 1 of the year
in which the instruments of ratifica­
tion of the Protocol are exchanged;
(2) in respect of tax withheld at the
source, to amounts paid on or after
the first day of the sixth month next
following the date on which the in­
struments of ratification of the Pro­
tocol are exchanged;
(3) in respect of other taxes, for
taxable years beginning on or after
January 1 of the year following the
year in which the instruments of rat­
ification of the Protocol are ex­
changed.
Subpart B. —Legislation and Related
Committee Reports
Public Law 97-2161
97th Congress, H. R. 6685
July 18, 1982
1 This publication of the law is restricted to
excerpts involving tax matters. Conference Re­
port No. 97-632 is not published.
An Act making urgent supplemen­
tal appropriations for the fiscal year
ending September 30, 1982, and for
other purposes
Be it enacted by the Senate and House
of Representatives of the United States
of America in Congress assembled,
That the following sums are appro­
priated, out of any money in the
Treasury not otherwise appropriated,
to supply supplemental appropria­
tions (this Act may be cited as the
“Urgent Supplemental Appropria­
tions Act, 1982”) for the fiscal year
ending September 30, 1982, and for
other purposes, namely:
TITLE II
GENERAL PROVISIONS

Sec. 211. (a) Subsection (a) of sec­
tion 112 of the Act of December 15,
1981 (95 Stat. 1194), is amended by
inserting after “in connection with a
qualified issue” the following: “, ex­
cept to the extent such funds are used
in connection with the consideration
or granting of an exemption from the
application of such revenue ruling or
regulation under proposed income tax
regulation section 1. 103-7(b)(6)(ii) or
any similar statute or regulation”.
(b) Subsection (d) of section 112 of
the Act of December 15, 1981 (95 Stat.
1196), is amended to read as follows:
“(d) It is the sense of the Congress
that after August 23, 1981, the Sec­
retary of the Treasury or his delegate,
in all cases, should enforce any rev­
enue ruling or regulation described in
paragraph (1) or (2) of subsection (a)
in a manner consistent with the pro­
visions of this section. Nothing in the
preceding sentence shall prevent the
Secretary of the Treasury or his del­
egate from granting or considering an
exemption from the application of such
a revenue ruling or regulation under
proposed income tax regulation sec­
tion 1.103-7(b)(6)(ii) or any similar
statute or regulation. ”.

Sec. 215. (a) The last sentence of
section 162(a) of the Internal Reve­
nue Code of 1954 (relating to trade
or business expenses) is amended by
inserting “, but amounts expended by
such Members within each taxable year
for living expenses shall not be de­
ductible for income tax purposes in
excess
of $3, 000” after “home”.
(b) Paragraph (4) of section 280A(f)
of such Code (relating to coordina­
tion with section 162(a)(2)) is amended
to read as follows:
“(4) Coordination with sec­
tion 162(a)(2). —Nothing in this sec­
tion shall be construed to disallow any
deduction allowable under section
162(a)(2) (or any deduction which
meets the tests of section 162(a)(2)
but is allowable under another pro­
vision of this title) by reason of the
taxpayer’s being away from home in
the pursuit of a trade or business (other
than the trade or business of renting
dwelling units). ”.