Protocol Amending Convention US and UK… Taxes on Income and Capital Gains, July 19, 2002

PROTOCOL AMENDING

THE CONVENTION BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE UNITED KINGDOM

OF GREAT BRITAIN AND NORTHERN IRELAND

FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE

PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL GAINS,

SIGNED AT LONDON ON 24th JULY 2001

The Government of the United States of America and the Government of the United
Kingdom of Great Britain and Northern Ireland;
Desiring to conclude a Protocol to amend the Convention for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital
Gains, signed at London on 24 July 2001 (hereinafter referred to as “the Convention”);
Have agreed as follows:

ARTICLE I
Paragraph 5 of Article 1 of the Convention shall be deleted and replaced by the
following:
“5. The provisions of paragraph 4 of this Article shall not affect:
a) the benefits conferred by a Contracting State under paragraph 2 of Article 9
(Associated Enterprises), sub-paragraph b) of paragraph 1 and paragraphs 3 and 5 of
Article 17 (Pensions, Social Security, Annuities, Alimony, and Child Support),
paragraphs 1 and 5 of Article 18 (Pension Schemes) and Articles 24 (Relief From
Double Taxation), 25 (Non-discrimination), and 26 (Mutual Agreement Procedure) of
this Convention; and
b) the benefits conferred by a Contracting State under paragraph 2 of Article 18
(Pension Schemes) and Articles 19 (Government Service), 20 (Students), 20A
(Teachers), and 28 (Diplomatic Agents and Consular Officers) of this Convention, upon
individuals who are neither citizens of, nor have been admitted for permanent residence
in, that State.”
ARTICLE II
Paragraph 4 of Article 10 of the Convention shall be deleted and replaced by the
following:
“4. Sub-paragraph a) of paragraph 2 and sub-paragraph a) of paragraph 3 of this Article
shall not apply in the case of dividends paid by a pooled investment vehicle which is a resident of
a Contracting State. Sub-paragraph b) of paragraph 2 and sub-paragraph b) of paragraph 3 of this
Article shall apply in the case of dividends paid by a pooled investment vehicle, the assets of
which consist wholly or mainly of shares, securities or currencies or derivative contracts relating
to shares, securities or currencies. In the case of dividends paid by a pooled investment vehicle
not described in the preceding sentence, sub-paragraph b) of paragraph 2 and sub-paragraph b) of
paragraph 3 of this Article shall apply only if
a) the beneficial owner of the dividends is an individual or pension scheme, in
either case holding an interest of not more than 10 per cent. in the pooled investment
vehicle;
b) the dividends are paid with respect to a class of stock that is publicly traded
and the beneficial owner of the dividends is a person holding an interest of not more
than 5 per cent. of any class of the stock of the pooled investment vehicle; or
c) the beneficial owner of the dividends is a person holding an interest of not
more than 10 per cent. in the pooled investment vehicle and that vehicle is diversified.”
ARTICLE III
The following new Article 20A shall be inserted:
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“ARTICLE 20A
Teachers
1. A professor or teacher who visits one of the Contracting States for a period not
exceeding two years for the purpose of teaching or engaging in research at a university, college
or other recognised educational institution in that Contracting State and who was immediately
before that visit a resident of the other Contracting State, shall be exempted from tax by the
first-mentioned Contracting State on any remuneration for such teaching or research for a
period not exceeding two years from the date he first visits that State for such purpose.
2. The exemption provided in this Article may be applied by the Contracting State in
which the teaching or research is performed to current payments to such professor or teacher in
anticipation or fulfilment of the requirements of paragraph 1 or by way of withholding and
refund, but in either case exemption shall be conditional upon fulfilment of the requirements of
paragraph 1.
3. This Article shall apply to income from research only if such research is undertaken
by the professor or teacher in the public interest and not primarily for the benefit of some other
private person or persons.”
ARTICLE IV
Sub-paragraph d) of paragraph 7 of Article 23 of the Convention shall be deleted and
replaced by the following:
“d) an equivalent beneficiary is a resident of a Member State of the European
Community or of a European Economic Area state or of a party to the North
American Free Trade Agreement but only if that resident:
(i) A) would be entitled to all the benefits of a comprehensive
convention for the avoidance of double taxation between any Member State of
the European Community or a European Economic Area state or any party to the
North American Free Trade Agreement and the Contracting State from which
the benefits of this Convention are claimed, provided that if such convention
does not contain a comprehensive limitation on benefits article, the person
would be a qualified person under paragraph 2 of this Article (or for the
purposes of sub-paragraph g) of paragraph 2, under the provisions specified in
clause ( i) of that sub-paragraph) if such person were a resident of one of the
Contracting States under Article 4 (Residence) of this Convention; and
B) with respect to income referred to in Article 10 (Dividends),
11 (Interest) or 12 (Royalties) of this Convention, would be entitled under such
convention to a rate of tax with respect to the particular class of income for
which benefits are being claimed under this Convention that is at least as low as
the rate applicable under this Convention; or
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(ii) is a qualified person by reason of sub-paragraphs a), b), clause (i) of
sub-paragraph c), clause ( i) of sub-paragraph d), or sub-paragraph e) of
paragraph 2 of this Article.
For the purposes of applying paragraph 3 of Article 10 (Dividends) in order to determine
whether a person, owning shares, directly or indirectly, in the company claiming the benefits of
this Convention, is an equivalent beneficiary, such person shall be deemed to hold the same
voting power in the company paying the dividend as the company claiming the benefits holds
in such company.”
ARTICLE V
1. Paragraph 3 of Article 29 of the Convention shall be deleted and replaced by the
following:
“3. a) The Convention between the Government of the United States of America and
the Government of the United Kingdom of Great Britain and Northern Ireland for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income and Capital Gains, signed at London on December 31st, 1975, as
modified by subsequent notes and protocols (“the prior Convention”) shall cease to have
effect in relation to any tax with effect from the date on which this Convention has effect
in relation to that tax in accordance with paragraph 2 of this Article. In relation to tax
credits in respect of dividends paid by companies which are residents of the United
Kingdom, the prior Convention shall terminate and cease to be effective in respect of
dividends paid on or after the first day of the second month next following the date on
which this Convention enters into force.
b) Notwithstanding sub-paragraph a) of this paragraph, where any person
entitled to benefits under the prior Convention would have been entitled to greater
benefits thereunder than under this Convention, the prior Convention shall, at the
election of such person, continue to have effect in its entirety with respect to that person
for a twelve-month period from the date on which the provisions of this Convention
otherwise would have effect under paragraph 2 of this Article. The prior Convention
shall terminate on the last date on which it has effect in relation to any tax or to any
entitlement to tax credits in accordance with the foregoing provisions of this sub-
paragraph.”
2. Paragraph 4 of Article 29 of the Convention shall be deleted and paragraph 5 shall be
re-numbered as paragraph 4.
ARTICLE VI
1. This Protocol shall be subject to ratification in accordance with the applicable
procedures of each Contracting State and instruments of ratification shall be exchanged as soon
as possible.
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2. This Protocol shall enter into force upon the exchange of instruments of ratification,
and shall thereupon have effect in accordance with Article 29 of the Convention.
ARTICLE VII
This Protocol shall remain in force as long as the Convention remains in force.
IN WITNESS WHEREOF, the undersigned, being duly authorized thereto by their
respective Governments, have signed this Convention.
DONE at Washington, in duplicate, this 19th day of July, 2002.
FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF
THE UNITED STATES OF AMERICA: THE UNITED KINGDOM OF
GREAT BRITAIN AND
NORTHERN IRELAND:
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