S.I. No. 425/1999 - Double Taxation Relief (Taxes on Income and Capital Gains) (United States of America) Order, 1999

WHEREAS it is enacted by sections 826 (1) and 828 of the Taxes Consolidation Act, 1997 (No. 39 of 1997), that if the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax or capital gains tax and any taxes of a similar character, imposed by the laws of the State or by the laws of that territory, and that it is expedient that those arrangements should have the force of law, the arrangements shall, notwithstanding anything in any enactment other than section 168 of the Taxes Consolidation Act, 1997 , have the force of law:

AND WHEREAS it is further enacted by section 826 (6) of the Taxes Consolidation Act, 1997 , that where such an order is proposed to be made, a draft of the order shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann:

AND WHEREAS a draft of the following Order has been laid before Dáil Éireann and a resolution approving of the draft has been passed by Dáil Éireann:

NOW, the Government, in exercise of the powers conferred on them by sections 826 (1) and 828 of the Taxes Consolidation Act, 1997 (No. 39 of 1997), hereby order as follows:

1. This Order may be cited as the Double Taxation Relief (Taxes on Income and Capital Gains) (United States of America) Order, 1999.

2. It is hereby declared—

(a) that the arrangements specified in the Convention, the text of which is set out in the Schedule to this Order, have been made with the Government of the United States of America in relation to affording relief from double taxation in respect of income tax, corporation tax or capital gains tax and any taxes of a similar character, imposed by the laws of the State or by the laws of the United States of America, and

(b) that it is expedient that those arrangements should have the force of law.

SCHEDULE

CONVENTION

AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF IRELAND AND THE GOVERNMENT OF THE UNITED STATES OF AMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS SIGNED AT DUBLIN ON 28 JULY, 1997

The Government of Ireland and the Government of the United States of America, desiring to amend the Convention between the Government of Ireland and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains signed at Dublin on 28 July, 1997 (hereinafter referred to as the “1997 Convention”), have agreed as follows:

ARTICLE I

Paragraph 4 of Article 10 (Dividends) of the 1997 Convention shall be deleted and replaced by the following:

“4. Subparagraph a) of paragraph 2 shall not apply in the case of dividends paid by a Regulated Investment Company (RIC) or a Real Estate Investment Trust (REIT). In the case of dividends paid by a RIC, subparagraph b) of paragraph 2 shall apply. In the case of dividends paid by a REIT, subparagraph b) of paragraph 2 also shall not apply unless:

a) the beneficial owner of the dividends is an individual holding an interest of not more than 10 percent in the REIT;

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 percent of any class of the REIT's stock; or

c) the beneficial owner of the dividends is a person holding an interest of not more than 10 percent in the REIT and the REIT is diversified.”

ARTICLE 2

1. This Convention shall be subject to ratification in accordance with the applicable procedures in Ireland and the United States of America and instruments of ratification shall be exchanged as soon as possible.

2. This Convention shall enter into force upon the exchange of instruments of ratification and shall have effect in respect of dividends paid on or after the first day of the second month next following the date on which the Convention enters into force.

IN WITNESS WHEREOF, the undersigned, being duly authorised thereto by their respective Governments, have signed this Convention.

DONE at Washington in duplicate, this 24th day of September, 1999.

EXPLANATORY NOTE

(This note is not part of the Instrument and does not purport to be a legal interpretation.)

This Order gives the force of law to the Convention amending the Convention between the Government of Ireland and the Government of the United States of America which is set out in the Schedule. The effect of the Convention is summarised below.

The existing Double Taxation Convention between Ireland and the United States of America was signed at Dublin on 28 July, 1997 and replaced an earlier Convention in force since 1951.

The current Convention makes an amendment to the existing 1997 Convention to reflect recent changes in US policy in relation to foreign investors in Real Estate Investment Trusts (REITs).

PROVISIONS OF THE AMENDING CONVENTION

Article I replaces paragraph 4 of Article 10 (Dividends) of the 1997 Convention.

It enlarges the circumstances under which dividends paid by a Real Estate Investment Trust (REIT) in the United States to Irish resident shareholders can benefit from the reduced 15% withholding tax on dividends provided by paragraph 2(b) of Article 10 of the 1997 Convention.

Sub-paragraph (a) of the replacement paragraph 4 retains the benefit of the 15% withholding tax for individual holders which was provided by the original paragraph 4. Sub-paragraphs (b) and (c) respectively extend the same benefit to dividends paid by a publicly traded REIT to shareholders with not more than a 5% interest in the REIT and to dividends paid by a REIT which is diversified to shareholders with not more than a 10% interest in the REIT.

Article 2 provides that the provisions of the Convention will enter into force when each country has completed its constitutional requirements for ratification and both have exchanged their instruments of ratification. It will thereupon have effect for dividends paid on or after the first day of the second month next following the date of entry into force.