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July 8, 2003 JS-538
Treasury Announces Entry into Force of Protocol Amending Bilateral Income Tax Treaty with Mexico
The Treasury Department announced today that the Protocol amending the existing bilateral income tax treaty with Mexico entered into force on July 3rd. The Protocol, which was signed in Mexico City on November 26, 2002, is only the third agreement entered into by the United States that eliminates source-country withholding taxes on certain intercompany dividends. This elimination of withholding taxes represents an elimination of potential tax barriers that will serve to further encourage cross-border investment between the United States and Mexico. The Protocol also includes provisions that modernize the treaty to take account of developments in the tax laws and treaty policies of both countries since the treaty entered into force in 1993.
Under the terms of the Protocol, each country was required to notify the other when its constitutional and statutory requirements for entry into force had taken place, and the Protocol was to enter into force upon the second of such notifications. This process was completed by delivery of the second such notification on July 3, 2003.
With the entry into force of the protocol, the new provisions relating to the withholding tax on dividends will be effective for dividends paid or credited on or after September 1, 2003. All other provisions of the Protocol will be effective with respect to taxable periods beginning on or after January 1, 2004.
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