FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department welcomes the March 13th action by the Senate approving the new tax treaty with the United Kingdom and the protocols amending the tax treaties with Australia and Mexico.

“The three agreements approved by the Senate will operate to reduce bilateral tax barriers to cross-border trade and investment between the United States and these three important partners,” said Secretary Snow.  “These enhanced tax treaty relationships will foster even closer economic ties with the United Kingdom, Australia and Mexico, all of which we consider as true neighbors of the United States.”

Each of the agreements contains provisions that will further reduce withholding taxes on cross-border income.  The three agreements are the first U.S. tax agreements to provide for the elimination of withholding tax on dividends arising from certain direct investments.  All three agreements modernize the bilateral treaty relationships to take into account changes in laws and policies and bring the relationships into closer conformity with U.S. tax treaty policy.

The new U.S-U.K. treaty replaces the existing income tax treaty between the United States and the United Kingdom, which has been in effect since 1980.  The U.S.-Australia protocol amends the existing income tax treaty with Australia which was concluded in 1982.  The U.S.-Mexico protocol amends the existing income tax treaty with Mexico which was concluded in 1992.

The new treaty with the United Kingdom and the protocol with Australia each will enter into force when the required exchange of instruments of ratification is completed.  The protocol with Mexico will enter into force when the ratification requirements in Mexico are completed and the required notification is provided.