FROM THE OFFICE OF PUBLIC AFFAIRS

December 28, 2004
js-2172

Treasury Announces Entry Into Force of Protocol Amending U.S.-Netherlands Income Tax Treaty

WASHINGTON, DC -- The Treasury Department announced that the protocol amending the income tax treaty between the United States and the Netherlands entered into force today.

"I am very pleased that this important protocol improving the long-standing tax treaty relationship between the United States and the Netherlands is now in force," said Secretary Snow. "The enhancements reflected in the protocol will foster even closer ties between our two countries to the benefit of both our economies."

The United States and the Netherlands signed the protocol at a ceremony at the Treasury Department on March 8, 2004. The United States Senate approved the protocol on November 17, 2004.

The protocol amends the existing U.S.-Netherlands tax treaty, which entered into force in 1993, to take into account developments over the last decade. The protocol reflects a modernization of the anti-treaty shopping rules to prevent inappropriate exploitation of the treaty, including a tightening of the rules applicable to publicly-traded companies to ensure real nexus between the company and its residence country. The protocol also provides for the elimination of source-country withholding taxes on certain intercompany dividends, removing a remaining barrier to cross-border investment in both directions.

Under the terms of the protocol, each country was required to notify the other when its constitutional requirements for entry into force had taken place, with the protocol entering into force upon the second of the required notifications. This process was completed by delivery of the second such notification today.

With the entry into force today, the protocol generally will be effective for taxable periods beginning on or after January 1, 2005. The provisions of the protocol relating to withholding taxes will be effective for amounts paid or credited on or after February 1, 2005.

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