FROM THE OFFICE OF PUBLIC AFFAIRS

December 14, 1998
RR-2854

United States and Germany Sign Protocol to Estate, Gift and Inheritance Tax Convention

The Treasury Department announced that U.S. Deputy Assistant Secretary of State for International Finance and Development Barbara Griffiths and German Ambassador Juergen Chrobog signed today in Washington a Protocol to the estate, gift and inheritance tax Convention between the United States and Germany. The Protocol amends the existing Convention, which was signed in 1980.

The Protocol addresses two major issues relating to legislative changes made in the Technical and Miscellaneous Revenue Act of 1988 (TAMRA). First, the Protocol provides a U.S.estate tax marital deduction for certain estates of limited value where the surviving spouse is not a U.S.citizen. Second, the Protocol provides a pro rata unified credit to the estate of a German domiciliary for purposes of computing the U.S. estate tax. The amount of this pro rata unified credit varies, based on the extent to which the assets of the estate are situated in theUnited States. These two provisions are similar to relief provided in a 1995 protocol to the U.S.-Canada income tax treaty.

The Protocol also makes other changes to the Convention to reflect more closely current U.S.treaty policy. For example, the Protocol extends the period of time during which a citizen of one country can be domiciled in the other country without becoming subject to the primary taxing jurisdiction of the other country. The Protocol also extends the United States' ability to tax domiciliaries and certain former citizens and long-term residents under the saving clause of theConvention.

The Protocol generally is effective with respect to decedents dying after the date of entry into force. However, the provisions regarding the marital deduction for estates of limited value, the pro rata unified credit, and the United States' ability to tax under the saving clause are effectivewith respects to decedents dying after November 10, 1988 (the effective date of TAMRA).

The Protocol will enter into force after the countries have exchanged instruments of ratification. Copies of the Protocol are available on the Internet or from the Office of Public Affairs, Treasury Department, Room 2321,Washington, D.C. 20220.