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A discussion about international tax would not be complete without a discussion about tax treaties and where they fit into global commerce and trade.
Tax treaties, on a very basic level, are agreements between two countries that provide rules that govern how each country will tax a certain item that could potentially be taxed by both countries. The countries are often referred to as the “contracting parties”.
Generally, a treaty provision will reduce and sometimes exempt from tax the amount of the tax liability that was imposed on a taxpayer through either country’s withholding tax system.
Because a higher tax rate usually will apply to an item of income that is not subject to a treaty, it is an important step in tax planning to confirm whether there is a reciprocal treaty in effect with the country where the income is derived in order to have a complete understanding of your ultimate tax obligation.
The United States has income tax treaties with a number of foreign countries. Below is a list of the countries with which they have a treaty (current as of December 31, 2011) and the effective dates of these treaties:
Country
|
General
|
Effective Date
|
Australia
|
Dec. 1, 1983
|
Austria
|
Jan. 1, 1999
|
Bangladesh
|
Jan. 1, 2007
|
Barbados
|
Jan. 1, 1984
|
Belgium
|
Jan. 1, 2008
|
Bulgaria
|
Jan. 1, 2009
|
Canada
|
Jan. 1, 1985
|
China, People's Republic of
|
Jan. 1, 1987
|
Commonwealth of Independent States
|
Jan. 1, 1976
|
Cyprus
|
Jan. 1, 1986
|
Czech Republic
|
Jan. 1, 1993
|
Denmark
|
Jan. 1, 2001
|
Egypt
|
Jan. 1, 1982
|
Estonia
|
Jan. 1, 2000
|
Finland
|
Jan. 1, 1991
|
France
|
Jan. 1, 1996
|
Germany
|
Jan. 1, 1990
|
Greece
|
Jan. 1, 1953
|
Hungary
|
Jan. 1, 1980
|
Iceland
|
Jan. 1, 2009
|
India
|
Jan. 1, 1991
|
Indonesia
|
Jan. 1, 1990
|
Ireland
|
Jan. 1, 1998
|
Israel
|
Jan. 1, 1995
|
Italy
|
Jan. 1, 2010
|
Jamaica
|
Jan. 1, 1982
|
Japan
|
Jan. 1, 2005
|
Kazakhstan
|
Jan. 1, 1996
|
Korea, South
|
Jan. 1, 1980
|
Latvia
|
Jan. 1, 2000
|
Lithuania
|
Jan. 1, 2000
|
Luxembourg
|
Jan. 1, 2001
|
Malta
|
Jan. 1, 2011
|
Mexico
|
Jan. 1,1994
|
Morocco
|
Jan. 1, 1981
|
Netherlands
|
Jan. 1, 1994
|
New Zealand
|
Nov. 2, 1983
|
Norway
|
Jan. 1, 1971
|
Pakistan
|
Jan. 1, 1959
|
Philippines
|
Jan. 1, 1983
|
Poland
|
Jan. 1, 1974
|
Portugal
|
Jan. 1, 1996
|
Romania
|
Jan. 1, 1974
|
Russia
|
Jan. 1, 1994
|
Slovak Republic
|
Jan. 1, 1993
|
Slovenia
|
Jan. 1, 2002
|
South Africa
|
Jan. 1, 1998
|
Spain
|
Jan. 1, 1991
|
Sri Lanka
|
Jan. 1, 2004
|
Sweden
|
Jan. 1, 1996
|
Switzerland
|
Jan. 1, 1998
|
Thailand
|
Jan. 1, 1998
|
Trinidad and Tobago
|
Jan. 1, 1970
|
Tunisia
|
Jan. 1, 1990
|
Turkey
|
Jan. 1, 1998
|
Ukraine
|
Jan. 1, 2001
|
United Kingdom
|
Jan. 1, 2004
|
Venezuela
|
Jan. 1, 2000
|
|
|
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