CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA

AND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE AVOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT

TO TAXES ON INCOME AND CAPITAL

GENERAL EFFECTIVE DATE UNDER ARTICLE 33: 1 JANUARY 1996

TABLE OF ARTICLES

Article 1---------------------------------Personal Scope

Article 2---------------------------------Taxes Covered

Article 3---------------------------------General Definitions

Article 4---------------------------------Resident

Article 11--------------------------------Interest

Article 12--------------------------------Royalties

Article 13--------------------------------Capital Gains

Article 14--------------------------------Independent Personal Services

Article 15--------------------------------Dependent Personal Services

Article 16--------------------------------Directors’ Fees

Article 17--------------------------------Artistes and Sportsmen

Article 18--------------------------------Pensions

Article 19--------------------------------Public Remuneration

Article 20--------------------------------Teachers and Researchers

Article 27--------------------------------Exchange of Information

Article 28--------------------------------Assistance in Collection

Article 29--------------------------------Miscellaneous Provisions

Article 30--------------------------------Limitation on Benefits of the Convention

Article 31--------------------------------Diplomatic and Consular Officers

Article 32--------------------------------Provisions for Implementation

Article 33--------------------------------Entry Into Force

Article 34--------------------------------Termination

Letter of Submittal---------------------of 9 September, 1994

Letter of Transmittal-------------------of 19 September, 1994

MESSAGE

FROM

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT

The White House.

THE PRESIDENT: I have the honor to submit to you, with a view to its transmission to the

Senate for advice and consent to ratification, the Convention Between the Government of the

United States of America and the Government of the French Republic for the Avoidance of

Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and

Capital, signed at Paris on August 31, 1994, together with two related exchanges of notes signed

on the same date.

The new Convention will replace the existing income tax convention between the United

income that arises in one of the countries and is derived by residents of the other country may be

taxed by the country in which the income arises (the “source country”). Rules are provided for

each category of income, such as business profits, investment income, and personal service

income. The Convention confirms that the country of residence will avoid international double

taxation by providing relief for the tax imposed by the source country. It also provides for

administrative cooperation between the tax authorities of the two countries in applying the

Convention and the taxes covered by the Convention. The benefits of the Convention are limited

to qualified residents of the two countries.

The new Convention confirms that residents of each country include tax-exempt

Convention to other U.S. portfolio investors. It also addresses the treatment of dividends paid by

regulated investment companies and real estate investment trusts, bringing those provisions into

line with current U.S. treaty policy. The new Convention clarifies the scope of the exemption at

source of copyright royalties.

An important improvement in the new Convention is the modernization of the limitation on

also strengthened by bringing up to date the provisions concerning associated enterprises and the

The new Convention preserves the special French tax benefits for U.S. citizens residing in

France and for French residents who are partners of U.S. partnerships.

provisions concerning taxes on dividends, interests, and royalties and the U.S. excise tax on

insurance premiums paid to foreign insurers will take effect on the first day of the second month

following the entry into force. The provisions concerning other taxes generally will take effect

for taxable years or taxable events occurring on or after January 1 of the year following the entry

into force. However, certain provisions concerning the availability of the French dividend tax

credit and the application of the copyright royalty exemption will apply for dividends and

royalties paid or credited on or after January 1, 1991. The 1967 convention and the related

exchanges of letters will cease to have effect as of the date on which the provisions of this

Convention become effective.

Respectfully submitted,

Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on

notes. Also transmitted for the information of the Senate is the report of the Department of State

with respect to the Convention.

The Convention replaces the 1967 income tax convention between the United States of

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES

OF AMERICA AND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE

AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL

EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL

The Government of the United States of America and the Government of the French

Personal Scope

This Convention shall apply only to persons who are residents of one or both of the

Contracting States, except as otherwise provided in the Convention.

(a) in the case of the United States:

(i) the Federal income taxes imposed by the Internal Revenue Code (but

excluding social security taxes); and

(ii) the excise taxes imposed on insurance premiums paid to foreign

insurers and with respect to private foundations

(hereinafter referred to as "United States tax"). The Convention, however, shall apply to

the excise taxes imposed on insurance premiums paid to foreign insurers only to the

extent that the risks covered by such premiums are not reinsured with a person not

entitled to exemption from such taxes under this or any other income tax convention

which applies to these taxes;

(iii) the tax on salaries (la taxe sur les salaires) governed by the provisions

of the Convention applicable, as the case may be, to business profits or to income

from independent personal services; and

(iv) the wealth tax (l'impôt de solidarité sur la fortune) (hereinafter

referred to as "French tax").

2. The Convention shall apply also to any identical or substantially similar taxes that are

imposed after the date of signature of the Convention in addition to, or in place of, the existing

taxes. The competent authorities of the Contracting States shall notify each other of any

significant changes which have been made in their respective taxation laws and of any official

ARTICLE 3

General Definitions

1. For the purposes of this Convention:

(b) the term "United States" means the United States of America, but does not

territory. When used in a geographical sense, the term "United States" means the states

thereof and the District of Columbia and includes the territorial sea adjacent to those

States and any area outside the territorial sea within which, in accordance with

international law, the United States has sovereign rights for the purpose of exploring and

and the superjacent waters;

(d) the term "person" includes, but is not limited to, an individual and a company;

(e) the term "company" means any body corporate or any entity which is treated as

a body corporate for tax purposes;

(f) the terms "enterprise of a Contracting State" and "enterprise of the other

Contracting State" mean, respectively, an enterprise carried on by a resident of a

Contracting State and an enterprise carried on by a resident of the other Contracting State;

(g) the term "international traffic" means any transport by a ship or aircraft, except

when the ship or aircraft is operated solely between places in a Contracting State;

(h) the term "competent authority" means:

provisions of Article 26 (Mutual Agreement Procedure), have the meaning which it has under the

taxation laws of that State.

ARTICLE 4

1. For the purposes of this Convention, the term "resident of a Contracting State" means any

person who, under the laws of that State, is liable to tax therein by reason of his domicile,

residence, place of management, place of incorporation, or any other criterion of a similar nature.

2. (a) France shall consider a U.S. citizen or an alien admitted to the United States

for permanent residence (a "green card" holder) to be a resident of the United States for

the purposes of paragraph 1 only if such individual has a substantial presence in the

the principles of subparagraphs (a) and (b) of paragraph 3.

local authority thereof, and any agency or instrumentality of such State,

(ii) a pension trust and any other organization established in that State and

maintained exclusively to administer or provide retirement or employee benefits

that is established or sponsored by a person that is a resident of that State under

the provisions of this Article; and any not-for-profit organization established and

exempt from income taxation in that State;

(iii) in the case of the United States, a regulated investment company, a

real estate investment trust, and a real estate mortgage investment conduit; in the

case of France, a "société d'investissement a capital variable" and a "fonds

commun de placement"; and any similar investment entities agreed upon by the

competent authorities of both Contracting States;

(iv) a partnership or similar pass-through entity, an estate, an trust (other

than one referred to in subparagraph (ii) or (iii) above), but only to the extent that

the income derived by such partnership, similar entity state, or trust is subject to

tax in the Contracting State as the income of a resident, either in the hands of such

benefits under this Convention.

3. Where, by reason of the provisions of paragraphs 1 and 2, an individual is a resident of

both Contracting States, his status shall be determined as follows:

(a) he shall be deemed to be a resident of the State in which he has a permanent

home available to him; if he has a permanent home available to him in both Contracting

States, he shall be deemed to be a resident of the State with which his personal and

economic relations are closer (center of vital interests);

(b) if the State in which he has his center of vital interests cannot be determined,

or if he does not have a permanent home available to him in either State, he shall be

deemed to be a resident of the State of which he is a national;

(d) if he is a national of both States or of neither of them, the competent

authorities of the Contracting States shall settle the question by mutual agreement.

is a resident of both Contracting States, the competent authorities shall endeavor to settle the

such agreement, such person shall not be considered to be a resident of either Contracting State

ARTICLE 5

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop; and

(f) a mine, an oil or gas well, a quarry, or any other place of extraction of natural

resources.

3. The term "permanent establishment" shall also include a building site or construction or

installation project, or an installation or drilling rig or ship used for the exploration or to prepare

for the extraction of natural resources, but only if such site or project lasts, or such rig or ship is

(b) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of storage, display, or delivery;

(c) the maintenance of a stock of goods or merchandise belonging to the enterprise

solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose of

purchasing goods or merchandise, or of collecting information, for the enterprise;

(e) the maintenance of a fixed place of business solely for the purpose of carrying

on, for the enterprise, any other activity of a preparatory or auxiliary character;

(f) the maintenance of a fixed place of business solely for any combination of the

activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent

of an independent status to whom paragraph 6 applies - is acting on behalf of an enterprise and

has and habitually exercises in a Contracting State an authority to conclude contracts in the name

in respect of any activities which that person undertakes for the enterprise, unless the activities of

the provisions of that paragraph.

6. An enterprise shall not be deemed to have a permanent establishment in a Contracting

State merely because it carries on business in that State through a broker, general commission

agent, or any other agent of an independent status, provided that such persons are acting in the

ordinary course of their business as such.

ARTICLE 6

1. Income from real property (including income from agriculture or forestry) situated in a

Contracting State may be taxed in that State.

2. The term "real property" shall have the meaning which it has under the law of the

Contracting State in which the property in question is situated. The term shall in any case include

options, promises to sell, and similar rights relating to real property, property accessory to real

any other form of real property.

4. The provisions of paragraphs 1 and 3 shall also apply to income from real property of an

enterprise and to income from real property used for the performance of independent personal

services.

5. Where the ownership of shares or other rights in a company entitles a resident of a

Contracting State to the enjoyment of real property situated in the other Contracting State and

held by that company, the income derived by the owner from the direct use, letting, or use in any

other form of this right of enjoyment may be taxed in that other State to the extent that it would

between both of them and some other person, the amount of the interest, having regard to the

debt-claim for which it is paid, exceeds the amount that would have been agreed upon by the

payer and the beneficial owner in the absence of such relationship, the provisions of this Article

shall apply only to the last-mentioned amount. In such case the excess part of the payments shall

provisions of this Convention.

1. Royalties arising in a Contracting State and paid to a resident of the other contracting State

may be taxed in that other State.

Contracting State shall be taxable only in that other State.

4. The term "royalties" means:

(a) payments of any kind received as a consideration for the use of; or the right to

use, any copyright of literary, artistic, or scientific work or any neighboring right

(including reproduction rights and performing rights), any cinematographic film, any

sound or picture recording, or any software;

(b) payments of any kind received as a consideration for the use of; or the right to

use, any patent, trademark, design or model, plan, secret formula or process, or other like

right or property, or for information concerning industrial, commercial, or scientific

State, in which the royalties arise, through a permanent establishment situated therein, or

performs in that other State independent personal services from a fixed base situated therein, and

the royalties are attributable to such permanent establishment or fixed base. In such case the

provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the

case may be, shall apply.

6. (a) Royalties shall be deemed to arise in a Contracting State when the payer is a

resident of that State.

(b) Where, however, the person paying the royalties, whether he is a resident of a

Contracting State or not, has in a Contracting State a permanent establishment or a fixed

shall be deemed to arise in the State in which the permanent establishment or fixed base

is situated.

(c) Notwithstanding subparagraphs (a) and (b), royalties paid for the use of,; or the

right to use, property in a Contracting State shall be deemed to arise therein.

they are taken into account as expenses for tax purposes in the Contracting State in which

7. Where, by reason of a special relationship between the payer and the beneficial owner or

use, right, or information for which they are paid, exceeds the amount which would have been

agreed upon by the payer and the beneficial owner in the absence of such relationship, the

provisions of this Article shall apply only to the last-mentioned amount. In such case the excess

part of the payments shall remain taxable according to the laws of each Contracting State, due

1. Gains from the alienation of real property situated in a Contracting State may be taxed in

that State.

2. For purposes of paragraph 1, the term "real property situated in a Contracting State"

means:

(a) where the United States is the Contracting State, real property referred to in

Article 6 (Real Property) that is situated in the United States, a United States real property

interest (as defined in section 897 of the Internal Revenue Code, as it say be amended

from time to time without changing the general principle thereof), and an interest in a

partnership, trust, or estate, to the extent attributable to real property situated in the

their value, directly or indirectly, from real property situated in France;

iii) an interest in a partnership, a "société de personnes", a "groupement

d'intérêt économique” (economic interest group), or a "groupement européen

d'intérêt économique” (European economic interest group) (other than a

partnership, a "société de personnes", a "groupement d'intérêt économique"

(economic interest group), or a "groupement européen d'intérêt économique” that

is taxed as a company under French domestic law), an estate, or a trust, to the

extent attributable to real property situated in France.

3. (a) Gains from the alienation of movable property forming part of the business

alienation of such permanent establishment (alone or with the whole enterprise) or of

such fixed base, may be taxed in that other State. Where the removal of such property

from the other Contracting State is deemed to constitute an alienation of such property,

the gain that has accrued as of the time that such property is removed from that other

subsequent to that time of removal may be taxed in the first-mentioned Contracting State

to the provisions of subparagraph (a) during its existence may be taxed in the Contracting

payments are deferred until such permanent establishment or fixed base has ceased to

exist.

4. Gains derived by an enterprise of a Contracting State that operates ships or aircraft in

6. Subject to the provisions of paragraph 5, gains from the alienation of any property other

than property referred to in paragraphs 1 through 4 shall be taxable only in the Contracting State

of which the alienator is a resident.

Independent Personal Services

1. Income derived by a resident of a Contracting State in respect of professional services or

other activities of an independent character shall be taxable only in that State unless that resident

paragraph 1, may be taxed in the Contracting State in which such fixed base is situated, even if

the payments are deferred until such fixed base has ceased to exist.

3. The term "professional services" includes especially independent scientific, literary,

artistic, educational, or teaching activities as well as the independent activities of physicians,

lawyers, engineers, architects, dentists, and accountants.

4. The provisions of paragraph 4 of Article 7 (Business Profits) shall apply by analogy. In no

event, however, shall those provisions or the provisions of Article 4 (Resident) result in France

exempting under Article 24 (Relief from Double Taxation) more than 50 percent of the earned

preceding sentence shall reduce the amount of partnership earned income from sources within

France on which France can tax partners who are not residents of France.

Dependent Personal Services

Remuneration), salaries, wages, and other similar remuneration derived by a resident of a

employment is exercised in the other Contracting State. If the employment is so exercised, such

remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a

of the other State; and

(c) the remuneration is not borne by a permanent establishment or a fixed base

which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived by a

resident of a Contracting State in respect of an employment exercised as a member of the regular

complement of a ship or aircraft operated in international traffic shall be taxable only in that

State.

State.

Artistes and Sportsmen

1. Notwithstanding the provisions of Articles 14 (Independent Personal Services) and 15

(Dependent Personal Services), income derived by a resident of a Contracting State as an

entertainer, such as a theater, motion picture, radio, or television artiste or a musician, or as a

sportsman, from his personal activities as such exercised in the other Contracting State, may be

including expenses reimbursed to him or borne on his behalf, does not exceed 10,000 United

States dollars or its equivalent in French francs for the taxable period concerned.

2. Where income in respect of personal activities exercised by an entertainer or sportsman in

not a resident of a Contracting State, that income may, notwithstanding the provisions of Articles

exercised. However, the provisions of this paragraph shall not apply where it is established that

income, directly or indirectly, in respect of such activities that in the aggregate exceeds the

amount specified in paragraph 1 for the taxable period concerned.

3. The provisions of paragraphs 1 and 2 shall not apply to income derived by a resident of a

1. Subject to the provisions of paragraph 2 of Article 19 (Public Remuneration):

(a) except as provided in subparagraph (b), pensions and other similar

remuneration, including distributions from pension and other retirement arrangements,

derived and beneficially owned by a resident of a Contracting State in consideration of

past employment, whether paid periodically or in a lump sum, shall be taxable only in

that State:

which are of a mandatory character.

2. (a) In determining the taxable income of an individual who renders personal

services and who is a resident of a Contracting State but not a national of that State,

contributions paid by, or on behalf of, such individual to a pension or other retirement

arrangement that is established and maintained and recognized for tax purposes in the

other Contracting State shall be treated in the same way for tax purposes in the first-

mentioned State as a contribution paid to a pension or other retirement arrangement that

is established and maintained and recognized for tax purposes in that first-mentioned

State, provided that the competent authority of the first-mentioned State agrees that the

(b) For the purposes of subparagraph (a):

(i) where the competent authority of France agrees that a United States

pension or other retirement arrangement generally corresponds to a mandatory

French pension arrangement (without regard to the mandatory nature of such

other retirement arrangement shall be treated in France in the same way for tax

mandatory French pension or other retirement arrangement generally corresponds

mandatory nature of such arrangement), it is understood that contributions to the

French pension or other retirement arrangement shall be treated in the United

States in the same way for tax purposes as contributions to the United States

pension or other retirement arrangement; and

subject to the provisions of Article 24 (Relief from Double Taxation), when and to the

extent that such payments are considered gross income by the other Contracting State.

Public Remuneration

1. (a) Remuneration, other than a pension, paid by a Contracting State, a political

subdivision (in the case of the United States) or local authority thereof; or an agency or

instrumentality of that State, subdivision, or authority to an individual in respect of

2. (a) Any pension paid by, or out of funds created by, a Contracting State, a political

subdivision (in the case of the United States) or local authority thereof; or an agency or

instrumentality of that State, subdivision, or authority to an individual in respect of

services rendered to that State, subdivision, authority, agency, or instrumentality shall be

taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if

the individual is a resident of and national of that State and not at the same time a national of the

first-mentioned State.

3. The provisions of Article 4 (Independent Personal Services), 15 (Dependent Personal

carried on by a Contracting State, a political subdivision (in the case of the United States) or

local authority thereof, or an agency or instrumentality of that State, subdivision, or authority.

other Contracting State and who, at the invitation of the Government of that other State or of a

visits that other State for the primary purpose of teaching or engaging in research, or both, at a

university or other recognized educational or research institution shall be taxable only in the first-

mentioned State on his income from personal services for such teaching or research for a period

not exceeding 2 years from the date of his arrival in the other State. An individual shall be

Students and Trainees

1. (a) An individual who is a resident of a Contracting State immediately before his

visit to the other Contracting State and who is temporarily present in the other

Contracting State for the primary purpose of:

(i) studying at a university or other recognized educational institution in

that other Contracting State;

(ii) securing training required to qualify him to practice a profession or

(b) The amounts referred to in subparagraph (a) are:

(i) gifts from abroad for the purposes of his maintenance, education, study,

research, or training;

(ii) a grant, allowance, or award described in subparagraph (a) (iii); and

(iii) income from personal services performed in the other Contracting

State in an amount not in excess of 5,000 United States dollars or its equivalent in

French francs for any taxable period.

(c) The benefits of this paragraph shall only extend for such period of time as may

be reasonably or customarily required to effectuate the purpose of the visit, but in no

event shall any individual have the benefits of this Article and Article 20 (Teachers and

such research is undertaken not in the public interest but primarily for the private benefit

of a specific person or persons.

2. An individual who is a resident of a Contracting State immediately before his visit to the

under contract with, a resident of the first-mentioned State for the primary purpose of:

(b) studying at a university or other recognized educational institution in the other

shall be exempt from tax by that other State for a period of 12 consecutive months with respect to

his income from personal services in an aggregate amount not in excess of 8,000 United States

dollars or its equivalent in French francs.

2. The provisions of paragraph 1 shall not apply to income, other than income from real

property as defined in paragraph 2 of Article 6 (Income from Real Property), if the recipient of

such income, being a resident of a Contracting State, carries on business in the other Contracting

State through a permanent establishment situated therein, or performs in that other State

independent personal services from a fixed base situated therein, and the right or property in

respect of which the income is paid is effectively connected with such permanent establishment

or fixed base. In such case the provisions of Article 7 (Business Profits) or Article 14

(Independent Personal Services), as the case may be, shall apply.

(b) Capital represented by shares, rights, or an interest in a company the assets of

which consist at least 50 percent of real property situated in a Contracting State, or derive

at least 50 percent of their value, directly or indirectly, from real property situated in a

Contracting State, may be taxed in that State.

(c) If and to the extent that the assets of a person other than an individual or a

company consist of real property situated in a Contracting State, or derive their value,

directly or indirectly, from real property situated in a Contracting State, capital

represented by an interest in such person may be taxed in that State.

2. Capital of an individual represented by shares, rights, or an interest (other than shares,

State. An individual is considered to have a substantial interest if he or she owns, alone or with

related persons, directly or indirectly, shares, rights, or interests the total of which gives right to

at least 25 percent of the corporate earnings.

permanent establishment that an enterprise of a Contracting State has in the other Contracting

personal services may be taxed in that other State.

4. Capital of an enterprise of a Contracting State that operates ships or aircraft in international

traffic represented by such ships or aircraft and movable property pertaining to the operation of

such ships or aircraft shall be taxable only in that State.

the United States and not a French national, the assets situated outside of France that such a

person owns on the first of January of each of the five years following the calendar year in which

he becomes a resident of France shall be excluded from the base of assessment of the above-

mentioned wealth tax relating to each of those five years. If such an individual loses the status of

resident of France for a duration of at least three years and again becomes a resident of France,

the assets situated outside of France that such a person owns on the first of January of each of the

five years following the calender year in which he again becomes a resident of France shall be

excluded from the base of assessment of the tax relating to each of those five years.

States as a credit against the United States income tax:

(i) the French income tax paid by or on behalf of such citizen or resident;

and

(ii) in the case of a United States company owning at least 10 percent of

the voting power of a company that is a resident of France and from which the

United States company receives dividends, the French income tax paid by or on

behalf of the distributing corporation with respect to the profits out of which the

dividends are paid.

(b) In the case of an individual who is both a resident of France and a citizen of

the United States:

(a) (iii) of paragraph 2. However, the credit so allowed against United States

income tax shall not reduce that portion of the United States income tax that is

creditable against French income tax in accordance with subparagraph (a) (iii) of

paragraph 2;

citizenship of the taxpayer, would be exempt from United States income tax under

provisions of this subparagraph (b) (ii) shall apply only to the extent that an item

provision of this subparagraph (b) relating to source of income shall apply in

determining credits against United States income tax for foreign taxes other than

French income tax as defined in subparagraph (e) ; and

(c) In the case of an individual who is both a resident and citizen of the United

reason of paragraph 4 of Article 14 is not exempt from French tax under this Article shall

be considered income from sources within France. The amount of such income shall

reduce (but not below zero) the amount of partnership earned income from sources

outside the United States that would otherwise be allocated to partners who are not

residents of France. For this purpose, the reduction shall apply first to income from

sources within France and then to other income from sources outside the United States. If

the individual member of the partnership is both a resident of France and a citizen of the

United States, this provision shall not result in a reduction of United States tax below that

which the taxpayer would have incurred without the benefit of deductions or exclusions

available solely by reason of his presence or residence outside the United States.

(a) Income arising in the United States that may be taxed or shall be taxable only

in the United States in accordance with the provision of this Convention shall be taken

into account for the computation of the French tax where the beneficiary of such income

is a resident of France and where such income is not exempted from company tax

according to French domestic law. In that case, the United States tax shall not be

deductible from such income, but the beneficiary shall be entitled to a tax credit against

the French tax. Such credit shall be equal:

(i) in the case of income other than that referred to in subparagraphs (ii)

and (iii), to the amount of French tax attributable to such income;

(ii) in the case of income referred to in Article 14 (Independent Personal

(b) by any other agreement between the Contracting States.

2. Notwithstanding any provision of the Convention except the provisions of paragraph 3, the

United States may tax its residents, as determined under Article 4 (Resident), and its citizens as if

former citizen whose loss of citizenship had as one of its principal purposes the avoidance of

3. The provisions of paragraph 2 shall not affect:

under paragraph 1(b) of Article 18 (Pensions), and under Articles 24 (Relief From Double

Taxation), 25 (Non-Discrimination), and 26 (Mutual Agreement Procedure); and

(b) the benefits conferred under Articles 19 (Public Remuneration), 20 (Teachers

and Researchers), 21 (Students and Trainees) and 31 (Diplomatic and Consular Officers),

the first-mentioned State from stamp or like tax otherwise arising with respect to such

transaction.

5. A resident of a Contracting State that maintains one or several abodes in the other

Contracting State shall not be subject in that other State to an income tax according to an

"imputed income" based on the rental value of that or those abodes.

6. Nothing in this Convention shall affect the U.S. taxation of an excess inclusion with

respect to a residual interest in a real estate mortgage investment conduit under section 860G of

the Internal Revenue Code, as it may be amended from time to time without changing the general

income when and to the extent that the exercise of the option or disposition of the stock

gives rise to ordinary income for United States tax purposes;

(b) United States state and local income taxes on income from personal services

and any other business income (except income that is exempt under subparagraph 2(a) (i)

or (ii) of Article 24 (Relief from Double Taxation)) shall be allowed as business

expenses.

8. Notwithstanding the provisions of subparagraph 1(b):

(a) Notwithstanding any other agreement to which the Contracting States may be

parties, a dispute concerning whether a measure is within the scope of this Convention

procedures under this Convention exclusively shall apply to the dispute.

(b) Unless the competent authorities determine that a taxation measure is not

within the scope of this Convention, the non-discrimination obligations of this

Convention exclusively shall apply with respect to that measure, except for such national

General Agreement on Tariffs and Trade. No national treatment or most-favored-nation

procedure, decision, administrative action, or any other form of measure.

authority;

(c) a company meeting one of the following conditions:

(i) the principal class of its shares is listed on a recognized securities

exchange located in either Contracting State and is substantially and regularly

traded on one or more recognized securities exchanges;

(ii) more than 50 percent of the aggregate vote and value of its shares is

owned, directly or indirectly, by any combination of companies that are resident in

either Contracting State, the principal classes of the shares of which are listed and

traded as described in subparagraph (c) (i), persons referred to in subparagraph

(b), and companies of which more than 50 percent of the aggregate vote and value

than 50 percent of the aggregate vote and value of their shares is owed by

persons referred to in subparagraph (b); and

(bb) at least 70 percent of the aggregate vote and value of its shares

is owned, directly or indirectly, by any combination of companies that are

residents of either Contracting State or of one or more member states of

the European Union, the principal classes of shares of which are listed and

substantially and regularly traded on one or more recognized stock

exchanges, persons referred to in subparagraph (b), companies of which

more than 50 percent of the aggregate vote and value of their shares is

owned by persons referred to in subparagraph (b), one or more member

subdivisions, or authorities, and companies of which more than 50 percent

of the aggregate vote and value of their shares is owned by such member

states, subdivisions, authorities, or agencies or instrumentalities;

(d) a person, if 50 percent or more of the beneficial interest in such person (or, in

is not owned, directly or indirectly, by persons that are not qualified persons, and:

persons; or

to make deductible payments to persons that are not qualified persons and less

then 30 percent of such gross income is used, directly or indirectly, to make

deductible payments to persons that are neither qualified persons nor residents of

member states of the European Union;

2. (a) A resident of a Contracting State shall also be entitled to the benefits of the

Convention with respect to income derived from the other Contracting State if:

(i) such resident is engaged in the active conduct of a trade or business in

the first-mentioned State (other than the business of making or managing

investments, unless the activities are banking or insurance activities carried on by

a bank or insurance company);

(ii) the income is connected with or incidental to the trade or business in

the first-mentioned State; and

(iii) the trade or business is substantial in relation to the activity in the

7.5 percent and the average of the ratios exceeds 10 percent:

(i) the ratio of the value of assets used or held for use in the conduct of the

trade or business of the resident in the first-mentioned State to the value of assets

used or held for use in the conduct of the activity in the other State;

(ii) the ratio of the gross income derived from the conduct of the trade or

business of the resident in the first-mentioned State to the gross income derived

from the conduct of the activity in the other States;

(iii) the ratio of the payroll expense of the trade or business of the resident

in the first-mentioned State for services performed in that State to the payroll

expense of the activity in the other State for services performed in that other State.

State. If neither the resident nor any of its associated enterprises has an ownership interest in the

activity in the other State, the resident’s trade or business in the first-mentioned State shall be

considered substantial in relation to such activity.

that resident functions as a headquarter company for a multinational corporate group.

Convention in respect of income referred to in Articles 10 (Dividends), 11 (Interest), or 12

(a) more than 30 percent of the aggregate vote and value of all of its shares is

owned, directly or indirectly, by qualified persons resident in that State;

(b) more than 70 percent of all such shares is owned, directly or indirectly, by any

combination of one or more qualified persons and persons that are residents of member

establishments which are not situated in that State derives income from the other Contracting

State, and that income is attributable to a permanent establishment which that enterprise has in a

third jurisdiction, the tax benefits that would otherwise apply under the other provisions of the

Convention will not apply to any item of income on which the combined tax in the first-

mentioned State and in the third jurisdiction is less than 60 percent of the tax that would be

imposed in the first-mentioned State if the income were earned in that State by the enterprise and

were not attributable to the permanent establishment in the third jurisdiction. Any dividends,

interest, or royalties to which the provisions of this paragraph apply shall be subject to tax in the

other State at a rate not exceeding 15 percent of the gross amount thereof. Any other income to

which the provisions of this paragraph apply shall be subject to tax under the provisions of the

or insurance company); or

(b) when France is the first-mentioned State, France taxes the profits of such

permanent establishment according to the provisions of its domestic law referred to in

subparagraph (e) (iii) of paragraph 2 of Article 24 (Relief from Double Taxation) or the

United States taxes such profits according to the provisions of subpart F of part II of sub-

chapter N of chapter 1 of subtitle A of the Internal Revenue Code, as it may be amended

from time to time without changing the general principle thereof.

6. The following definitions shall apply for purposes of this Article:

(a) The reference in subparagraphs (c) (ii) and (c) (iii) of paragraph 1 to shares

Union, as defined in subparagraph (d) of paragraph 6.

(b) The term "gross income," as used in subparagraph (d) of paragraph 1, means

gross income for the first taxable period preceding the current taxable period, provided

that the amount of gross income for the first taxable period preceding the current taxable

income for the four taxable periods preceding the current taxable period.

for the purchase or use of or the right to use tangible property in the ordinary course of

in which the person making such payments is a resident. Types of payments may be

added to, or eliminated from, the exceptions mentioned in the preceding definition of

"deductible payments" by mutual agreement of the competent authorities.

(d) The term "resident of a member state of the European Union," as used in

Convention under the principles of paragraph 1 if such person were a resident of one of

the Contracting States under Article 4 (Resident) of this Convention.

(e) The term "recognized securities exchange" as used in paragraph 1 means:

(i) the NASDAQ System owned by the National Association of Securities

Dealers, Inc. and any stock exchange registered with the U.S. Securities and

Exchange Commission as a national securities exchange for purposes of the U.S.

Securities Exchange Act of 1934;

(ii) the French stock exchanges controlled by the "Commission des

opération bourse," and the stock exchanges of Amsterdam, Brussels, Frankfurt,

Hamburg, London, Madrid, Milan, Sydney, Tokyo, and Toronto;

paragraph 2 applies to a person that is directly so engaged or is a partner in a partnership

that is so engaged, or is so engaged through one or more associated enterprises (wherever

resident);

(h) the term "headquarter company" as used in paragraph 3 means a person

fulfilling the following conditions:

(i) it provides in the Contracting State of which it is a resident a substantial

portion of the overall supervision and administration of a multinational corporate

group, which may include, but cannot be principally, group financing;

(ii) the corporate group consists of companies that are resident in, and

engaged in an active business in, at least five countries, and the business activities

(iii) the business activities carried on in any one country other than the

Contracting State of which the headquarter company is a resident generate less

then 50 percent of the gross income of the group;

(iv) no more than 25 percent of its gross income is derived from the other

(v) it has, and exercises, independent discretionary authority to carry out

of which it is a resident as persons described in paragraph 2; and

connection with, or is incidental to, the active business referred to in subparagraph

(ii).

If the gross income requirements of subparagraph (ii), (iii), or (iv) of this paragraph are not

fulfilled, they will be deemed to be fulfilled if the required ratios are met when calculated on the

upon such person’s request,

(a) that the establishment, acquisition, or maintenance of such person and the

conduct of its operations did not have as one of its principal purposes the obtaining of

benefits under the Convention, or

(b) that it would not be appropriate, having regard to the purpose of this Article, to

deny the benefits of the Convention to such person.

The competent authority of the other Contracting State shall consult with the competent authority

of the first-mentioned State before denying the benefits of the Convention under this paragraph.

8. The competent authorities of the Contracting States may consult together with a view to

1. Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or

consular officers under the general rules of international law or under the provisions of special

agreements.

2. Notwithstanding the provisions of Article 4 (Resident), an individual who is a member of a

diplomatic mission, consular post, or permanent mission of a Contracting State that is situated in

the other Contracting State or in a third State shall be deemed for the purposes of the Convention

to be a resident of the sending State if he is liable therein to the same obligations in relation to

tax on his total income or capital as are residents of that State.

mission of a third State, who are present in a Contracting State and are not liable in either

Contracting State to the same obligations in respect of taxes on income or on capital as are

residents of that State.

1. Notwithstanding the provisions of subparagraph 4 (i) of Article 10 (Dividends) and of

of the Contracting States may prescribe rules and procedures, jointly or separately, to determine

the mode of application of the provisions of this Convention.

2. The requirements to which a resident of a Contracting State may be subjected in order to

1. The Contracting States shall notify each other when their respective constitutional and

statutory requirements for the entry into force of this Convention have been satisfied. The

Convention shall enter into force on the date of receipt of the later of such notifications.

2. The provisions of the Convention shall have effect:

force, and

(c) in respect of taxes not mentioned in subparagraph (a) or (b), for taxes on

taxable events occurring on or after the first day of January of the year following the year

in which the Convention enters into force.

3. Notwithstanding the provisions of paragraph 2,

(a) the provisions of subparagraph (e) of paragraph 4 of Article 10 (Dividends)

and of Article 12 (Royalties) shall have effect for dividends and royalties paid or credited

after the first day of January 1991;

(b) The provisions of Article 26 shall apply in respect of cases presented to the

4. The Convention Between the United States of America and the French Republic with

Respect to Taxes on Income and Property, Signed on July 28, 1967 and Amended by Protocols of

October 12, 1970, November 24, 1978, January 17, 1984 and June 16, 1988 and the exchanges of

letters attached thereto shall cease to have effect from the date on which the provisions of this

Termination

This Convention shall remain in force indefinitely. However, either Contracting State may

terminate the Convention by giving notice of termination through diplomatic channels at least six

months before the end of any calender year after the expiration of a period of five years from the

date on which the Convention enters into force. In such event, the Convention shall cease to have

the first day of January next following the expiration of the six-month period; and

(c) in respect of taxes not described in subparagraph (a) or (b), for taxes on

taxable events occurring on or after the first day of January of the year following the

expiration of the six-month period.

DONE at Paris, this 31

languages, both texts being equally authentic.

FOR THE GOVERNMENT OF THE FOR THE GOVERNMENT OF

UNITED STATES OF AMERICA FRENCH REPUBLIC

Excellency:

I have the honor to refer to the Income Tax Convention between the United States and

France, signed today.

During the course of discussions leading to the development of the Convention, the United

States and French delegations agreed that nothing in paragraph 5 of Article 11 (Interest) shall be

located in that Contracting State. The provisions of internal law referred to in the preceding

sentence are, in the case of the United States, those provisions of the Internal Revenue Code that

impose a tax on interest described in section 884(f)(1)(A) of such Code, and in the case of France

articles 119 bis and 125 A of the code général des impôts.

The United States and French delegations further agreed that the term "business property," as

and paragraph 1 of Article 23, not withstanding that the single French term “actif” is used

If this is in accord with your understanding, I would appreciate a confirmation from you to

this effect. If so, this understanding and your reply agreeing to its terms shall constitute an

integral part of the Convention.

RÉPUBLIQUE FRANÇAISE

MINISTÈRE DU BUDGET

LE MINISTRE

Madame l'Ambassadeur,

J'ai l'honneur d'accuser réception de votre lettre de ce jour dont le texte est le suivant:

Au cours des discussions qui ont abouti à la mise au point de cette Convention, les

délégations de la France et des Etats-Unis sont convenues que rien dans le paragraphe 5 de son

article 11 (Intérêts) ne peut être interprété comme empêchant ou limitant l'application par un Etat

contractant de sa législation interne ou de sa convention fiscale avec un Etat tiers, en ce qui

concerne les intérêts payés par un établissement stable situé dans cet Etat contractant à un

résident d'un Etat tiers.

Les dispositions de la législation interne auxquelles se réfère la phrase précédente sont, dans

le cas des Etats-Unis, les dispositions de l'‘Internal Revenue Code’ relatives à l'imposition des

intérêts définie à la section 884 (f)(1)(A) de ce code, et, dans le cas de la France, les articles 119

Les délégations des Etats-Unis et de la France sont convenues en outre que l'expression

‘business property’ employée au paragraphe 3 de l'article 13 (Gains en capital) et au paragraphe

3 de l'article 23 (Fortune) peut avoir un sens plus étroit que le terme ‘assets’ employé au

paragraphe 2 de l'article 13 et au paragraphe 1 de l'article 23, bien que le terme français ‘actif’

ce point, accord qui fera partie intégrante de la Convention."

J'ai l'honneur de vous confirmer l'accord de mon Gouvernement sur ce qui précède.

Paris, le 31 août 1994

Madame l'Ambassadeur,

Me référent à la Convention fiscale, signée ce jour, entre la France et les Etats-Unis, je

souhaite, d'ordre de mon Gouvernement, vous proposer une position commune sur les deux

points suivants.

En ce qui concerne le iv) du b) du paragraphe 2 de l’article 4 (Résident), dans la mesure où

les associés ou membres d’une société de personnes, d’un groupement d’intérêt économique ou

d’un groupement européen d’intérêt économique constitué en France, qui a son siège de direction

effective en France et qui n’y est pas soumis à l’impôt sur les sociétés, sont des résidents d’un

En ce qui concerne l'application de l'article 8 (Navigation maritime et aérienne), nonobstant

l'article 2 selon lequel la Convention ne s'applique qu'aux impôts nationaux des deux Etats, la

France accepte que les entreprises des Etats-Unis qui exploitent des navires ou des aéronef en

trafic international soient dégrevées d'office de la taxe professionnelle due en France à raison de

cette exploitation, à condition que les entreprises de France qui exploitent des navires ou des

aéronefs en trafic international ne soient pas soumises aux Etats-Unis, à raison de cette

exploitation, aux impôts des Etats membres sur le revenu.

Je vous serais obligé de me confirmer que ce qui précède recueille l'agrément de votre

Gouvernement. Dans l'affirmative, la présente lettre et votre réponse constitueront l'accord de nos

deux Gouvernements sur ces points, accord qui fera partie intégrante de la Convention.