Article I

TAXES COVERED

means: i) In the case of Saudi Arabia, the

Ministry of Finance & National Economy; and ii) In the case of the United States,

1. This Agreement shall apply to all taxes on income derived from the international operation of a ship or ships or aircraft imposed by each Contracting Party irrespective of the manner in which such taxes are levied.
2. There shall be regarded as taxes on income derived from the international operation of a ship or ships or aircraft all taxes imposed on the total of such income or imposed on elements of such income.
3. The taxes to which this Agreement shall apply are: a) In the case of the Kingdom of Saudi

and “the other Contracting Party” mean the Government of the Kingdom of Saudi Arabia or the Government of the United States of America, as the context requires; b) The term “tax” means “Saudi tax”

or “United States tax”, as the context requires; c) The term “operation of a ship or

ships or aircraft” means the transportation by sea or air, as the context requires, of persons, baggage, livestock, goods, merchandise or mail, including the sale of tickets and similar documents used for the purpose of such transport, and other directly related activities, carried on by the owner, lessor, or charterer of a ship or aircraft; d) The term “international operation”

or “international transport” means operation as defined in paragraph (c), except where the operation of the ship or aircraft is solely between places in a Contracting Party; e) The term “income derived from the

Arabia, any Saudi tax described in paragraphs 1 and 2 (hereinafter referred to as “Saudi tax”); and b) In the case of the United States,

Federal income taxes described in paragraphs 1 and 2 imposed by the U.S. Internal Revenue Code, including the tax on gross income imposed by section 887 and, as provided in section 884(d)(2), the branch profits tax (hereinafter referred to as “United States tax”).

international operation of a ship or ships or aircraft” includes: i) Income derived from the rental

on a full (time or voyage) basis of a ship or ships or aircraft used in international transport; ii) Income derived from the rental

an a bareboat basis of a ship or ships or aircraft used in international transport; iii) Income derived from the rental

of containers and related equipment used in international transport that is incidental to income from the international operation of a ship or ships or aircraft; iv) Gains from the sale or other

alienation of a ship or ships or aircraft used in international transport; v) Income derived from the interna

tional operation of a ship or ships or aircraft by an individual

the Secretary of the Treasury or his delegate. 2. In the application of the provisions of this Agreement by a Contracting Party any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has at that time under the laws of that Contracting Party relating to the taxes which are the subject of this Agreement.