ARTICLE 24

Non-Discrimination

Paragraph 1 provides that nationals of a Contracting State (including both individuals and companies) shall not be treated less favorably with respect to taxation and connected requirements by the other Contracting State than are nationals of that other Contracting State in the tame circumstances. This provision applies to a national of a Contracting State, whether or not that person is a resident of either Contracting State. A national of the United States who is subject to U.S. tax on his worldwide income is not in the same circumstances as a national of Barbados who is not resident in Barbados and is, therefore, not subject to Barbadian tax on his worldwide income. Thus, the United States is not obliged to treat a national of Barbados who is a resident of a third State in the same manner as a United States national who is a resident of that third State.

Paragraph 2 provides that a Contracting State may not impose more burdensome taxes on a permanent establishment in that State of an enterprise of the other Contracting State than the first-mentioned State imposes on its own enterprises carrying on the same activities. The paragraph clarifies that the basic rule of paragraph 2 is not to be construed as obliging Contracting State to grant to a resident of the other Contracting State any personal allowances, reliefs, and tax reductions on account of civil status or family responsibilities which it grants to its own residents.

There are several exceptions provided in the paragraph to the prohibition against discrimination with respect to permanent establishments. The paragraph does not prevent Barbados from imposing its branch profits tax, nor would the United States be prevented from imposing an additional tax on branch profits, should such a tax be introduced in the United States in the future. Similarly, the Barbados tax on the premium income of nonresident insurers or foreign insurance companies may be imposed at statutory rates without violating paragraph 2.

Paragraph 3 prohibits discrimination in the matter of deductions. Interest, royalties, and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State must be deductible disbursements for determining taxable profits in the firstmentioned State under the same conditions as if they had been paid to a resident of the firstmentioned State. Exceptions to this rule arise where the provisions of paragraph 1 of Article 9 (Associated Enterprise) paragraph 6 of Article 11 (Interest) or paragraph 5 of Article 12 (Royalties) apply. The term “other disbursements” includes a reasonable allocation of executive

and general administrative expenses, research and development expenses, and other expenses incurred for the benefit of a group of related enterprises.

Paragraph 4 requires that a Contracting State not impose more burdensome taxation on an enterprise of that State owned by residents of the other Contracting State than the first-mentioned State imposes on other similar enterprises of that State.

Paragraph 5 confirms that Article 24 applies to the taxes of the Contracting States which are identified in Article 2 (Taxes Covered) as the taxes to which the Convention applies.

The provisions of this Article do not override the right of the United States to impose the tax provided in Code section 897 (relating to gains derived by nonresident aliens or foreign corporations from U.S. real property interests). However, a Barbados corporation holding a U.S. real property interest is entitled to make the election under Code section 897(I) to be treated as a U.S. corporation.

The saving clause in paragraph 3 of Article 1 (General Scope) does not apply to Article 24.