ARTICLE 25

Mutual Agreement Procedure

This Article modernizes the mutual agreement procedures found in the existing Convention by adopting provisions similar to those in the recent amendments to our Conventions with the Netherlands, the United Kingdom, and the Federal Republic of Germany and in our recently revised Convention with France. When a resident of one State considers that action of one or both States has resulted, or will possibly result, in taxation contrary to the provisions of the proposed Convention, such resident may present his case to the competent authority of the State of which he is a resident within 2 years from the date the resident is notified (or collection is made at the source) of the tax (or, where the problem arises from inconsistent action of both States, within two years from the date the resident is notified, or from collection at source, of the tax which has been last asserted or collected). This remedy is in addition to any remedy provided by the national laws of either State.

This Article contemplates that the competent authority of the two States will endeavor to settle by mutual agreement such cases of taxation not in accordance with the Convention as well as any other difficulties or doubts arising as to the application of the Convention. Some particular areas on which the competent authorities may consult and reach agreement are the amount of industrial and commercial profits to be attributed to a permanent establishment, the allocation of income, deductions, credits, or allowances between a resident and a related person, the determination of source of particular items, and the meaning of any term used in the Convention.

In implementing the provisions of this Article, the competent authorities will communicate with each other directly and meet together for an exchange of oral opinions when advisable.

In cases in which the competent authorities reach agreement with respect to a particular matter, taxes will be adjusted and refunds or credits allowed in accordance with such agreement. This provision permits the issuance of a refund or credit notwithstanding procedural barriers otherwise existing under state’s law, such as the Statute of Limitations.

This provision w ill apply only where agreement or partial agreement has been reached between the competent authorities and will apply in the case of any such agreement after the Convention goes into effect even though the agreement may concern taxable years prior thereto.

Revenue Procedure 70-18 sets forth the procedure followed by the United States in implementing its obligations under this type of Article.