ARTICLE 26

Nondiscrimination

Paragraph (1) provides that a citizen of one Contracting State who is a resident of the other Contracting State will not be subject in that other Contracting State to more burdensome taxes than a citizen of that other Contracting State who is a resident thereof. The determination of whether there is more burdensome taxation is to be made by comparing the treatment of individuals who are in comparable positions. Thus, for example, a citizen of Egypt who is a resident of the United States and who otherwise meets the requirements specified in section 911 of the Code would, under this Article, be eligible for the benefits of section 911 even though not a citizen of the United States.

Paragraph (2) provides that a permanent establishment which a resident of one

Contracting State has in the other Contracting State will not be subject in that other Contracting State to more burdensome taxes than a resident of that other Contracting State carrying on the same activities, However, as noted in paragraph (2)(a), this does not obligate a Contracting State to grant to individual residents of the other Contracting State any personal allowances, reliefs, or deductions for 'taxation purposes on account of civil status or family responsibilities which it grants its own individual residents.

Under paragraph (2)(b) Egypt is not obliged to grant United States corporations the exemptions granted Egyptian corporations under Articles 5 and 6 of Law No. 14 of 1939. Article 5 of that law exempts from Egyptian tax certain foreign source investment income which an Egyptian insurance company earns on reserves which are required under foreign law to be deposited in a foreign country. Article 6 of that law exempts certain distributions to shareholders of Egyptian investment companies, where the investment company has paid tax on its dividend and interest income.

Paragraph (2)(c) preserves the rules of the first and second paragraphs of Article 11 and Article 11 bis of Law No.14 of 1939. Under these provisions of Egyptian law, the Egyptian branch profits of a foreign corporation are deemed to be distributed and are treated as dividends. Thus, a branch of a foreign corporation is subject to tax on deemed distribution, while an Egyptian corporation is not, because the actual tax on the Egyptian corporation's dividends falls on the recipient and not on the paying corporation. Paragraphs (5) and (6) of Article 11 (Dividends) provide for this treatment. Paragraph (2)(c) of this Article confirms that this treatment will not be considered discriminatory.

Paragraph (3) prohibits one Contracting State from subjecting a corporation of such Contracting State, the capital of which is wholly or partly owned, directly or indirectly, by one or more residents of the other Contracting State to any taxation or any requirement connected with taxation which is other or more burdensome than those applicable to corporations of the firstmentioned Contracting State carrying on the same activities, the capital of which is wholly or partly owned or controlled by one or more residents of the first-mentioned Contracting State.

The provisions of this Article do not override the rig' ht of the (3'nited 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).

Under paragraph (3) of Article 1 (Taxes Covered), the provisions of this Article extend to all taxes of every kind imposed at the national, state or local level.

The saving clause in paragraph (3) of Article 6 (General Rules of Taxation) does not apply to this Article. Thus, a Contracting State may not deny any rights conferred by this Article to its citizens and residents.