ARTICLE 32

Termination

Paragraph (1) provides that the Convention will continue in force indefinitely, but that it may be terminated by either Contracting State at any time after five years from the date it enters into force. A Contracting State seeking to terminate the Convention must give at least six months' notice through diplomatic channels. If the Convention is terminated, such termination will be effective with respect to income of calendar years or taxable years beginning (or in the case of taxes payable at source, payments made) on or after April 1 next following the expiration of the six month period. It is intended that the reference to calendar years applies only to cases where the taxable year is the calendar year.

Under paragraph (2), the provisions of Article 21 (Social Security Payments) may be terminated by either Contracting State at any time after the Convention enters into force by prior notice given through diplomatic channels.

EXCHANGES 0F NOTES (PROTOCOL 1)

Three notes were exchanged at the time of the signing of the Protocol. A note dealing with exchanges of information is described in the explanation of Article 29 (Exchange of Information). A note dealing with procedures for certifying organizations in the Contracting State as eligible to receive deductible contributions is described in the explanation of Article 15A (Charitable Contributions). The third note observed that during the negotiations, the Israeli delegation had stressed the need for provisions in the Convention, such as an investment credit, which would promote the flow of United States investment to Israel. While observing that the United States cannot, at the present time, agree to such a provision, the United States offered assurances that, should circumstances change, including the manner in which the United States taxes income from investments in Israel, the U.S. would be prepared to resume discussions with a view to incorporating provisions into the Convention which will minimize the interference of the United States tax system with incentives offered by Israel. These provisions would be consistent with United States tax policies regarding other developing countries.

PROTOCOL 2

UNITED STATES TREASURY DEPARTMENT’S TECHNICAL EXPLANATION

OF THE SECOND PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE STATE OF ISRAEL WITH RESPECT TO TAXES

ON INCOME SIGNED ON JANUARY 24, 1993

The Second Protocol ("the Protocol") signed at Jerusalem on January 26, 1993, amends the Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, signed on November 20, 1975, as amended by the Protocol signed On May 30, 1980, ("the Convention"). This technical explanation is an official guide to the Protocol. It reflects policies behind particular provisions, as well as understandings reached with respect to the interpretation and application of the Protocol. The technical explanation is not intended to provide a complete comparison between the Protocol and the Articles of the Convention that it amends.

The Protocol was accompanied by notes, signed at the time of the signature of the Protocol (the “Exchange of Notes”), indicating the views of the negotiators and the Contracting States with respect to a number of the provisions of the Protocol. In the discussions of each of the Articles of the Protocol in this explanation, the relevant portions of the Exchange of Notes also are discussed.