ARTICLE 29

Termination

The present Convention will remain in force indefinitely; however, each Contracting State may, prior to the 30th of June in any calendar year at any time after five years from the date on which this Convention enters into force, terminate the Convention in writing submitted through diplomatic channels to the other Contracting State. In the event of a termination before July 1 of any such year, the Convention will continue to apply for the last time:

(1) To taxes due at the source on income payable or paid not later than December 31 of the year in which such termination occurs, and

(2) In the case of other taxes imposed on income for taxable periods ending not later than December 31 of the same year.

DONE in triplicate, in the English, French and Arabic languages, the three texts having equal authenticity, this First day of August, 1977.

FOR THE GOVERNMENT OF THE FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA KINGDOM OF MOROCCO

(s) Robert Anderson, (s) Abdelkader Benslimane, Ambassador of the United States of America. Minister of Finance.

NOTES OF EXCHANGE

Rabat, August 1, 1977.

The Honorable Robert Anderson, American Ambassador, Rabat.

Dear Mr. Ambassador: During the discussions which were held in both Rabat and Washington for the purpose of concluding a convention to avoid double taxation between the United States and Morocco, the Moroccan delegation emphasized to the American delegation that the Moroccan Government, for the purpose of promoting private investment, will exempt certain profits and interest payments from taxation. The Moroccan delegation expressed its hope that the U.S. Government would accordingly grant citizens and residents of the United States a "tax-sparing" credit against the U.S. tax. The U.S. delegation indicated that the Senate has been reluctant to approve such a provision in other tax conventions. However, the U.S. delegation has promised to review its position should the Senate reconsider its decision on this matter.

I would be grateful to you if you would confirm your government's commitment to resume discussions on this point should the Senate approve a provision of this kind in the interest of another country.

Please accept, Mr. Ambassador, assurances of my highest esteem.

ABDELKADER BENSLIMANE .

Rabat, August 1, 1977

His Excellency, Mr. Abdelkader Benslimane Minister of Finance, Rabat.

Excellency: In your letter of today's date you kindly informed me of the following:

"During the discussions which were held in both Rabat and Washington for the purpose of concluding a convention to avoid double taxation between the United States and Morocco, the Moroccan delegation emphasized to the American delegation that the Moroccan Government, for the purpose of promoting private investment, will exempt certain profits and interest payments from taxation. The Moroccan delegation expressed its hope that the U.S. Government would accordingly grant citizens and residents of the United States a 'tax-sparing' credit against the U.S. tax. The U.S. delegation indicated that the Senate has been reluctant to approve such a provision in other tax conventions. However, the U.S. delegation has promised to review its position should the Senate reconsider its decision on this matter.”

"I would be grateful to you if you would confirm your government's commitment to resume discussions on this point should the Senate approve a provision of this kind in the interest of another country."

I have the honor to confirm the above-mentioned commitment.

Please accept, Excellency, the assurances of my highest consideration.

ROBERT ANDERSON.

NOTES OF EXCHANGE (AGREEMENT)

Agreement Between the United States of America and Morocco Interpreting Certain Articles of the Convention of August 1, 1977 Effected by Exchange of Letters Signed at Washington and Rabat October 25, 1979

with Note signed at Rabat April 17, 1981

The Assistant Secretary for Tax Policy, Department of the Treasury,

to the Moroccan Director of Tax Division, Ministry of Finance

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

ASSISTANT SECRETARY

October 25, 1979

Mr. Alaoui Medaghri Director of Tax Division Ministry of Finance Rabat, Morocco

Dear Mr. Medaghri:

In connection with the recently negotiated income tax convention between the Government of the United States and the Government of the Kingdom of Morocco, which was signed in Rabat on August 1, 1977, certain questions have arisen with respect to which it is deemed appropriate that there be an exchange of notes regarding the agreement reached by the delegations from our two countries.

Under Article 21(2) of the Convention, for purposes of computing the appropriate amount of taxes paid to Morocco, a citizen or resident of the United States is permitted to elect to include in the Moroccan tax for which he claims a tax credit the amount he is required to invest in Moroccan equipment bonds under Article 37 of the Royal Decree No. 1.010-65 of the 8th of Ramadan 1385 (December 31, 1965), in accordance with regulations to be issued by the United States Secretary of the Treasury. Under Article 21(2), any amount which has been so claimed and which is repaid by the Government of Morocco must be treated by the United States taxpayer as a refund of Moroccan tax for the year of repayment. Under United States domestic law, when a taxpayer treats an amount as a refund of a foreign tax for which a foreign tax credit was previously claimed, he is not charged interest except to the extent interest is paid to him by the foreign government. It is our understanding that under Article 37 of Royal Decree No. 1.010-65

of the 8th of Ramadan, a taxpayer will receive payments of interest from the Moroccan Government on Moroccan equipment bonds. It is agreed by our delegations that, with respect to a United States taxpayer who elects to include an amount invested in Moroccan equipment bonds in his Moroccan tax for which foreign tax credit is claimed, any interest paid on the bonds by the Moroccan Government will belong to the United States. It is agreed, however, that Moroccan taxes may be deducted from such interest. Regulations to be issued by the Treasury department pursuant to Article 21(2) will so provide.

Paragraph 1 of Article 25 of the Convention covers claims made by taxpayers of a Contracting State to one of the two tax administrations. The solutions arrived at in the course of the mutual agreement procedure provided for by paragraph 1 of Article 25 will be implemented notwithstanding the time limits in effect in the two Contracting States.

I have the honor to propose to you that the present note and your reply thereto constitute the legal interpretation of Articles 21(2) and 25(1) of the Convention.

Please accept, Mr. Director, the assurances of my highest consideration.

(s) Donald C. Lubick Assistant Secretary for Tax Policy

[TRANSLATION]

The Moroccan Director of Tax Division, Ministry of Finance, to the

Assistant Secretary for Tax Policy, Department of the Treasury

ROYAUME DU MAROC RABAT, LE____

MINISTERE DES FINANCES

OCTOBER 25, 1979 DIVISION DES IMPOTS

17/344/D.I.

Mr. Donald C. Lubick Assistant Secretary for Tax Policy Department of the Treasury Washington, D.C. 20220

Dear Mr. Lubick:

I have the honor to refer to your letter of today’s date which reads as follows:

“In connection with the recently negotiated income tax convention between the Government of the United States and the Government of the Kingdom of Morocco, which was signed in Rabat on August 1, 1977, certain questions have arisen with respect to which it is deemed appropriate that there be an exchange of notes regarding the agreement reached by the delegations from our two countries.

Under Article 21(2) of the Convention, for purposes of computing the appropriate amount of taxes paid to Morocco, a citizen or resident of the United States is permitted to elect to include in the Moroccan tax for which he claims a tax credit the amount he is required to invest in Moroccan equipment bonds under Article 37 of the Royal Decree No. 1.010-65 of the 8th of Ramadan 1385 (December 31, 1965), in accordance with regulations to be issued by the United States Secretary of the Treasury. Under Article 21(2), any amount which has been so claimed and which is repaid by the Government of Morocco must be treated by the United States taxpayer as a refund of Moroccan tax for the year of repayment. Under United States domestic law, when a taxpayer treats an amount as a refund of a foreign tax for which a foreign tax credit was previously claimed, he is not charged interest except to the extent interest is paid to him by the foreign government. It is our understanding that under Article 37 of Royal Decree No. 1.010-65 of the 8th of Ramadan, a taxpayer will receive payments of interest from the Moroccan Government on Moroccan equipment bonds. It is agreed by our delegations that, with respect to a United States taxpayer who elects to include an amount invested in Moroccan equipment bonds in his Moroccan tax for which foreign tax credit is claimed, any interest paid on the bonds by the Moroccan Government will belong to the United States. It is agreed, however, that Moroccan taxes may be deducted from such interest. Regulations to be issued by the Treasury department pursuant to Article 21(2) will so provide.

Paragraph 1 of Article 25 of the Convention covers claims made by taxpayers of a Contracting State to one of the two tax administrations. The solutions arrived at in the course of the mutual agreement procedure provided for by paragraph 1 of Article 25 will be implemented notwithstanding the time limits in effect in the two Contracting States.

I have the honor to propose to you that the present note and your reply thereto constitute the legal interpretation of Articles 21(2) and 25(1) of the Convention”

I wish to inform you that I agree with the contents of your letter.

Please accept, Mr. Director, the assurances of my highest consideration.

(s) Alaoui Medaghri: Director of Tax Division, Ministry of Finance

Rabat, Morocco

INTERPRETIVE NOTE

INTERPRETIVE NOTE TO ARTICLE 10, PARAGRAPH 2 (b)

With reference to the Agreement between the United States of America and the Kingdom of Morocco signed at Rabat on August 1, 1977, it is understood that the Moroccan tax on profits of Moroccan branches and establishments available for remittance to their American home offices will be subject to the limitation as is provided in Article 10, paragraph 2 (b) of this Agreement with respect to taxation of dividends distributed by subsidiaries to their parents.

Done at Rabat, April 17, 1981.

For the Secretary of the Treasury of the For the Minister of Finance United States of America of the Kingdom of Morocco

(s) Mr. John Brayton Redecker (s) Mr. Medaghri Alaoui Mohamed Economic Counselor of the Director of Taxes Embassy of the United States