ARTICLE 32 — U.S. Income Tax Treaty

Termination

(1) This Convention shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Convention at any time after five years from the date on which this Convention enters into force provided that at least six-months' prior notice of termination has been given through diplomatic channels. In such event, the Convention shall cease to have force and effect as respects income of taxable years or income years beginning (or, in the case of taxes payable at the source, payments made) on or after January 1 next following the expiration of the six-month period.

(2) Notwithstanding the provision of paragraph (1), and upon prior notice to be given through diplomatic channels, the provisions of Article 19 (Social Security Payments) may be terminated by either Contracting State at any time after this Convention enters into force.

DONE at Oslo in duplicate, in the English and Norwegian languages, the two texts having equal authenticity, this third day of December 1971.

FOR THE UNITED STATES OF AMERICA: FOR THE KINGDOM OF NORWAY

(s) Philip K. Crowe (s) Andreas Cappelen

NOTES OF EXCHANGE

OSLO, December 3, 1971

No. 81

His Excellency ANDREAS CAPPELEN, Minister of Foreign Affairs, Oslo

EXCELLENCY: I have the honor to refer to the Convention between the United States of America and Norway for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Property which was signed today and to confirm, on behalf of the Government of the United States of America, the following understandings reached between the two Governments.

(1) The income, if any, derived by a resident of a Contracting State engaged in the operation in international traffic of ships or aircraft from the use, maintenance, and lease of containers and related equipment (including trailers for the inland transport of containers) in connection with the operation in international traffic of ships or aircraft described in Article 6 of the Convention falls within the scope of the income described in that article and therefore is exempt from tax in the other Contracting State.

(2) Income derived by a resident of one of the Contracting States engaged in the operation of ships or aircraft in international traffic from the leasing of a ship or aircraft is to be considered income from the operation of ships or aircraft in international traffic and therefore is exempt from income taxation in the other Contracting State in accordance with the provisions of Article 6 of the Convention.

(3) Income derived by a partner who is a resident of one of the Contracting States from an interest in a partnership which derives its income from the operation in international traffic of ships or aircraft and which is carried on with one or more partners resident in the other Contracting State shall be taxable only in the Contracting State in which he is a resident. Capital invested in such a partnership by partners resident in the United States shall be exempt from any Norwegian taxes on capital.

agency agreement, SAS, Inc. is authorized to perform only such functions as SAS assigns to it, all in connection with international air traffic. Under that agreement, all revenues collected by SAS, Inc. are automatically credited to SAS. Operating expenses incurred by SAS, Inc. are debited to SAS in accordance with the terms of the agency agreement. SAS is obligated under the terms of the agency agreement to reimburse SAS, Inc. for all of its expenses irrespective of the revenues of SAS, Inc. SAS, Inc. does not perform any functions except those connected with or incidental to the business of SAS as an operator of aircraft in international traffic.

In view of the special nature of the SAS consortium and in view of the agency agreement as described above the United States for purposes of Article 6 of the Convention signed today and Article 5 of the existing Convention shall treat all of the income earned by SAS, Inc. which is derived from the operation in international traffic of aircraft as the income of the SAS consortium.

If this is in accord with your understanding, I would appreciate an acknowledgment from you to that effect.

PHILIP K. CROWE

[TRANSLATION]

THE ROYAL DEPARTMENT OF FOREIGN AFFAIRS

THE MINISTER OSLO, December 3, 1971 His Excellency PHILIP K. CROWE, United States Ambassador, Oslo

EXCELLENCY: I have the honor to acknowledge the receipt of Your Excellency's note of today's date, which reads as follows:.

“I have the honor to refer to the Convention between the United States of America and Norway for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Property which was signed today and to confirm, on behalf of the Government of the United States of America, the following understandings reached between the two Governments.

(2) Income derived by a resident of one of the Contracting States engaged in the operation of

ships or aircraft in international traffic from the leasing of a ship or aircraft is to be considered income from the operation of ships or aircraft in international traffic and therefore is exempt from income taxation in the other Contracting State in accordance with the provisions of Article 6 of the Convention.

(4) Scandinavian Airlines System (SAS) is a consortium within the meaning of Article 6, its participating members being Det Norske Luftfartselskap A/S (DNL), A.B. Aerotransport (ABA), and Det Danske Luftfartselskab A/S (DDL). In order to avoid the problems inherent in operating in the United States through a consortium, the members of the consortium in 1946 established a New York corporation, Scandinavian Airlines System, Inc. (SAS, Inc.) to act on their behalf in the United States pursuant to an agency agreement dated September 18, 1946. A similar agreement was entered into by SAS directly and SAS, Inc. on March 14, 1951. Pursuant to the agency agreement, SAS, Inc. is authorized to perform only such functions as SAS assigns to it, all in connection with international air traffic. Under that agreement, all revenues collected by SAS, Inc. are automatically credited to SAS. Operating expenses incurred by SAS, Inc. are debited to SAS in accordance with the terms of the agency agreement. SAS is obligated under the terms of the agency agreement to reimburse SAS, Inc. for all of its expenses irrespective of the revenues of SAS, Inc. SAS, Inc. does not perform any functions except those connected with or incidental to the business of SAS as an operator of aircraft in international traffic.

If this is in accord with your understanding, I would appreciate an acknowledgment from you to that effect.”

In reply I have the honor to inform Your Excellency that the Government of Norway accepts this proposal and agrees that Your Excellency's note and this reply shall constitute an agreement between the two Governments.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.

ANDREAS CAPPELEN

PROTOCOL

UNITED STATE-NORWAY PROTOCOL AMENDING INCOME TAX CONVENTION

Protocol Signed at Oslo September 19, 1980; Ratification Advised by the Senate of the United States of America November 18, 1981;

Ratified by the President of the United States of America December 3, 1981;

Ratified by Norway Ratifications Exchanged at Washington December 15, 1981; Proclaimed by the President of the United States of America January 12, 1982;

Entered into Force December 15, 1981.

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF

THE UNITED STATES OF AMERICA AND THE KINGDOM OF NORWAY FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL

EVASION WITH RESPECT TO TAXES ON INCOME AND PROPERTY SIGNED AT OSLO ON DECEMBER 3, 1971, WHICH PROTOCOL WAS SIGNED AT OSLO

ON SEPTEMBER 19, 1980

LETTER OF SUBMITTAL (PROTOCOL)

DEPARTMENT OF STATE, Washington, November 13, 1980.

The PRESIDENT, The White House.

THE PRESIDENT: I have the honor to submit to you, with a view to its transmission to the Senate for advice and consent to ratification, the Protocol amending the Convention between the Government of the United States of America and the Kingdom of Norway for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and property signed at Oslo on December 3, 1971, which Protocol was signed at Oslo on September 19, 1980.

The Protocol modifies the existing convention between the United States and Norway. It takes into account changes in Norway's tax system during the intervening years and otherwise brings the Convention up to date.

In 1975, Norway amended its corporate tax in several ways to increase the burden of that tax

on corporations deriving income from the extraction of offshore oil and gas. The 1975 legislation also added a special tax on income from submarine petroleum resources. Due to the nature of the 1975 changes and subsequent amendments, it is not clear whether the payments being made to Norway by United States taxpayers engaged in offshore petroleum extraction are eligible for the foreign tax credit in the United States. Article I of the Protocol resolves this issue by providing that foreign tax credits are available with respect to the corporate tax and special surcharge on offshore petroleum income. The amount of credit for taxpayers subject to the special tax is limited, however, to the amount necessary to offset United States tax on the petroleum income from sources within Norway. This per country limitation is similar to the limitation contained in the Third Protocol to the income tax convention between the United States and the United Kingdom.

The existing income tax convention between the United States and Norway does not specify when activities in connection with the exploration or exploitation of a country's continental shelf and its natural resources are sufficient to give that country the right to impose tax, as the country of the source of the income from such activities, Article II of the Protocol allows Norway and the United States to impose tax on income arising from the exploitation or exploration of natural resources on its continental shelf after such activities exist for more than 30 days in a twelvemonth period. This rule applies to income of employees and independent contractors as well as to corporate profits. In the case of employees, however, an exemption is provided for wages attributable to sixty days of personal services performed in the taxable year.

The Protocol modifies the provisions for the rates of withholding tax at source on dividends and interest. In the case of dividends, the rate of withholding is increased from 10 to 15 percent. Norway has been amending its tax conventions with other countries to assure the uniform application of 15 percent withholding on Norwegian dividends. This increase in Norway's withholding tax is mitigated by Norway’s split rate tax system which allows corporations to reduce their Norwegian corporate tax burden by making larger distributions to their shareholders.

The provision in the Convention exempting interest from tax in the country of source is modified by Article V of the Protocol to allow imposition of a 10 percent withholding tax. Interest arising on commercial credit, bank loans, and obligations outstanding on the date of the signature of the Protocol remains, however, exempt from withholding tax. Furthermore, interest generally remains exempt in the country of source unless the other country has legislation in effect which authorizes the taxation of interest paid to nonresidents. Norway does not now have a withholding tax on interest. Thus, at this time, all interest remains exempt from tax at source under Article V of the Protocol.

As in the case of other recent United States tax treaties, the Protocol with Norway contains a provision designed to allow the United States to tax gains derived by residents of Norway from the sale of stock of a corporation, or an interest in a partnership, trust or an estate, in cases where the property of such entities consists principally of United States real estate. Other provisions of the Protocol include a new article on the tax treatment of entertainers and athletes, a technical amendment to the exemption for social security payments made by the other country, and a clarification that former United States citizens who give up their citizenship to avoid United States tax do not benefit from the Convention. Also included is a definition of Norway's obligation to give credits for United States taxes, and provisions to modernize the Mutual

Agreement Procedure and Exchange of Information articles of the Convention.

The Protocol will enter into force upon the exchange of instruments of ratification and its provisions will have effect:

(a) In respect of credits against United States tax allowed pursuant to Article I of this Protocol, as of the sixth taxable year preceding January 1 of the year in which the Protocol enters into force;

(b) In respect of tax withheld at the source, to amounts paid on or after the first day of the sixth month next following the date on which the Protocol enters into force;

(c) In respect of other taxes, for taxable years beginning on or after January 1 of the year following the year in which the Protocol enters into force.

A technical memorandum explaining in detail the provisions of the Protocol is being prepared by the Department of the Treasury and will be submitted to the Senate Committee on Foreign Relations.

The Department of the Treasury, with the cooperation of the Department of State, was primarily responsible for the negotiation of the Convention. It has the approval of both Departments.

Respectfully submitted,

EDMUND S. MUSKIE.

LETTER OF TRANSMITTAL (PROTOCOL)

THE WHITE HOUSE, December 2, 1980.

To the Senate of the United States:

I transmit herewith, for Senate advice and consent to ratification, a protocol amending the Convention between the United States of America and the Kingdom of Norway signed at Oslo on December 3, 1971, which Protocol was signed at Oslo on September 19, 1980. I also enclose, for the information of the Senate, the report of the Department of State.

The Protocol modifies the existing convention between the United States and Norway. It takes into account changes in Norway's tax system during the years since the Convention was negotiated and otherwise brings it up to date.

In 1975, Norway amended its corporate tax in several ways to increase the burden of that tax on corporations deriving income from the extraction of offshore oil and gas. The 1975 legislation also added a special tax on income from submarine petroleum resources. Article I of the Protocol clarifies certain questions arising from these changes by providing foreign tax credits with respect to the corporate tax and the special tax, with a limitation for taxpayers subject to the special tax to the amount necessary to offset United States tax on the petroleum income from sources within Norway. This limitation is similar to that contained in the Third Protocol to the income tax convention between the United States and the United Kingdom.

The Convention does not provide specific rules to determine when a country has the right to tax income resulting from the exploration or exploitation of its continental shelf and its natural resources. Article II of the Protocol allows Norway and the United States to impose a tax on income derived from the exploitation or exploration of natural resources on their respective continental shelves after such activities have existed for more than 30 days in a twelve-month period. With respect to income from employment in such activities, however, an exemption is provided for wages attributable to sixty days of personal services performed in the taxable year.

In addition, the Protocol modifies the rate of withholding tax at source on dividends and interest and allows the United States to tax gains from the sale of shares in companies whose assets consist principally of United States real property. It also contains other provisions, including a new provision on the tax treatment of entertainers and athletes and clarifies provisions on administrative cooperation.

I recommend that the Senate give early and favorable consideration to the Protocol and give advice and consent to its ratification.

JIMMY CARTER.

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

A PROCLAMATION

CONSIDERING THAT:

The Protocol amending the Convention between the United States of America and the Kingdom of Norway for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Property, signed at Oslo on December 3, 1971, which Protocol was signed at Oslo on September 19, 1980, the text of which is hereto annexed;

The Senate of the United States of America by its resolution of November 18, 1981, twothirds of the Senators present concurring therein, gave its advice and consent to ratification of the Protocol, subject to the understanding that appropriate Congressional committees and the General Accounting Office shall be afforded access to the information exchanged under this treaty where such access is necessary to carry out their oversight responsibilities, subject only to the limitations and procedures of the Internal Revenue Code.

The Protocol was ratified, subject to the aforesaid understanding by the President of the United States of America on December 3, 1981, in pursuance of the advice and consent of the Senate, and was ratified on the part of the Kingdom of Norway;

The instruments of ratification of the Protocol were exchanged at Washington on December 15, 1981, and accordingly the Protocol entered into force on December 15, 1981, effective as specified in Article XIII;

NOW, THEREFORE, I, Ronald Reagan, President of the United States of America, proclaim

and make public the Protocol to the end that it be observed and fulfilled with good faith on and after December 15, 1981, by the United States of America and by the citizens of the United States of America and all other persons subject to the jurisdiction thereof.

IN TESTIMONY WHEREOF, I have signed this proclamation and caused the Seal of the United States of America to be affixed.

DONE at the city of Washington this twelfth day of January in the year of our Lord one thousand nine hundred eighty-two and of the Independence of the United States of America the two hundred sixth.

RONALD REAGAN

By the President:

ALEXANDER M. HAIG, JR.

Secretary of State

PROTOCOL AMENDING THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE KINGDOM OF NORWAY FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WIT RESPECT TO TAXES

ON INCOME AND PROPERTY, SIGNED AT OSLO ON DECEMBER 3, 1971

The United States of America and the Kingdom of Norway, desiring to conclude a Protocol to amend the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Property, signed at Oslo on December 3, 1971, have agreed as follows: