ARTICLE 2. GENERAL DEFIN1TIONS

This Article sets out definitions of certain of the basic terms used In the pro­ posed Convention and sets forth rules for determining fiscal domicile or residence for purposes of the proposed Convention. A number of important terms, however, are defined elsewhere in the Convention.

Any term used In this Convention which is not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of the

State which is imposing the tax. The proposed Convention also provides a pro­ cedure under which a common definition may be arrived at by the competent

authorities of the United States and Trinidad and Tobago, in Order to prevent double taxation or further any other purpose of this Convention, If the definition of such term under the respective internal laws of the States differs or if

the term is not readily definable under the laws of one or both of the States. The common meaning is to be arrived at by means of the mutual agreement procedure which is described in Article 23 (Mutual Agreement Procedures) of the proposed Convention. While treaties in the past did not specify the power of the competent authorities to resolve such differences in definitions, this power is nevertheless inherent in the authority set forth In the mutual agreement articles of these treaties to resolve "difficulties or doubts."

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This Article defines geographical Trinidad and Tobago and geographical United States to include their respective continental shelves. The addition of a definition of the continental shelf is intended to clarify what the Contracting States con­ sider to be included within their respective jurisdictions to tax. The United States continental shelf is defined as the seabed and subsoil of the adjacent submarine areas beyond the territorial sea over which the United States exercises exclusive rights in accordance with international law for the purpose of exploration and exploitation of the natural resources of such area, but only to the extent that the person, property, or activity to which this Convention is being applied is con­ nected with such exploration or exploitation. For example, the income earned by a ship and Its employees engaged in taking seismograph soundings on the United

States continental shelf will be treated for tax purposes the same as the Income from a comparable activity on the land of one of the States of the United States. A comparable definition is used In the case of Trinidad and Tobago. The definition of the continental shelf in the case of the United States only includes the con­ tinental shelf surrounding the 50 States. Thus, for example, the continental shelf surrounding Puerto Rico is not included. If the Treaty were extended beyond the 50 States and the District of Columbia (see Article 29-Extension of Convention) the continental shelf of the extended areas could also be covered. While the ter­ ritorial sea is part of the United States and Trinidad and Tobago for all purposes, the defined continental shelf is only part of the United States or Trinidad and

Tobago, as the case may be, in limited situations. It is included only to the extent that a person or property or activity to which the Convention is being applied is connected with exploration or exploitation of the continental shelf. The phrase

"connected with" does not require physical attachment to the continental shelf to be within the scope of the definition.

This Article also sets forth rules for determining residence for purposes of the proposed Convention. Residence is important because, in general, only a resident of the Contracting States may qualify for the benefits of the Convention.

A resident of one of the Contracting States is a corporation of that State (as defined in this Article) or any person (other than a corporation) who is a resident of that State for purposes of its tax. Specifically in the case of the

United States the term "a resident of the United States" means a United States corporation and any person (except a corporation or any other entity treated

as a corporation for United States tax purposes) resident in the United States for purposes of its tax. The parenthetical language in the definition of a resident

of the United States is intended to make clear that a foreign corporation, or other entity treated as a foreign corporation for United States tax purposes, which is a resident of the United States for certain purposes of its income tax law is not, under the Convention, a resident of the United States. A similar rule was needed in the case of Trinidad and Tobago.

In the case of the United States, the definition provides that a partnership, estate, or trust is treated as a resident only to the extent that the income derived by such person is suoject to United States tax as the income of a resident. This language, although different from the Income Tax Convention between the United States and France, signed July 28, 1967, is intended to achieve the same result. Under United States law, a partnership is never, and an estate or trust is often not, taxed as such. Under the proposed Convention, in the case of the United States, income received by a partnership, estate, or trust will not qualify for the benefits of the Convention unless such income is subject to tax in the United States Thus, in effect, the status of income which is subject to tax only in the hands of the partners or beneficiaries will be determined by the

residence of such partners or beneficiaries. With respect to income taxed in the hands of the estate or trust, the residence of the estate or trust is determinative.

This provision is reciprocal because of the presence of a similar problem under Trinidad and Tobago law.

Unlike our other conventions, the proposed Convention with Trinidad and Tobago does not provide a mechanism for determining a single residence for

individuals who are treated by each State as being respectively resident therein. In addition, corporations could be treated by both States as being resident therein under the definitions set forth in the treaty. Dual residency in the case of corporations is a relatively easy situation for them to avoid.

This Article also provides that the terms "paid," "distributed," and "received" when applied to income shall Include amounts which are "credited." This pro­ vision, which has not appeared in previous income tax conventions to which

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the United States is a party, is intended to make clear that a dividend paid by n Trinidad and Tobago corporation Includes an amount credited by such corporation.