ARTICLE 29. EXTENSION OF CONVENTION

This Article provides a method by which either State may extend the Conven­ tion, either in whole or in part or with such modification as may be found neces­ sary for special application in a particular case, to all or any areas for whose international relations the State Is responsible and which area imposes taxes substantially similar in character to those which are the subject of this Convention.

Extension to an area may be accomplished by a State through a written noti­ fication given to the other State through diplomatic channels. The other State shall indicate its acceptance by a written communication through diplomatic channels. When the notification and communication have been ratified in ac­

cordance with the constitutional procedures of each State and instruments of ratification exchanged the extension will take effect for the date specified in, and be subject to such conditions as are specified in, the notification. Without such acceptance and exchange of instruments of ratification in respect of an area, none of the provisions of this Convention shall apply to such areas.

Either of the States may terminate an extension with respect to an area by 6 months prior written notice of termination given to the other State at any time after the date of entry Into force of the extension. The termination will take effect for taxable years beginning on or after the first day of January next

BELGIUM 407

107

following the expiration of the 6-month period. The termination of an extension to a particular area shall not affect the application of the ^{Convention to the}

United States, Trinidad and Tobago, or any other area to which ^{the Convention} has been extended.

OCTOBER 6, 1970.

TECHNIOAL EXPLANATIoN or PBOPOsED UNrrED STATEG-NETHEBLANDS ^{EsTATE TAx}

CONVENTION

(Department of the Treasury)

. INTRODUCTION

The proposed Estate Tax Convention and Protocol with the Netherlands Is the first estate tax convention to be sent to the Senate since the Convention ^between the United States and Canada, which was ratified on January 31, ¹⁹⁶ That Convention replaced an earlier estate tax convention between the two countries. Prior to that the most recent estate tax convention forwarded to the Senate was

with Italy. It was ratified on July 29, 1955.

The proposed Convention Is substantially different from the twelve ^existing tax conventions' principally because of two significant developments since the negotiation of our last estate tax convention. The new convention Is the first to reflect changes and the policies underlying those changes in United States estate taxation of nonresident aliens contained in the Foreign Investors ^{Tax Act of}

1966. The proposed convention is also based, in part, on the provisions ^{of the} OECD Model Estate Tax Convention (entitled Draft Double Taxation Conven­ tion on Estates and Inheritances), published in 1966 by the Organization for Economic Co-operation and Development, to the extent consistent with the laws and policies of the United States and the Netherlands. The United States played a substantial part In the drafting of the model convention. As the United ^States

nears the completion of its income tax convention network in Western Europe

(based on the OECD Model Income Tax Convention), we are seeking a ^comple­ mentary estate tax convention system. The proposed convention reflects a co­ ordination and rationalization of the Netherlands succession and transfer duties

(typical of Western European legal systems) with the United States estate tax.

However, most of the provisions in the proposed convention are found in the existing conventions and only a few provisions are ^{new, such as Article 4, which}

provides rules designed to ameliorate tax problems of ^{persons temporarily} present in a foreign country, and Article 10(1), which provides for a marital

(typical of Western European legal systems) with the United States estate tax.

exemption.

The provisions of the proposed Convention are discussed article by article below, after brief summaries of the Federal estate tax, the Dutch succession and transfer duties, and the general approaches of existing United States estate tax

conventions and the OECD Model Convention.

FEDERAL ESTATE TAX

The Federal estate tax is imposed with respect to the worldwide estates of decedents who were citizens or residents of the United States at death and on

the estates of nonresidents who were not citizens (referred to hereafter as non­ resident aliens) with respect to their property deemed situated in the United

States. For Federal estate tax purposes, a resident of the United States Is a domiciliary therein, i.e., a person residing in the United States who has the intention to remain in the United States Indefinitely or a person who has lived in the United States with such an intention and who subsequently left the

United States without having the intention to. remain indefinitely In the country of his new residence. In other words, while the term "resident" is used In the estate tax laws, it is generally defined in terms of the common law rules with respect to domicile.

For situs rules of United States domestic law, see sections 2104 and 2105 of the Internal Revenue Code of 1954 (the "Code") and the regulations thereunder; for a discussion of the more important types of property taxable on the basis of

1 The United States has estate tax conventions in force with Australia, Canada, Finland. 'rance, Greece, Ireland, Italy, Japan, Norway, Switzerland, the Republic of South Africa, !andthe United Kingdom.

BELGIUM 408