Article 2 contains general definitions of various terms found in the convention. This…

first income-tax convention signed by the United States to contain geographic definitions of the contracting states which include their respective continental shelves. Article 3 contains general rules of taxation. The credit provisions are set forth in Article 4. Article 9 contains the definition of "permanent establishment". Article 29 sets forth a procedure by which the application of the

convention may be extended to areas, to which it is not otherwise applicable, "for whose international relations" each party is responsible.

There is no provision in the convention for an investment credit or similar tax incentive to stimulate United States investment in Trinidad and Tobago. Trinidad and Tobago, while expressing strongly the view that the convention should contain such an incentive, agreed to defer consideration thereof in order to permit early signing of the convention. It has been agreed to continue discussions on this subject with a view to concluding, if possible, a supplementary protocol.

It is provided in Article 28 that the convention, after the exchange of instruments of ratification, shall have effect for taxable years beginning on or after January 1 of the year in which the exchange takes place, except that provisions regarding tax deferral for technical assistance shall have effect with respect to stock received on or after the date of signature and except that, after signature of the convention, Trinidad and Tobago is to take all steps necessary to give effect to the reduced rates of tax on dividends provided by Article 12 (Dividends) so that such provisions shall be effective from January 1, 1970, to terminate on December 31, 1970 unless the convention has by that date been ratified by both contracting states. The convention is to continue in effect indefinitely, subject to the right of either party, after five years from the date of entry into force, to give notice for termination. In the event of such notice, the convention would cease to be effective for taxable years beginning on or after January 1 following the expiration of a period of six months from the date of notice of termination.

Respectfully submitted,

WILLIAM P. ROGERS.

LETTER OF TRANSMITTAL

THE WHITE HOUSE, Washington, March 5, 1970.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the convention between the United States of America and Trinidad and Tobago for the avoidance of double taxation, the prevention of fiscal evasion with respect to taxes on income, and the encouragement of international trade and investment, signed at Port of Spain on January 9, 1970.

I transmit also, for the information of the Senate, the report of the Secretary of State with respect to the convention.

The convention of December 22, 1966 with Trinidad and Tobago relating to double taxation

of income ceased to be in force at the end of 1969. Whereas the 1966 convention was limited in scope, the new convention is a comprehensive one which, in general, follows the pattern of bilateral income-tax conventions now in force between the United States and a number of other countries. Some of the provisions reflect the special needs of a developing country.

Among the provisions of special interest are those which relate to the taxation of dividends, interest, royalties, and income from real property and those which relate to exchanges of technical know-how for stock.

Under the new convention, only Trinidad and Tobago assumes an obligation with respect to reduction in withholding tax rates on investment income in order to eliminate a tax barrier to direct investment. The United States would continue to impose its tax at the statutory rate of 30 percent to avoid encouraging an outflow of capital to the United States from Trinidad and Tobago. The maximum rates of withholding by Trinidad and Tobago would be 25 percent on portfolio dividends, 10 percent on direct investment dividends, and 15 percent on interest. The withholding rate on royalties would be limited, on a reciprocal basis, to 15 percent.

The treaty contains a novel provision designed to remove a tax barrier to the flow of technology in a case where a resident of one country transfers patents or similar property rights, technical information, and certain ancillary services to a corporation of the other country in return for its stock. Under the treaty, the taxes of the two countries that would otherwise apply to the transaction may be deferred until disposition of the stock.

This convention is the first to contain a definition of the continental shelf for the purpose of applying the treaty rules to income earned from the exploration or exploitation of natural resources on the continental shelf.

The new convention does not contain a special United States tax incentive, such as an investment credit, to promote United States capital investment in Trinidad and Tobago. In view of the keen interest of the authorities of that country in such a provision, it has been agreed to continue discussions on the subject.

The convention has the approval of the Department of State and the Department of the Treasury.

I recommend that the Senate give early and favorable consideration to the convention.

RICHARD NIXON. Enclosures:

1. Report of the Secretary of State.
2. Tax convention with Trinidad and Tobago signed January 9, 1970.

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

A PROCLAMATION

CONSIDERING THAT:

The convention between the United States of America and Trinidad and Tobago for the avoidance of double taxation, the prevention of fiscal evasion with respect to taxes on income, and the encouragement of international trade and investment was signed at Port of Spain on January 9, 1970, the text of which is as follows:

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA

AND THE GOVERNMENT OF TRINIDAD AND TOBAGO FOR THE AVOIDANCE OF DOUBLE TAXATION, THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, AND THE ENCOURAGEMENT OF INTERNATIONAL TRADE AND INVESTMENT

The Government of the United States of America and the Government of Trinidad and Tobago, desiring to conclude a convention for the avoidance of double taxation, the prevention of fiscal evasion with respect to taxes on income, and the encouragement of international trade and investment, have agreed upon the following articles.