Article 3. GENERAL DEFINITIONS

Paragraph 1 defines a number of basic terms used in the Convention. Certain others are defined in other articles of the Convention. For example, the term "resident of a Contracting State" is defined in Article 4 (Residence). The term "permanent establishment" is defined in Article 5 (Permanent Establishment). The terms "dividends," "interest" and "royalties" are defined in Articles 10, 11 and 12, respectively, which deal with the taxation of those classes of income.

The term "Contracting State" means the United States or Ukraine, depending on the context in which the term is used.

The terms "United States" and "Ukraine" are defined in subparagraphs b) and c), respectively. The term "United States" is defined to mean the United States of America. The term does not include Puerto Rico, the Virgin Islands, Guam or any other U.S. possession or territory. When used geographically, the "United States" includes the territorial sea, and any area outside the territorial sea that in accordance with international law has been or may be designated an area in which the United States may exercise rights with respect to the seabed and subsoil and their natural resources.

When used geographically the term "Ukraine" includes the territorial sea, and any area outside the territorial sea that in accordance with international law has been or may be designated an area in which the United States may exercise rights with respect to the seabed and subsoil and their natural resources.

Subparagraph d) defines the term "national" to include any individual possessing the nationality of a Contracting State, and

any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State.

Subparagraph e) defines the term "person" to include an individual, an estate, a trust, a partnership, a company and any other body of persons. Any such person may be a "resident" of a Contracting State for purposes of Article 4 and thus entitled to the benefits of the Convention.

The term "company" is defined in subparagraph f) as any entity treated as a body corporate for tax purposes. In Ukraine, this includes a joint stock company, a limited liability company, a joint venture, and any other legal entity or an organization subject to the tax on profits in Ukraine. For U.S. tax purposes, the rules of Treas. Reg. § 301.7701-2 generally will be applied to determine whether an entity is a body corporate. However, Ukrainian entities described in the second sentence Of subparagraph f) are treated as companies for all purposes of the treaty.

Subparagraph g) defines the term "international traffic." The term means any transport by a ship or aircraft except when such transport is solely between places within a Contracting State. The exclusion from international traffic of transport solely between places within a Contracting State means, for example, that the transport of goods or passengers solely between New York and Chicago by a Ukrainian carrier (if it were permitted) would not be treated as international traffic, and the resulting income would not be exempt from U.S. tax under Article 8. It would however, be treated as business profits under Article 7 and would, therefore, be taxable in the United States only if attributable to a U.S. permanent establishment, and then only on a net basis. If, however, goods or passengers are carried by a Ukrainian airplane from Kiev to New York and then to Chicago, the trip would be international transport with respect to the carriage for those who continued to Chicago as well as for those who disembarked in New York.

Subparagraph h) defines the term "property." The definition is relevant for possible future enactment of a tax on capital by either Contracting State. (See Article 23 (Property).)

The terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" are defined in subparagraph i) as an enterprise carried on by a resident of one of the States and an enterprise carried on by a resident of the other State, respectively. The term "enterprise" is not defined in the Convention.

The "competent authority" is the Government official charged with administering the provisions of the Convention and with attempting to resolve any doubts or difficulties that may arise

in interpreting its provisions. The U.S. competent authority is the Secretary of the Treasury or his authorized representative. The Secretary of the Treasury has delegated the competent authority function to the Commissioner of Internal Revenue, who has, in turn, delegated the authority to the Assistant Commissioner (International). With respect to interpretive issues, the Assistant Commissioner acts with the concurrence of the Associate Chief Counsel (International) of the Internal Revenue Service. In Ukraine, the competent authority is the Minister of Finance or his authorized representative.

Paragraph 2 provides that, in the application of the Convention, any term used but not defined in the Convention will have the meaning that it has under the law of the Contracting State whose tax is being applied, unless the context requires a different interpretation or the competent authorities agree to a common meaning.