ARTICLE 30

Termination

This Article contains the rules for terminating the Convention.

Paragraph 1

Paragraph 1 states that the Convention is to remain in effect indefinitely, unless terminated by one of the Contracting States in accordance with the provisions of Article 30. The Convention may be terminated at any time after the year in which the Convention enters into force, provided that at least six months prior notice of the termination has been given through the diplomatic channel. If such notice of termination is given, subparagraph (a) provides that the provisions of the Convention with respect to withholding at source will cease to have effect on or after January 1 of the year following the date on which the notice is given. Likewise, for other taxes, the Convention will cease to have effect as of taxable periods beginning on or after January 1 of the year following the date on which the notice is given.

Paragraph 2

Paragraph 2 is intended to deal with changes in law of either of the Contracting States that have the effect of changing the application of the Convention in a significant manner or that alter the relationship between the Contracting States. Paragraph 2 provides, first, that, in response to a change in the law of either State, the appropriate authority of either State may request consultations with its counterpart in the other State to determine whether a change in the Convention is appropriate. The “appropriate authorities” may be the Contracting States themselves, communicating through diplomatic channels, or they may be the competent authorities under the Convention, communicating directly. The request for consultations may come either from the authority of the Contracting State making the change in law, or it may come from the authority of the other State. If the authorities determine, on the basis of consultations, that a change in domestic legislation has significantly altered the balance provided by the Convention, they will consult with a view to amending the Convention to restore an appropriate balance. Any such amendment would, of course, require a protocol or new treaty which would be subject to Senate advice and consent to ratification.

Other Aspects of Article

A treaty performs certain specific and necessary functions regarding information exchange and mutual agreement. In the case of information exchange the treaty's function is to override confidentiality rules relating to taxpayer information. In the case of mutual agreement its function is to allow competent authorities to modify internal law in order to prevent double taxation and tax avoidance. With respect to the effective termination dates for these aspects of the treaty, therefore, if a treaty is terminated as of January 1 of a given year, no otherwise confidential information can be exchanged after that date, regardless of whether the treaty was in force for the taxable year to which the request relates. Similarly, no mutual agreement departing

from internal law can be implemented after that date, regardless of the taxable year to which the agreement relates. Therefore, for the competent authorities to be allowed to exchange otherwise confidential information or to reach a mutual agreement that departs from internal law, a treaty must be in force at the time those actions are taken and any existing competent authority agreement ceases to apply.