Exchange of notes

No. 238

July 28, 1997

Excellency,

I have the honour to refer to the Convention and Protocol between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains which has been signed today and to propose on behalf of the Government of the United States the following:

In the course of the negotiations leading to the conclusion of the Convention and Protocol signed today, the negotiators developed and agreed upon a common understanding and interpretation of the following provisions.

1. With reference to Article 7 (Business Profits).

For the purposes of paragraph 6, the assets of a permanent establishment shall be understood to include any property or rights used by or held by or for such permanent establishment.

2. With reference to Article 18 (Pensions, Social Security, Annuities, Alimony and Child Support).

It is understood that the term "or similar legislation" is intended to refer to United States tier 1 Railroad Retirement benefits.

3. With reference to subparagraph 2 (c) of Article 23 (Limitation on Benefits).

It is understood that transactions between associated enterprises will be considered arm's length if the conditions made or imposed between the two enterprises in their commercial or financial relations do not differ from those that would be made between independent enterprises. Transactions between independent enterprises referred to in Article 9 (Associated Enterprises) will be considered to be arm's length. Whether two enterprises are associated will be determined without regard to the residence of the two enterprises.

4. With reference to subparagraph 2 (d) and 2 (e) of Article 23 (Limitation on Benefits).

It is understood that, for the purposes of determining whether a person, other than an individual or a company, qualifies for benefits under clause (ii) of subparagraph 2 (d) or a company qualifies for benefits under clause (ii) of subparagraph 2 (e), a person is "referred to in subparagraph (d)(i) or (e)(i)" or "referred to in subparagraph (b)", and a company is "described in subparagraph (e)(i)", only if that person or company is a resident of one of the Contracting States and is entitled to the benefits of the Convention by reason of subparagraph (b), (d)(i) or (e)(i), as the case may be.

5. With reference to paragraph 3 of Article 26 (Mutual Agreement Procedure).

It is understood that the competent authorities may consult for the elimination of double taxation in cases not provided for in the Convention only with respect to covered taxes.

6. With reference to Article 27 (Exchange of Information and Administrative Assistance).

It is understood that, in addition to the provisions of paragraph 3 of Article 27, the United States may, pursuant to a request under the provisions of the Irish [Criminal Justice Act, 1994](/1994/en/act/pub/0015/index.html) (or any law which succeeds that Act) to the Irish Minister for Justice, obtain information, including authenticated copies of unedited original documents, of financial institutions located in Ireland, or depositions of witnesses located in Ireland, as is appropriate for giving effect to such request, for the purpose of the investigation (including investigations by the Internal Revenue Service) or prosecutions of criminal fiscal offences (including criminal revenue offences) under the laws of the United States, as provided for in said Act. Ireland may obtain such types of information for the enforcement of Irish tax law by making requests directly to the United States competent authority.

The foregoing understandings are acceptable to the Government of the United States. If the foregoing understandings are acceptable to the Government of Ireland, I have the honour to confirm that this Note and Your Excellency's reply thereto shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the entry into force of the Convention.

I avail myself of this opportunity to renew to Your Excellency the assurance of my highest consideration.

Jean Kennedy Smith,

Ambassador for the United States of America.

28 July, 1997.

Her Excellency, Mrs Jean Kennedy Smith, Ambassador of the United States of America, Dublin.

Excellency,

I have received your note of 28 July, 1997, that states the following:

I have the honour to refer to the Convention and Protocol between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains which has been signed today and to propose on behalf of the Government of the United States the following:

In the course of the negotiations leading to the conclusion of the Convention and Protocol signed today, the negotiators developed and agreed upon a common understanding and interpretation of the following provisions.

1. With reference to Article 7 (Business Profits).

For the purposes of paragraph 6, the assets of a permanent establishment shall be understood to include any property or rights used by or held by or for such permanent establishment.

2. With reference to Article 18 (Pensions, Social Security, Annuities, Alimony and Child Support).

It is understood that the term "or similar legislation" is intended to refer to United States tier I Railroad Retirement benefits.

3. With reference to subparagraph 2 (c) of Article 23 (Limitation on Benefits).

It is understood that transactions between associated enterprises will be considered arm's length if the conditions made or imposed between the two enterprises in their commercial or financial relations do not differ from those that would be made between independent enterprises. Transactions between independent enterprises referred to in Article 9 (Associated Enterprises) will be considered to be arm's length. Whether two enterprises are associated will be determined without regard to the residence of the two enterprises.

4. With reference to subparagraph 2 (d) and 2 (e) of Article 23 (Limitation on Benefits).

It is understood that, for the purposes of determining whether a person, other than an individual or a company, qualifies for benefits under clause (ii) of subparagraph 2 (d) or a. company qualifies for benefits under clause (ii) of subparagraph 2 (e), a person is "referred to in subparagraph (d)(i) or (e)(i)" or "referred to in subparagraph (b)", and a company is "described in subparagraph (e)(i)", only if that person or company is a resident of one of the Contracting States and is entitled to the benefits of the Convention by reason of subparagraph (b), (d)(i) or (e)(i), as the case may be.

5. With reference to paragraph 3 of Article 26 (Mutual Agreement Procedure).

It is understood that the competent authorities may consult for the elimination of double taxation in cases not provided for in the Convention only with respect to covered taxes.

6. With reference to Article 27 (Exchange of Information and Administrative Assistance).

It is understood that, in addition to the provisions of paragraph 3 of Article 27, the United States may, pursuant to a request under the provisions of the Irish [Criminal Justice Act, 1994](/1994/en/act/pub/0015/index.html) (or any law which succeeds that Act) to the Irish Minister for Justice, obtain information, including authenticated copies of unedited original documents, of financial institutions located in Ireland, or depositions of witnesses located in Ireland, as is appropriate for giving effect to such request, for the purpose of the investigation (including investigations by the Internal Revenue Service) or prosecutions of criminal fiscal offences (including criminal revenue offences) under the laws of the United States, as provided for in said Act. Ireland may obtain such types of information for the enforcement of Irish tax law by making requests directly to the United States competent authority.

The foregoing understandings are acceptable to the Government of the United States. If the foregoing understandings are acceptable to the Government of Ireland, I have the honour to confirm that this Note and Your Excellency's reply thereto shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the entry into force of the Convention.

The foregoing understandings are acceptable to the Government of Ireland. I have the honour to confirm that Your Excellency's Note and the present reply shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the entry into force of the Convention.

I avail myself of this opportunity to renew to Your Excellency the assurance of my highest consideration.

RAY BURKE, T.D.

Minister for Foreign Affairs.