[Senate Treaty Document 106-9]
[From the U.S. Government Publishing Office]



106th Congress 
 1st Session                     SENATE                     Treaty Doc.
                                                                  106-9
_______________________________________________________________________

                                     



 
                     TAX CONVENTION WITH SLOVENIA

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

  CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE REPUBLIC OF 
  SLOVENIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF 
 FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL, SIGNED AT 
                       LJUBLJANA ON JUNE 21, 1999




 September 13, 1999.--Convention was read the first time, and together 
  with the accompanying papers, referred to the Committee on Foreign 
     Relations and ordered to be printed for the use of the Senate.


                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
69-112                      WASHINGTON : 1999



                         LETTER OF TRANSMITTAL

                              ----------                              

                               The White House, September 13, 1999.
To the Senate of the United States:
    I transmit herewith for Senate advice and consent to 
ratification the Convention Between the United States of 
America and the Republic of Slovenia for the Avoidance of 
Double Taxation and the Prevention of Fiscal Evasion with 
Respect to: Taxes on Income and Capital, signed at Ljubljana on 
June 21, 1999. Also transmitted is the report of the Department 
of State concerning the Convention.
    This Convention, which is similar to tax treaties between 
the United States and OECD nations, provides maximum rates of 
tax to be applied to various types of income and protection 
from double taxation of income. This Convention also provides 
for resolution of disputes and sets forth rules making its 
benefits unavailable to residents who are engaged in treaty-
shopping or with respect to certain abusive transactions.
    I recommend that the Senate give early and favorable 
consideration to this Convention and that the Senate give its 
advice and consent to ratification.

                                                William J. Clinton.
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                       Washington, August 10, 1999.
The President,
The White House.
    The President: I have the honor to submit to you, with a 
view to its transmission to the Senate for advice and consent 
to ratification, the Convention Between the United States of 
America and the Republic of Slovenia for the Avoidance of 
Double Taxation and the Prevention of Fiscal Evasion with 
Respect to Taxes on Income and Capital, signed at Ljubljana on 
June 21, 1999 (``the Convention'').
    This Convention will be the first such convention between 
the United States of America and the Republic of Slovenia. This 
Convention generally follows the patterns of the U.S. Model Tax 
Treaty while incorporating some provisions found in the OECD 
Model Treaty. It provides for maximum rates of tax to be 
applied to various types of income, protection from double 
taxation of income, and exchange of information. It also 
contains rules making its benefits unavailable to persons who 
are engaged in treaty shopping and new provisions denying 
benefits in the case of certain abusive transactions. Like 
other U.S. tax conventions, this Convention provides rules 
specifying when income that arises in one of the countries and 
is attributable to residents of the other country may be taxed 
by the country in which the income arises (the ``source'' 
country).
    The withholding rates on investment income under the new 
Convention generally are consistent with those found in 
treaties with OECD member countries. Pursuant to Article 10, 
dividends from direct investments are subject to tax by the 
source country at a rate of five percent. The threshold 
criterion for direct investment is 25 percent. Other dividends 
are generally taxable at 15 percent. Under Article 12, 
royalties arising in one Contracting State and owned by a 
resident of the other Contracting State are subject to a five-
percent tax by the source country.
    Under Article 11 of this Convention, interest arising in 
one Contracting State and earned by a resident of the other 
Contracting State is subject to taxation by the source country 
at a maximum rate of five percent. However, interest received, 
guaranteed or insured by the government or central bank of 
either Contracting State and interest with respect to deferred 
payment for personal property or services is exempt from 
withholding by the source country.
    The reduced withholding rates described above do not apply 
if the beneficial owner of the income is a resident of one 
Contracting State who carries on business in the other 
Contracting State in which the income arises and the income is 
attributable to a permanent establishment or fixed base. If the 
income is attributable to a permanent establishment, it will be 
taxed as business profits, and if the income is attributable to 
a fixed base, it will be taxed as independent personal 
services.
    The maximum rates of withholding tax described in the 
preceding paragraphs are subject to the standard anti-abuse 
rules for certain classes of investment income found in other 
U.S. tax treaties and agreements.
    The taxation of capital gains, described in Article 13 of 
this Convention, generally follows the rule of recent U.S. tax 
treaties and the U.S. Model. Gains on real property (immovable 
property) are taxable in the country in which the property is 
located, and gains from the sale of personal property are taxed 
only in the State of residence of the seller, unless 
attributable to a permanent establishment or fixed base in the 
other State.
    Article 7 of this Convention generally follows the standard 
rules for taxation by one country of the business profits of a 
resident of the other. The non-residence country's right to tax 
such profits is generally limited to cases in which the profits 
are attributable to a permanent establishment located in that 
country. Article 10 of this Convention, like similar provisions 
in several recent U.S. treaties, preserves the right of the 
United States to impose its branch taxes in addition to the 
basic corporate tax on a branch's business.
    Article 8 of the proposed Convention, regarding the 
taxation of income from the operation of the ships and aircraft 
in international traffic and from the use, maintenance or 
rental of containers used in international traffic, is fully 
consistent with the U.S. Model. This Convention provides for 
exclusive residence-country taxation of profits from the 
international operation of ships or aircraft, including profits 
from the rental of ships and aircraft when the ship or aircraft 
is operated by the lessee in international traffic or when the 
rental activity is incidental to the operation of ships or 
aircraft by the lessor. All income from the use, maintenance or 
rental of containers used in international traffic is likewise 
exempt from source-country taxation under this Convention.
    The taxation of income from the performance of personal 
services under Articles 14 through 17 of this Convention 
generally follows standard U.S. treaty policy. The dollar 
threshold for taxation of athletes and entertainers is slightly 
lower than in the U.S. Model Treaty because of the lower 
average income level in Slovenia. Also, certain host-country 
exemptions are available to visiting students, trainees, 
professors, and researchers (Article 20).
    Article 22 of this Convention contains significant anti-
treaty-shopping rules making its benefits unavailable to 
persons engaged in treaty-shopping. In addition, this 
Convention contains new provisions aimed at preventing abuse 
with respect to specific transactions. Under these new 
provisions, a person otherwise entitled to treaty benefits will 
be denied those benefits if the main purpose or one of the main 
purposes of the creation or assignment of the rights giving 
rise to the income was to take advantage of the treaty.
    This Convention also contains rules necessary for its 
administration, including rules for the resolution of disputes 
under the Convention (Article 25) and for exchange of 
information (Article 26).
    The Convention would permit the General Accounting Office 
and the tax-writing committees of Congress (and analogous 
Slovenian authorities) to obtain access to certain tax 
information exchanged under the Convention for use in their 
oversight of the administration of tax laws.
    This Convention is subject to ratification. In accordance 
with the provisions of Article 29, it will enter into force 
upon the exchange of instruments of ratification. With respect 
to taxes withheld at source, it will take effect for payments 
made or credited on or after the first day of the third month 
following the date on which the Convention comes into force; 
with respect to other taxes, the Convention will take effect 
for taxable periods beginning on or after the first day of 
January following the date on which the Convention enters into 
force.
    This Convention, once ratified, will remain in force 
indefinitely unless terminated by one of the Contracting 
States, pursuant to Article 30. That Article provides that 
either State may terminate the Convention by giving prior 
notice through diplomatic channels.
    The Department of the Treasury and the Department of State 
cooperated in the negotiation of the Convention. It has the 
full approval of both Departments.
    Respectfully submitted,
                                                Madeleine Albright.


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