[Senate Treaty Document 108-26]
[From the U.S. Government Publishing Office]



108th Congress 
 2d Session                      SENATE                     Treaty Doc.
                                                                 108-26
_______________________________________________________________________
 
                SECOND PROTOCOL AMENDING TAX CONVENTION

                             WITH BARBADOS

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              transmitting

 SECOND PROTOCOL AMENDING THE CONVENTION BETWEEN THE UNITED STATES OF 
   AMERICA AND BARBADOS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE 
PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED ON 
DECEMBER 31, 1984, SIGNED AT WASHINGTON ON JULY 14, 2004; INCLUDING AN 
             EXCHANGE OF NOTES WITH ATTACHED UNDERSTANDINGS




September 13, 2004.--The Protocol 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
                         LETTER OF TRANSMITTAL

                              ----------                              

                               The White House, September 13, 2004.
To the Senate of the United States:
    With a view to receiving the advice and consent of the 
Senate to ratification, I transmit the Second Protocol Amending 
the Convention Between the United States of America and 
Barbados for the Avoidance of Double Taxation and the 
Prevention of Fiscal Evasion with Respect to Taxes on Income 
Signed on December 31, 1984, signed at Washington on July 14, 
2004. Also enclosed for the Senate's information is an exchange 
of notes with attached Understandings, which provide 
clarification with respect to the application of the 
Convention, as amended, in specified cases. Also transmitted 
for the information of the Senate is the report of the 
Department of State with respect to the Protocol.
    The Protocol updates the existing Convention to bring it 
into close conformity with current U.S. tax treaty policy and 
to ensure that the Convention cannot be used inappropriately to 
secure tax reductions in circumstances where there is no risk 
of double taxation. The Protocol would modernize the 
Convention's anti-treaty-shopping provision. The Protocol also 
updates the Convention to take account of a 1996 change in the 
Internal Revenue Code relating to the tax treatment of certain 
former long-term residents of the United States. The exchange 
of notes with attached Understanding provides guidance to 
taxpayers and each government regarding the intended 
interpretation of certain provisions of the Convention, as 
amended.
    I recommend that the Senate give early and favorable 
consideration to this Protocol and give its advice and consent 
to ratification.

                                                    George W. Bush.
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                                   August 26, 2004.
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 Second Protocol Amending the Convention 
Between the United States of America and Barbados for the 
Avoidance of Double Taxation and the Prevention of Fiscal 
Evasion with Respect to Taxes on Income Signed on December 31, 
1984, signed at Washington on July 14, 2004 (the ``Protocol''). 
Also enclosed for the information of the Senate is an exchange 
of notes with attached Understandings, which provides 
clarification with respect to the application of the 
Convention, as amended, in specified cases.
    The proposed Protocol was negotiated to ensure that the 
Convention, concluded in 1984, cannot be used inappropriately 
to secure tax reductions in circumstances where there is no 
risk of double taxation. The proposed Protocol also updates the 
Convention to reflect changes in U.S. tax law and to bring the 
Convention into closer conformity with current U.S. tax treaty 
policy.
    Article 2 of the proposed Protocol includes a revised 
``Limitation on Benefits'' provision, which is designed to deny 
``treaty-shoppers'' the benefits of the Convention. The new 
provision corresponds more closely to those in recent U.S. 
treaties than did the provision in the existing Convention. The 
new provision also includes enhanced protections against new 
forms of potential treaty shopping.
    The existing Convention preserves the U.S. right to tax 
former citizens whose loss of citizenship had, as one of its 
principal purposes, the avoidance of tax. In order to reflect 
1996 amendments to the applicable provision of the Internal 
Revenue Code, Article 1 of the proposed Protocol expands this 
right to include taxation of former long-term residents whose 
loss of such status had, as one of its principal purposes, the 
avoidance of tax. Article 3 of the proposed Protocol includes a 
clarification to the operation of the Convention's information 
exchange provision.
    The exchange of notes with attached Understanding 
accompanying the proposed Protocol provides additional 
explanations and guidance regarding the agreed interpretation 
of the Convention, as amended.
    The proposed Protocol will enter into force upon the 
exchange of instruments of ratification. It will have effect, 
with respect to taxes withheld at source, on the first day of 
the second month next following the date ofentry into force. 
With respect to other types of taxes it will have effect for taxable 
years beginning on or after January 1 of the year following the date of 
entry into force.
    The Department of the Treasury and the Department of State 
cooperated in the negotiation of the proposed Protocol. It has 
the full approval of both Departments.
            Respectfully submitted,
                                                   Colin L. Powell.


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