[Senate Treaty Document 109-4]
[From the U.S. Government Publishing Office]



109th Congress 
 1st Session                     SENATE                     Treaty Doc.
                                                                  109-4
_______________________________________________________________________
 
            PROTOCOL AMENDING THE TAX CONVENTION WITH FRANCE

                               __________

                                MESSAGE

                                  from

                   THE PRESIDENT OF THE UNITED STATES

                              TRANSMITTING

 PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED 
  STATES OF AMERICA AND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE 
AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH 
 RESPECT TO TAXES ON INCOME AND CAPITAL, SIGNED AT PARIS ON AUGUST 31, 
                                  1994




September 28, 2005.--The Protocol was read the first time, and together 
  with the accompanying papers, referred to the Committee on Foreign 
      Relations and order to be printed for the use of the Senate
                         LETTER OF TRANSMITTAL

                              ----------                              

                               The White House, September 28, 2005.
To the Senate of the United States:
    With a view to receiving the advice and consent of the 
Senate to ratification, I transmit herewith a Protocol Amending 
the Convention Between the Government of the United States of 
America and the Government of the French Republic for the 
Avoidance of Double Taxation and the Prevention of Fiscal 
Evasion with Respect to Taxes on Income and Capital, signed at 
Paris on August 31, 1994 (the ``Convention''), signed at 
Washington on December 8, 2004 (the ``Protocol''). Also 
transmitted for the information of the Senate is the report of 
the Department of State with respect to the Protocol.
    The Protocol was negotiated to address certain technical 
issues that have arisen since the Convention entered into 
force. The Protocol was concluded in recognition of the 
importance of U.S. economic relations with France.
    The Protocol clarifies the treatment of investments made in 
France by U.S. investors through partnerships located in the 
United States, France, or third countries. It also modifies the 
provisions of the treaty dealing with pensions and pension 
contributions in order to achieve parity given the two 
countries' fundamentally different pension systems. The 
Protocol makes other changes to the Convention to reflect more 
closely current U.S. tax treaty policy.
    I recommend that the Senate give early and favorable 
consideration to this Protocol and that the Senate give its 
advice and consent to ratification.
                                                    George W. Bush.
                          LETTER OF SUBMITTAL

                              ----------                              

                                       Department of State,
                                     Washington, September 2, 2005.
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, a Protocol Amending the Convention Between the 
Government of the United States of America and the Government 
of the French Republic for the Avoidance of Double Taxation and 
the Prevention of Fiscal Evasion with Respect to Taxes on 
Income and Capital, signed at Paris on August 31, 1994 (the 
``Convention''), and signed at Washington December 8, 2004 (the 
``Protocol'').
    The Protocol was negotiated to address certain technical 
issues that have arisen since the Convention entered into 
force. The Protocol was concluded in recognition of the 
importance of the United States' economic relations with 
France.
    The Protocol clarifies the treatment of investments made in 
France by U.S. investors through partnerships located in the 
United States, France, or third countries. Since France taxes 
French partnerships on their worldwide income and does not 
treat them as fiscally transparent, the Protocol confirms that 
France maintains taxing rights with respect to French 
partnerships. However, the Protocol provides that French treaty 
benefits will apply to U.S. residents who invest through U.S. 
partnerships or partnerships located in certain third 
countries. These partnership provisions will eliminate 
uncertainty and provide significant benefits to U.S. investors.
    The Protocol modifies the provisions of the treaty dealing 
with pensions and pension contributions in order to achieve 
parity given the two countries' fundamentally different pension 
systems. Under the Protocol, the country of source is assigned 
taxing rights with respect to both state social security 
payments and private pension payments. The Protocol also 
includes a provision that allows U.S. persons to deduct 
voluntary contributions to the French social security system to 
the same extent that contributions to a U.S. plan would be 
deductible, which is comparable to the provision in the 
Convention that allows French residents deductions for 
contributions to U.S. private pension plans.
    The Protocol makes other changes to the Convention to 
reflect more closely current U.S. tax treaty policy. The 
Protocol updates the treatment of dividends paid by U.S. real 
estate investment trusts to reflect a change in approach 
adopted in1997, which is intended to prevent the use of 
structures designed to avoid U.S. withholding taxes on outbound 
dividends while providing appropriate benefits to portfolio investors 
in such trusts. The Protocol also extends the provision in the 
Convention preserving U.S. taxing rights with respect to certain former 
citizens to cover certain former long-term residents.
    The United States and France will notify each other when 
their respective constitutional and legislative requirements 
for entry into force of the Protocol have been satisfied. The 
Protocol will enter into force on the date of receipt of the 
later of such notifications. In general, it will have effect 
with respect to taxes withheld at source, for amounts paid or 
credited on or after the first day of the second month 
following the date on which the Protocol enters into force, and 
with respect to other taxes, for taxable periods beginning on 
or after the first day of January following entry into force. 
However, the rules benefiting U.S. residents investing through 
partnerships will be applicable as of the effective dates of 
the Convention.
    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,
                                                  Condoleezza Rice.


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