Tax treaty update: Several key pacts awaiting Senate approval

Washington National Tax Services

In June 2011, the Senate Foreign Relations Committee recommended Senate approval of tax treaties or protocols with Hungary, Switzerland, and Luxembourg. However, one Senator has placed a “hold” on Senate floor consideration of the three pacts, and the fate and timing of these agreements, as well as others, remain uncertain. Separately, the US-Chile treaty was sent to the Senate for approval in May 2012, but was not considered last year by the Senate Foreign Relations Committee. As a result, no new US tax treaties or protocols entered into force during the 112th Congress.

The United States is expected to continue to strive in its treaties for effective protection against ‘treaty shopping.’ Other priorities include strong commitments for exchange of information, modernization of the treatment of cross-border retirement plans, and changes to the personal services articles of treaties (mainly, the policy of eliminating the independent personal services article as being redundant of the business profits article). In addition, Treasury likely will continue its recent policy of including binding arbitration as a means of deciding Competent Authority cases that otherwise are unresolved.

This WNTS Insight will provide updates on important treaties and protocols between the United States and key countries in Europe, Asia, and South America.

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