ARTICLE 18

Pensions, Annuities, Alimony and Child Support

Article 18 provides rules concerning the taxation of pensions, social security payments, annuities, alimony, and child support.

Paragraph 1 provides that, in general, pensions and other similar remuneration beneficially derived by a resident of a Contracting State in consideration of past employment

shall be taxable only by the State. Social security payments and other public pensions paid by a Contracting State to a resident of the other Contracting State (or to a citizen of the Unite States resident in any State) are taxable only by the Contracting State making the payments. However, the taxation of pensions in respect of services rendered to Contracting State is governed by the provisions of Article 19 (Government Service).

Paragraph 2 provides that annuities beneficially derived by a resident of the Contracting State are taxable only in that State. The term annuities is defined to mean a stated sum paid periodically a stated times during a specified number of years, under an obligation to make the payments in return for adequate and full consideration, other than services rendered.

Paragraph 3 provides that alimony paid to a resident of a Contracting State is taxable only by that State. The term "alimony" is defined as periodic payments made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support, which payments are taxable to the recipient under the laws of the State of which he is a resident. Thus, if a U.S. resident makes periodic payments pursuant to a written separation agreement to a resident of Barbados and such amounts are taxable to the Barbados resident under the laws of Barbados such alimony is exempt from U.S. tax. If the amounts are not taxable to the Barbadian recipient under the laws of Barbados then U.S. tax may be imposed at statutory rates.

Paragraph 4 provides that periodic payments for the support of a minor child made pursuant to a written separation agreement or decree of divorce, separate maintenance, or compulsory support, paid by a resident of one Contracting State to a resident of the other Contracting State is taxable only by the State of residence of the payor.

Paragraphs 1(a), 2 and 3 of this Article are subject to the saving clause of paragraph 3 of Article 1 (General Scope). Thus, for example, a private pension or an annuity paid to a resident of Barbados who is a U.S. citizen would be taxable by the United States regardless of the provisions of the Article. Paragraphs 1(b) and 4 of this Article, however, are, by virtue of paragraph 4(a) of Article 1, not subject to the saving clause. The rules of those paragraphs, therefore, apply regardless of the citizenship of the income recipient.