ARTICLE 18

Private Pensions and Annuities

The existing Convention provides that private pensions and annuities derived from sources within one State by an individual resident of the other State are exempt from tax in the State of source. The proposed Convention continues the existing rule by providing that pensions and other similar remuneration paid in consideration of past employment and annuities received by a resident of a State will be taxable only in the State of residence. However, pensions coming within the scope of Article 19 (Governmental Functions) will be taxable only by the State making payment.

The proposed Convention also provides that alimony paid to a resident of a State will be taxable only in the State of residence. A United States resident making alimony payments to a Belgian resident may deduct such payments (unless section 71(d) or 682 of the United States Internal Revenue Code applies).

The term "annuities" is defined as a stated sum paid periodically at stated times during life. or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than for services rendered). The term "pensions" is defined as periodic payments made after retirement or death in consideration for services rendered, or by way of compensation for injuries received in connection with past employment.

The effect of this provision is generally the same as that of the OECD Model Convention.