ARTICLE 24 — U.S. Income Tax Treaty

Nondiscrimination

Paragraph (3) of Article 20 of the existing Convention provides that citizens or corporations or other juridical persons of one State will not be subjected to more burdensome taxes in the other State than are imposed on the citizens or corporations or other juridical persons of such other State. The proposed Convention substitutes a modernized nondiscrimination Article which bans discrimination by one State against the citizens of the other State or permanent establishments of residents or corporations of the other State. Thus, for example, a citizen of Belgium who is a resident of the United States and who meets the requirements specified in section 911 of the Internal Revenue Code would, under this Article of the proposed Convention, be eligible for the benefits of section 911 although he is not also a citizen of the United States.

This Article provides, however, that a State may accord special treatment to its own residents on the basis of civil status or family responsibility.

This Article also deals with the fact that Belgian domestic law provides for a lower rate on distributed earnings of a Belgian corporation (30% basic rate) than on retained earnings of a Belgian corporation (up to 35% basic rate) and applies only the higher rate to the income of a Belgian permanent establishment of a foreign corporation. This is recognized as discriminatory and the proposed Convention provides that in the case of a Belgian permanent establishment of a United States corporation the lower rate for retained earnings will apply to that part of the earnings of the permanent establishment deemed distributed. It is provided in this Convention that the permanent establishment is deemed to distribute the same percentage of its earnings as the corporation of which it is a part distributes of its earnings. The provision permits Belgium, however, to impose its surcharge on the higher rate consistent with its domestic law.

The ban on discrimination extends to all taxes without regard to subject matter and whether imposed at the national, State or local level.

This Article is substantially similar to the nondiscrimination Article of the OECD Model Convention except that the Model includes a provision concerning Stateless persons which has been omitted from the proposed Convention.