ARTICLE 8

Shipping and Air Transport

This Article provides that, notwithstanding the rules of Article 7 (Business Profits) and Article 13 (Capital Gains), income which a resident of one of the States derives from the operation in international traffic of ships registered in that State and gains which a resident of one of the States derives from the sale, exchange, or other disposition of ships operated in international traffic by such residents and registered in that State shall be exempt from tax by the other State.

A resident of one of the States will also be exempt from tax in the other State on income derived from the operation in international traffic of aircraft registered in either State or In a State with which the other State has an income tax convention exempting such income. Gains which a resident of one of the States derives from the sale, exchange, or other disposition of aircraft are accorded the same treatment. An exchange of notes specifically exempting income from the operation of aircraft from tax in the respective States is not considered as an income tax convention exempting such income.

This Article also will apply to income derived from the leasing, to a person engaged in the operation of ships or aircraft, of a ship or aircraft under a full or bareboat charter, where the lessor is engaged in the operation of ships or aircraft if such lease is ancillary to the lessor's other operations. For example, if an airline of one of the Contracting States which has excess equipment in the winter months leases several aircraft which are excess during that period to an airline in the other Contracting State, the lessor is not subject to tax by that other Contracting State.

The exemption provided by this Article is also applicable to profits derived from any activities incidental to the operation of ships or aircraft in international traffic. Thus, for example, commissions derived by a Belgian international air carrier from the sale of passenger tickets in the United States as agent for other persons operating ships or aircraft, if incidental to its own international operations, will be exempt from United States tax under Article 8. Further, a Belgian airline company might have facilities at an international airport in the United States which are used to service and maintain its own aircraft in order to make maximum use of the facilities, the company might also service and maintain aircraft of other companies. The profits derived from the furnishing of such services to others would be exempt under Article 8 unless such activity ceased to be only an incidental activity. However, income derived by a Belgian airline company from the operation of a hotel in the United States would not be incidental to the operation of aircraft and would not be exempt.