Article 1-3

1.

This Convention shall apply to persons who are residents of one or both of the Contracting States, except as otherwise provided in the Convention.

2.

The Convention shall not restrict in any manner any exclusion, exemption, deduction, credit, or other allowance now or hereafter accorded:

a)

by the laws of either Contracting State; or

b)

by any other agreement between the Contracting States.

3.

Notwithstanding the provisions of subparagraph 2 b):

a)

the provisions of Article 25 (Mutual Agreement Procedure) of this Convention exclusively shall apply to any dispute concerning whether a measure is within the scope of this Convention, and the procedures under this Convention exclusively shall apply to that dispute; and

b)

unless the competent authorities determine that a taxation measure is not within the scope of this Convention, the nondiscrimination obligations of this Convention exclusively shall apply with respect to that measure, except for such national treatment or most-favored-nation obligations as may apply to trade in goods under the General Agreement on Tariffs and Trade. No national treatment or most-favored-nation obligation under any other agreement shall apply with respect to that measure.

c)

For the purpose of this paragraph, ``measure'' is a law, regulation, rule, procedure, decision, administrative action, or any similar provision or action.

4.

Notwithstanding any provision of the Convention except paragraph 5 of this Article, a Contracting State may tax its residents (as determined under Article 4 (Resident)), and by reason of citizenship may tax its citizens, as if the Convention had not come into effect. For this purpose, the term ``citizen'' shall include a former citizen or long-term resident whose loss of such status had as one of its principal purposes the avoidance of tax, but only for a period of 10 years following such loss.

5.

The provisions of paragraph 4 shall not affect:

a)

the benefits conferred by a Contracting State under paragraph 2 of Article 9 (Associated Enterprises), under paragraphs 2 and 5 of Article 18 (Pensions, Social Security, Annuities, Alimony, and Child Support), and under Articles 23 (Relief from Double Taxation), 24 (Nondiscrimination), and 25 (Mutual Agreement Procedure); and

b)

the benefits conferred by a Contracting State under Articles 19 (Government Service), 20 (Students, Trainees and Researchers), and 27 (Members of Diplomatic Missions and Consular Posts), upon individuals who are neither citizens of, nor have been admitted for permanent residence in, that State.

1.

The existing taxes to which the Convention shall apply are:

a)

in the United States: the Federal income taxes imposed by the Internal Revenue Code (but excluding the accumulated earnings tax, the personal holding company tax, and social security taxes), and the excise taxes imposed with respect to the investment income of private foundations (hereafter referred to as ``United States tax'');

b)

in Estonia: the income tax (tulumaks) (but excluding the tax on insurance companies provided in paragraph 35 of the Estonian income tax law), and the local income tax (kohalik tulumaks), (hereafter referred to as ``Estonian tax'').

2.

The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws or other laws affecting their obligations under the Convention, and of any official published material concerning the application of the Convention, including explanations, regulations, rulings, or judicial decisions.

1.

For the purposes of this Convention, unless the context otherwise requires:

a)

the term ``Contracting State'' means the United States or Estonia as the context requires;

b)

the term ``United States'' means the United States of America, but does not include Puerto Rico, the Virgin Islands, Guam, or any other United States possession or territory. When used in a geographical sense, the term ``United States'' includes any area adjacent to the territorial waters of the United States within which under the laws of the United States and in accordance with international law, the rights of the United States may be exercised with respect to the sea bed and its sub-soil and their natural resources;

c)

the term ``Estonia'' means the Republic of Estonia and, when used in a geographical sense means the territory of Estonia and any other area adjacent to the territorial waters of Estonia within which under the laws of Estonia and in accordance with international law, the rights of Estonia may be exercised with respect to the sea bed and its sub-soil and their natural resources;

d)

the term ``person'' includes an individual, an estate, a trust, a partnership, a company, and any other body of persons;

e)

the term ``company'' means any body corporate or any entity which is treated as a body corporate for tax purposes;

f)

the terms ``enterprise of a Contracting State'' and ``enterprise of the other Contracting State'' mean, respectively, an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

g)

the term ``international traffic'' means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when such transport is solely between places in the other Contracting State;

h)

the term ``competent authority'' means:

(i)

in the United States, the Secretary of the Treasury or his delegate; and

(ii)

in Estonia, the Minister of Finance or his authorized representative;

i)

the term ``national'' means:

(i)

any individual possessing the nationality of a Contracting State; and

(ii)

any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State.

2.

As regards the application of the Convention at any time by a Contracting State, any term not defined herein shall, unless the context otherwise requires or the competent authorities agree to a common meaning pursuant to the provisions of Article 25 (Mutual Agreement Procedure), have the meaning which it has at that time under the laws of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

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