• Paragraph 1
• Paragraph 2
• Paragraph 3

ARTICLE 29 -- Entry into Force

This Article contains the rules for bringing the Convention into force and giving effect to its provisions.

Paragraph 1

Paragraph 1 provides that each State must notify the other through diplomatic channels when its ``constitutional requirements'' for ratification have been complied with. The constitutional requirements include ratification.

In the United States, the process leading to ratification and entry into force is as follows: Once a treaty has been signed by authorized representatives of the two Contracting States, the Department of State sends the treaty to the President who formally transmits it to the Senate for its advice and consent to ratification, which requires approval by two-thirds of the Senators present and voting. Prior to this vote, however, it generally has been the practice for the Senate Committee on Foreign Relations to hold hearings on the treaty and make a recommendation regarding its approval to the full Senate. Both Government and private sector witnesses may testify at these hearings. After receiving the Senate's advice and consent to ratification, the treaty is returned to the President for his signature on the ratification document. The President's signature on the document completes the process in the United States.

Paragraph 2

Paragraph 2 provides that the Convention will enter into force on the date on which the second of the two notifications of the completion of ratification requirements has been received. The date on which the Convention enters into force is not the date on which its provisions take effect. Paragraph 2 contains rules that determine when the provisions of the treaty will have effect. Under paragraph 2(a), the Convention will have effect with respect to taxes withheld at source (principally dividends, interest and royalties) for amounts paid or credited on or after the first day of January of the calendar year next following the date on which the Convention enters into force. For example, if instruments of ratification are exchanged on September 15 of a given year, the withholding rates specified in paragraph 2 of Article 10 (Dividends) would be applicable to any dividends paid or credited on or after January 1 of the following year. If for some reason a withholding agent withholds at a higher rate than that provided by the Convention (perhaps because it was not able to re-program its computers before the payment is made), the beneficial owner of the income may make a claim for refund pursuant to Code section 1464.

For all other taxes, paragraph 2(b) specifies that the Convention will have effect for any taxable year or assessment period beginning on or after January 1 of the year following entry into force.

As discussed under Articles 26 (Mutual Agreement Procedure) and 27 (Exchange of Information and Administrative Assistance), the powers afforded the competent authority under these Articles may apply retroactively to taxable periods preceding entry into force.

Paragraph 3

Paragraph 3 provides that the appropriate authorities of the Contracting States will consult within 5 years from the date of the entry into force of the convention regarding the application of the Convention to income derived from `` new technologies''. This term includes income from transmission by satellite, cable, optic fibre and similar technologies. These consultations may result in agreements by the competent authorities regarding the application of the existing agreement, or they may, if deemed appropriate, lead to amendments to the Convention by means of a protocol that would be subject to ratification. The ``appropriate authorities'' may be the Contracting States themselves or the competent authorities under the Convention.

Absent such agreement, under this Convention, income derived from these new technologies derived by a resident of one contracting State is not taxable in the other Contracting State unless such income is attributable to a permanent establishment in that other State. The principles of Article 5 (Permanent Establishment) will apply for purposes of determining whether a permanent establishment exists. If a permanent establishment does exist, the provisions of Article 7 (Business Profits) would apply to determine the amount of profits attributable to the permanent establishment that would be subject to tax in the host state.

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