Letter of Submittal

                                  DEPARTMENT OF STATE,
                                  Washington, December 11, 1974.

The PRESIDENT,
The White House.

The PRESIDENT: I have the honor to submit to you, with a view to its transmission to the Senate for advice and consent to ratification, the Convention between the Government of the United States of America and the Government of the Polish People's Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Income, and a related exchange of notes, signed at Washington on October 8, 1974.

The Convention deals mainly with Federal income taxes in the case of the United States and with substantially similar income taxes specified in Article 2 (2) (a) in the case of Poland. The provision relating to nondiscrimination applies, however, to taxes of every kind imposed at the national, state, or local 1evel.

This Convention is similar to other recent tax conventions concluded by this government. It incorporates the same basic principles with respect to the taxation of business income, personal service income and income from investments, and includes provisions for nondiscriminatory tax treatment and for reciprocal administrative cooperation.

Pursuant to this Convention profits derived by a business enterprise of one country would be subject to taxation by the other country only to the extent that the profits are attributable to a ``permanent establishment'' in that other country. Employees of a firm are not taxable by the host country on their personal service income unless the services are performed there during a stay lasting longer than six months during the taxable year concerned. Withholding taxes imposed on income going from one country to residents of the other country will be limited to 15 percent on portfolio dividends, 5 percent on dividends from a share holding of 10 percent or more, and 10 percent on royalties and film rentals, and interest will be exempt from tax. In the absence of a convention the United States tax rate has been 30 percent of the gross amount, and the Polish tax, although computed at graduated rates, also reaches 30 percent of the gross amount.

A technical memorandum explaining in detail the provisions and effect of the Convention is being prepared by the Department of the Treasury and will be submitted to the Senate Foreign Relations Committee for consideration in connection with the Convention.

Upon entry into force, this Convention will be effective from January 1, 1974, and will remain in force for a minimum period of five years. After the initial five year period it will remain in force indefinitely until terminated by either State.

The Department of the Treasury, with the cooperation of the Department of State, was primarily responsible for the negotiation of the Convention. It has the approval of both Departments.

   Respectfully submitted,  
                                 ROBERT S. INGERSOLL.

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