Supplementary Protocol Modifying and Supplementing the Convention of July 9, 1970 with an Exchange of Notes Signed at Washington December 31, 1987; 　　Transmitted by the President of the United States of America to the Senate February 29, 1988 (Treaty Doc. No. 100-15, 100th Cong., 2d Sess.); 　　Reported Favorably by the Senate Committee on Foreign Relations September 22, 1988 (S. Ex. Rept. No.100-24, 100th Cong., 2d Sess.); Advice and Consent to Ratification by the Senate October 22, 1988; Ratified by the President December 20, 1988; Ratified by Belgium June 19, 1989; Ratifications Exchanged at Brussels July 19, 1989; Proclaimed by the President September 6, 1989; Entered into Force August 3, 1989. 　　　　　 SUPPLEMENTARY PROTOCOL TO THE 1970 TAX 　　　　　CONVENTION WITH BELGIUM MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING THE SUPPLEMENTARY PROTOCOL, TOGETHER WITH A RELATED EXCHANGE OF NOTES, SIGNED AT WASHINGTON ON DECEMBER 31, 1987, MODIFYING AND SUPPLEMENTING THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE KINGDOM OF BELGIUM FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, SIGNED AT BRUSSELS ON JULY 9, 1970 LETTER OF SUBMITTAL (PROTOCOL) 　 DEPARTMENT OF STATE, Washington, February 2, 1988. 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, a Supplementary Protocol Modifying and Supplementing the Convention between the United States of America and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related exchange of notes. The Supplementary Protocol and the exchange of notes were signed at Washington on December 31, 1987. 　　The Convention needs to be modified to reflect changes in the tax laws and treaty policies of the United States and Belgium since it was concluded in 1970. Pending the successful conclusion of a comprehensive new convention, Department of the Treasury negotiators have concluded a limited Protocol addressing an issue of immediate concern to United States investors. 　　The Protocol will reduce the tax at source on direct investment dividends from 15 percent to 5 percent, effective January 1,1988. This will be beneficial to many United States businesses which, especially after the Tax Reform Act of 1986, have large excess foreign tax credits with respect to their foreign income. The Protocol will also provide rules to ensure that the reduced rates of tax provided in the Convention, as amended by the Protocol, are enjoyed only by residents of the two countries and do not become the object of "treaty shopping" by others. 　　The exchange of notes confirms that the French and Dutch texts of the new Article 12A incorporate the meaning of the English language term "beneficial interest." 　　A technical memorandum explaining in detail the provisions of the Supplementary Protocol is being prepared by the Department of the Treasury and will be submitted separately to the Senate Committee on Foreign Relations. 　　The Department of the Treasury, with the cooperation of the Department of State, was primarily responsible for the negotiation of the Supplementary Protocol. It has the approval of both Departments. Respectfully submitted, GEORGE P. SHULTZ. 　 LETTER OF TRANSMITTAL (PROTOCOL) THE WHITE HOUSE, February 29, 1988. To the Senate of the United States: 　　I transmit herewith, for Senate advice and consent to ratification, the Supplementary Protocol Modifying and Supplementing the Convention between the United States of America and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related exchange of notes. The Supplementary Protocol and the exchange of notes were signed at Washington on December 31, 1987. I also transmit for the information of the Senate the report of the Department of State with respect to the Protocol. 　　Pending the successful conclusion of a comprehensive new income tax convention, the　Supplementary Protocol will make certain improvements in the existing convention intended to promote the development of economic relations between the United States and Belgium. 　　It is most desirable that this Protocol be considered by the Senate as soon as possible and that the Senate give advice and consent to ratification. 　 RONALD REAGAN. BY THE PRESIDENT OF THE UNITED STATES OF AMERICA A PROCLAMATION CONSIDERING THAT: 　　The Supplementary Protocol Modifying and Supplementing the Convention Between the United States of America and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related exchange of notes, was signed at Washington on December 31, 1987, the text of which is hereto annexed; The Senate of the United States of America by its resolution of October 22, 1988, two-thirds of the Senators present concurring therein, gave its advice and consent to ratification, subject to the understandings that: 　　(1) The Treasury Department will effect the negotiation of a new Convention in an expeditious manner with the objective of modifying the tax rate on dividends specified in paragraph 2 of Article 10 (Dividends) to deny inappropriate relief from taxation at source on dividends paid by Regulated Investment Companies, Real Estate Investment Trusts, and any other U.S. corporations that essentially receive conduit treatment for U.S. income tax purposes; and 　　(2) The Treasury Department will effect the negotiation of a new Convention in an expeditious manner with the objective of coordinating policy as revised by the Tax Reform Act of 1986. 　　The Supplementary Protocol, with a related exchange of notes, subject to the said understandings, was ratified by the President of the United States of America on December 20, 1988, in pursuance of the advice and consent of the Senate; 　　It is provided in Article 4 of the Supplementary Protocol that the Supplementary Protocol shall enter into force on the fifteenth day after the date of the exchange of the instruments of ratification; The instruments of ratification of the Supplementary Protocol were exchanged at Brussels on July 19, 1989, and accordingly, the Supplementary Protocol and the related exchange of notes, subject to the said understandings, entered into force on August 3, 1989. 　　NOW, THEREFORE, I, George Bush, President of the United States of America, proclaim and make public the Supplementary Protocol, with an exchange of notes, subject to the said understandings, to the end that it be observed and fulfilled with good faith on and after August 3, 1989, by the United States of America and by the citizens of the United States of America and all other persons subject to the jurisdiction thereof. 　　IN TESTIMONY WHEREOF, I have signed this proclamation and caused the Seal of the United States of America to be affixed. 　　DONE at the city of Washington this sixth day of September in the year of our Lord one thousand nine hundred eighty-nine and of the Independence of the United States of America the two hundred fourteenth. By the President: (s) George Bush Secretary of State: (s) James A. Baker, III 　　　　SUPPLEMENTARY PROTOCOL MODIFYING AND SUPPLEMENTING THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE KINGDOM OF BELGIUM FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES SIGNED AT BRUSSELS ON JULY 9, 1970 The Government of the United States of America and the Government of the Kingdom of Belgium, 　　Desiring to promote the development of the economic relations between the United States of America and the Kingdom of Belgium, Considering that, in the course of the ongoing negotiations of a new convention between both countries, it is desirable to remove certain constraints to such development before the successful conclusion of the new convention, 　　Have decided to conclude a supplementary Protocol to the Convention between the United States of America and the Kingdom of Belgium for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, signed at Brussels on July 9, 1970 (hereinafter "the Convention") and Have agreed upon the following articles: ARTICLE 1 　　The text of Article 10 (Dividends) of the Convention is suspended and replaced by the following: 　　1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 　　2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed: (a) 5 percent of the gross amount of the dividends if the beneficial owner is a company which owns directly at least 10 percent of the voting stock of the company paying the dividends; (b) 15 percent of the gross amount of the dividends in all other cases. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 　　3. The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. This term also includes income - even if paid in the form of interest - which is taxable as income from capital invested by the members of a company, other than a company with share capital,which is a resident of Belgium. 　　4. The provisions (1) and (2) shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid forms part of the assets of such permanent establishment or fixed base. In such case, the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply. 　　5. Where a company which is a resident of a Contracting State pays dividends, the other　Contracting State may not impose any tax on the dividends paid by that company to a resident of the first-mentioned State, except insofar as the holding in respect of which the dividends are paid forms part of the assets of a permanent establishment or a fixed base situated in that other State. 　　6. For the purpose of paragraph (4) and notwithstanding any other provision of the Convention, dividends paid by a company which is a resident of Belgium in respect of a holding which forms part of the assets of a permanent establishment situated in Belgium, may be taxed separately in accordance with Belgian law. ARTICLE 2 　　In paragraph (5) of Article 11 (Interest) of the Convention, the words "paragraph (3) of Article 10 (Dividends)" shall be substituted for the words "paragraph (2) of Article 10 (Dividends)". ARTICLE 3 　　The following Article is inserted in the Convention between Article 12 (Royalties) and Article 13 (Capital Gains): ARTICLE 12A (Limitation on Benefits) 　　1. A person (other than an individual) which is a resident of a Contracting State and derives dividends, interest or royalties from the other Contracting State shall not be entitled under Articles 10 (Dividends), 11 (Interest) or 12 (Royalties) to relief from taxation in that other Contracting State unless: 　　(a) both of the following conditions are satisfied: 　　(i) more than 50 percent of the beneficial interest in such person (or in the case　of a company, more than 50 percent of the number of shares of each class of the　company's shares) is owned, directly or indirectly, by one or more individual residents　of one of the Contracting States, one of the Contracting States or its political　subdivisions or local authorities, or citizens of the United States; and 　　(ii) more than 50 percent of the gross income of such person is not used,directly or indirectly, to meet liabilities for interest or royalties to persons who are not　residents of one of the Contracting States, one of the Contracting States or its political　subdivisions or local authorities, or citizens of the United States; or 　　(b) the dividends, interest or royalties derived from the other Contracting State are　derived in connection with, or are incidental to, the active conduct by such person of a trade or business in the first-mentioned State (other than a business the principal activities of which are making or managing investments in the other Contracting State); or 　　(c) the person deriving the dividends, interest or royalties is a resident of a Contracting　State either in whose principal class of shares there is substantial and regular trading on a　recognized securities exchange, or more than 50 percent of whose shares of each class is owned by a resident of that Contracting State in whose principal class of shares there is such substantial and regular trading on a recognized securities exchange. 　　2. For purposes of subparagraph (1)(a)(ii), the term "gross income" means: 　　(a) in the case of the United States, gross income as defined under the Internal Revenue　Code of 1986, as may be amended from time to time, without regard to the geographic source of the income. 　　(b) in the case of Belgium, gross receipts, or where an enterprise is engaged in a　business which includes the manufacture or production of goods, gross receipts reduced by the direct costs of labor and materials attributable to such manufacture or production and paid or payable out of such receipts. 　　3. For purposes of subparagraph (1)(c), the term "recognized securities exchange" means: 　　(a) the NASDAQ System owned by the National Association of Securities Dealers,Inc. and any stock exchange registered with the Securities and Exchange Commission as a national securities exchange for purposes of the Securities Exchange Act of 1934; 　　(b) the Belgian stock exchanges; and 　　(c) any other securities exchange agreed upon by the competent authorities of the　Contracting States. ARTICLE 4 　　1. This supplementary Protocol, which shall form an integral part of the Convention signed at Brussels on July 9, 1970, shall be ratified and the instruments of ratification shall be exchanged at Brussels as soon as possible. 　　2. This supplementary Protocol shall enter into force on the fifteenth day after the date of the exchange of the instruments of ratifications and its provisions shall have effect with respect to dividends, interest and royalties credited or paid on or after January 1, 1988. ARTICLE 5 　　This supplementary Protocol shall remain in force as long as the Convention's in effect and in the event of termination of such Convention shall terminate simultaneously with such Convention. However, either Contracting State may terminate separately this supplementary Protocol, through diplomatic channels, by giving to the other Contracting State at least six months' written notice of termination at any time after five years from the day on which it enters into force. In such event, the supplementary Protocol shall cease to have effect with respect to dividends, interest and royalties credited or paid on or after the first day of January 1 next following the expiration of the six-month period and the provisions of the Convention, as effective on December 31, 1987, shall have effect with respect to such amounts. 　　IN WITNESS WHEREOF the undersigned, being duly authorized thereto by their respective Governments, have signed this supplementary Protocol. 　　DONE at Washington in duplicate, in the English, French and Dutch languages, the three texts being equally authentic, this 31st date of December, 1987. FOR THE GOVERNMENT OF THE 　　　　　　 FOR THE GOVERNMENT OF UNITED STATES OF AMERICA: 　　　　　　THE KINGDOM OF BELGIUM: (s) William Bodde, Jr. (s) Herman Dehennin.