Convention Signed at Cairo August 24, 1980; 　　Ratification Advised by the Senate of the United States of America November 18, 1981; 　　Ratified by the President of the United States of America December 1, 1981; 　　Ratified by the Arab Republic of Egypt; 　　Ratifications Exchanged at Washington December 1, 1981; 　　Proclaimed by the President of the United States of America December 15, 1981; 　　Entered into Force December 31, 1981. GENERAL EFFECTIVE DATE UNDER ARTICLE 31: 1 JANUARY 1982 TABLE OF ARTICLES Article 1 --------------------------------Taxes Covered Article 2 --------------------------------General Definitions Article 3 --------------------------------Fiscal Residence Article 4 --------------------------------Source of Income Article 5 --------------------------------Permanent Establishment Article 6 --------------------------------General Rules of Taxation Article 7 --------------------------------Income from Real Property Article 8 --------------------------------Business Profits Article 9 --------------------------------Shipping and Air Transport Article 10 -------------------------------Related Persons Article 11 -------------------------------Dividends Article 12 -------------------------------Interest Article 13 -------------------------------Royalties Article 14 -------------------------------Capital Gains Article 15 -------------------------------Independent Personal Services Article 16 -------------------------------Dependent Personal Services Article 17 -------------------------------Public Entertainer Article 18 -------------------------------Amounts Received for Furnishing Personal Services of Others Article 19 -------------------------------Private Pensions and Annuities Article 20 -------------------------------Social Security Payments Article 21 -------------------------------Governmental Functions Article 22 -------------------------------Teacher Article 23 -------------------------------Students and Trainees Article 24 -------------------------------Investment or Holding Companies Article 25 -------------------------------Relief from Double Taxation Article 26 -------------------------------Nondiscrimination Article 27 -------------------------------Mutual Agreement Procedure Article 28 -------------------------------Exchange of Information Article 29 -------------------------------Assistance in Collection Article 30 -------------------------------Diplomatic and Consular Officers Article 31 -------------------------------Entry into Force Article 32 -------------------------------Termination Letter of Submittal---------------------of 3 October, 1980 Letter of Transmittal-------------------of 12 November, 1980 The "Saving Clause"-------------------Paragraph 3 of Article 6 　　　　　　　　　　　　　　　MESSAGE 　　　　　　　　　　　　　　　FROM 　　　　　　　　THE PRESIDENT OF THE UNITED STATES 　　　　　　　　　　　　　　TRANSMITTING A CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE ARAB REPUBLIC OF EGYPT FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, SIGNED AT CAIRO ON AUGUST 24, 1980 　　　　　　　　　　LETTER OF SUBMITTAL 　　　　　　　　　　　　　　　　　　　　　　　　　　DEPARTMENT OF STATE, 　　　　　　　　　　　　　　　　　　　WASHINGTON, D.C., October 3, 1980. 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 Arab Republic of Egypt for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, (the Convention) signed at Cairo on August 24, 1980. Income tax conventions with Egypt were signed in 1960 and 1975 but neither entered into force. 　　The 1960 convention was withdrawn in 1964 because a tax sparing provision (an incentive for United States investment in Egypt) was unacceptable to the Senate. When the United States model income tax convention was published in 1976, it became necessary to amend the 1975 convention with Egypt. The Convention is a revised version of the 1975 convention. I recommend that the 1975 income tax convention with Egypt be withdrawn prior to Senate consideration of the new Convention. Negotiations with Egypt began in 1974, prior to the first publication of the United States model convention in 1976. The form and pattern of the Convention, therefore, are somewhat different from the United States model, but do not differ in major substantive respects from the model, except to reflect Egypt's status as a developing country or particular features of Egyptian law. 　　As in the model, business profits of a resident of one country may be taxed by the other only if such profits are attributable to a permanent establishment in the other country. Similarly with respect to independent personal service income, an individual who is a resident of one State may be taxed by the other on income from personal services performed in the other State only if certain tests are met. In the Convention, the time threshold is shorter than in the United States model, and, with respect to entertainers, the dollar threshold is lower. Maximum rates of tax are established on a reciprocal basis for the taxation by the source country of dividends, interest, and royalties. In general, these maximum rates in the Convention exceed the rates specified in the United States model. The rates in the Convention are, however, consistent with those established in other United States tax conventions with developing countries. 　　With respect to dividends, the United States withholding rate is, in general, limited to 15 percent, although a lower 5 percent rate is specified for dividends paid to a parent corporation in Egypt. On the Egyptian side, a special rule has been drafted because of several unique features of the Egyptian system of taxation of corporations and their shareholders. Under Egyptian law, dividends paid out of current earnings are fully deductible for purposes of corporate level taxation. The dividends are then subject to a series of withholding taxes equivalent in total rate to the corporate taxes. When the shareholder is a corporation, no further tax is due with respect to that income; individual shareholders, however, are subject to general income tax at progressive rates on their dividend income. Under the Convention, a United States corporation which receives dividends from an Egyptian corporation is not subject to any Egyptian tax beyond the withholding taxes. An individual United States shareholder is subject to the general income tax, but the average rate may not exceed 20 percent; it may, in some cases, be less than 20 percent, depending on the amount of the shareholder's Egyptian taxable income. 　　Interest is taxable at the source at a maximum rate of 15 percent, except that interest received, guaranteed or insured by a Contracting State or instrumentality is exempt at source. Royalties are subject to a maximum rate of tax at source of 15 percent. Motion picture royalties, under the Convention, are treated as business profits. They are not subject to withholding tax at the source and may be taxed by the source country, on a net basis, only if they are attributable to a permanent establishment which the recipient has in that country. 　　The Convention contains the usual rules relating to real property income, capital gains, the treatment of students, pensioners and government employees, nondiscrimination, and administrative cooperation. 　　These rules deviate only in minor respects from the model provisions. With respect to real property income and capital gains, the Convention provides that gain on the sale of shares or an interest in a partnership, estate or trust the assets of which consist principally of real property, may be taxed where the property is situated. Although such a rule does not appear in the current United States model, it has recently become United States policy to include such a provision in United States tax Conventions. 　　The Convention will enter into force 30 days following the exchange of instruments of ratification and its provisions will apply to withholding taxes on amounts paid or credited on or after the first day of the second month following the entry into force and to other taxes for taxable periods beginning on or after January 1 following the entry into force. 　　The Convention will remain in force indefinitely unless terminated by one of the Contracting States. 　　It may be terminated by six months' diplomatic notice after five years from its entry into force. 　　A technical memorandum explaining in detail the provisions of the Convention is being prepared by the Department of the Treasury and will be submitted 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 Convention. It has the approval of both Departments. Respectfully submitted, EDMUND S. MUSKIE. LETTER OF TRANSMITTAL THE WHITE HOUSE, November 12, 1980. To the Senate of the United States: 　　I transmit herewith, for Senate advice and consent to ratification, a Convention between the Government of the United States of America and the Government of the Arab Republic of Egypt for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, (the Convention) signed at Cairo on August 24, 1980. I transmit also the report of the Department of State with respect to the Convention. 　　The Convention will replace the income tax convention with Egypt which was signed in 1975. I therefore, desire to withdraw from the Senate the following treaty, removing it from the Treaty Calendar: The Convention between the Government of the United States of America and the Arab Republic of Egypt for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, signed at Washington on October 28, 1975 (Executive D, 94th Cong., 2d Sess.). 　　The Convention is similar to the United States model in major respects although different in form and pattern as the model was published after the negotiations of the convention had begun. As in the model, business profits of a resident of one country may be taxed by the other only if such profits are attributable to a permanent establishment in the other country. Similarly, with respect to independent personal service income, an individual who is a resident of one State may be taxed by the other State only if certain tests are met. In the Convention, the time threshold is shorter than in the United Statesmodel, and, with respect to entertainers, the dollar threshold is lower. 　　Maximum rates of tax are established on a reciprocal basis for the taxation by the source country of dividends, interest, and royalties. In general, these maximum rates in the Convention exceed the rates specified in the United States model. The rates in the Convention are, however, consistent with those established in other United States tax conventions with developing countries. 　　I recommend that the Senate give early and favorable consideration to the Convention. 　　　　　　　　　　　　　　　　　　　　　　　　　　　　　JIMMY CARTER. BY THE PRESIDENT OF THE UNITED STATES OF AMERICA 　　　　　　　　　　　　A PROCLAMATION CONSIDERING THAT: 　　The Convention between the Government of the United States of America and the Government of the Arab Republic of Egypt for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income was signed at Cairo on August 24, 1980, the text of which is hereto annexed; 　　The Senate of the United States of America by its resolution of November 18, 1981, two-thirds of　the Senators present concurring therein, gave its advice and consent to ratification of the Convention, subject to the following: 　　1) understanding that appropriate Congressional committees and the General Accounting Office shall be afforded access to the information exchanged under this treaty where such access is necessary to carry out their oversight responsibilities, subject only to the limitations and procedures of the Internal Revenue Code. 　　2) reservation that notwithstanding the provisions of paragraph (3) of Article 7 of the Convention (which relates to the taxation of gains from the alienation of shares of a corporation or of an interest in a partnership, estate, or trust, the property of which consists, directly or indirectly, principally of real property situated in one of the countries), gain derived by a resident of a Contracting State, from the alienation or other disposition of an interest in a corporation, or an interest in a partnership, trust, or estate, which has an interest in real property located in the other Contracting State, or the assets of which are considered under domestic law of that other Contracting State to consist, in whole or in part, of real property, or an interest therein, in that other State, may be taxed by that other State to the extent provided for by its domestic law. In addition, gain derived by a corporation which is a resident of a Contracting State upon the distribution (including a distribution in liquidation or otherwise) of an interest in real property (as determined under the domestic law of the other Contracting State) may be taxed by that other Contracting State to the extent provided for by its domestic law. 　　The Convention was ratified, subject to the aforesaid understanding and reservation, by the President of the United States of America on December 1, 1981, in pursuance of the advice and consent of the Senate and was ratified on the part of the Arab Republic of Egypt; The instruments of ratification of the Convention were exchanged at Washington on December 1, 1981, and accordingly the Convention enters into force on December 31, 1981, effective as specified in Article 31; 　　NOW, THEREFORE, I, Ronald Reagan, President of the United States of America, proclaim and　make public the Convention to the end that it be observed and fulfilled with good faith on and after December 31, 1981, 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 fifteenth day of December in the year of our Lord one thousand nine hundred eighty-one and of the Independence of the United States of America the two hundred sixth. By the President: RONALD REAGAN ALEXANDER M. HAIG, JR. Secretary of State