ARTICLE 9 Shipping and Air Transport 　　1. Notwithstanding Article 8 (Business Profits) and Article 15 (Capital Gains: 　　(a) Where a resident of the United States derives income from the operation in international traffic of ships or aircraft, or gains from the sale, exchange, or other disposition of ships or aircraft used in international traffic by such resident, Israel shall exempt such income or gains from taxation if the ships or aircraft are registered in either Contracting State or in a State with which the United States has a convention which exempts such income or gains. 　　(b) Where a resident of Israel derives income from the operation in international traffic of ships or aircraft, or gains from the sale, exchange, or other disposition of ships or aircraft used in international traffic by such resident, the United States shall exempt such income or gains from taxation. 　　2. For purposes of this Article, income derived from the operation in international traffic of ships or aircraft includes-- 　　(a) Income derived from the rental of ships or aircraft operated in international traffic if such rental income is incidental to other income described in paragraph (1); and 　　(b) Income derived from the use, maintenance, and lease of-- 　　(i) Containers, 　　(ii) Trailers for the inland transport of containers, and 　　(iii) Other related equipment 　　in connection with the operation by the resident in international traffic of ships or aircraft described in paragraph (1). ARTICLE 10 Grants 　　1. For the purpose of computing United States tax, if Israel, a political subdivision thereof, or any agency of either makes a qualifying cash grant to a resident of the United States, then- 　　(a) the amount of such grant shall be excluded from the gross income of such resident, 　　(b) if the resident is a corporation the amount of such grant shall be treated as a contribution to its capital, 　　(c) the resident shall be considered to have contributed as a shareholder the amount of such grant to the Israeli corporation designated by the terms of the grant, and 　　(d) the resident's basis for the stock of the Israeli corporation shall not be increased by the amount contributed under subparagraph (c). 　　2. For purposes of paragraph (1), a qualifying cash grant is one approved by Israel for investment promotion in Israel, but shall not include any amount which in whole or part, directly or indirectly- 　　(a) is in consideration for services rendered or to be rendered, or for the sale of goods, 　　(b) is measured in any manner by the amount of profits or tax liability, or 　　(c) is taxed by Israel. 　　　　　　　　　　　　ARTICLE 11 　　　　　　　　　　Related Persons 　　1. Where a person subject to the taxing jurisdiction of one of the Contracting States and any other person are related and where such related persons made arrangements or impose conditions between themselves which are different from those which would be made between independent persons, any income, deductions, credits, or allowances which would, but for those arrangements or conditions, have been taken into account in computing the income (or loss) of, or the tax payable by, one of such persons may be taken into account in computing the amount of the income subject to tax and the taxes payable by such person. 　　2. Where a redetermination has been made by one Contracting State to the income of one of its residents in accordance with paragraph (1), then the other Contracting State shall, if it agrees with such redetermination and if necessary to prevent double taxation, make a corresponding adjustment to the income of a person in such other Contracting State related to such resident. In the event the other Contracting State disagrees with such redetermination, the two Contracting States shall endeavor to reach agreement in accordance with the mutual agreement procedure in paragraph (2) of Article 28 (Mutual Agreement Procedure). 　　3. For purposes of this Convention, a person is related to another person if either person owns or controls directly or indirectly the other, or if any third person or persons own or control directly or indirectly both. For this purpose, the term "control" includes any kind of control, whether or not legally enforceable, and however exercised or exercisable. ARTICLE 12 Dividends 　　1. Dividends derived from sources within one of the Contracting States by a resident of the other Contracting State may be taxed by both Contracting States. 　　2. The rate of tax imposed by one of the Contracting States on dividends derived from sources within that Contracting State by a resident of the other Contracting State shall not exceed- 　　(a) 25 percent of the gross amount of the dividend paid; or 　　(b) When the recipient is a corporation, 12.5 percent of the gross amount of the dividend paid, but only if- 　　(i) During the part of the paying corporation's taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10 percent of the outstanding shares of the voting stock of the paying corporation was owned by the recipient corporation, and 　　(ii) Not more than 25 percent of the gross income of the paying corporation for such prior taxable year (if any) consists of interest or dividends (other than interest derived from the conduct of a banking, insurance, or financing business and dividends or interest received from subsidiary corporations, 50 percent or more of the outstanding shares of the voting stock of which is owned by the paying corporation at the time such dividends or interest is received). 　　3. Dividends paid by a corporation of one of the Contracting States to a person other than a resident of the other Contracting State (and in the case of dividends paid by an Israeli corporation, to a person other than a citizen of the United States) shall be exempt from tax by the other Contracting State. 　　4. Paragraphs (2) and (3) shall not apply if such dividends are treated, under paragraph (6) of Article 8 (Business Profits), as industrial or commercial profits attributable to a permanent establishment which the recipient has in the other Contracting State. In such case, the provisions of Article 8 (Business Profits) shall apply. ARTICLE 13 Interest 　　1. Interest derived by a resident of one of the Contracting States from sources within the other Contracting State may be taxed by both Contracting States. 　　2. Interest derived by a resident of one of the Contracting States from sources within the other Contracting State shall not be taxed by the other Contracting State at a rate in excess of 17.5 percent of the gross amount of such interest, except that, if the interest is derived from a loan of whatever kind granted by a bank, savings institution, or insurance company or the like, the interest shall not be taxed at an amount in excess of 10 percent of the gross amount of such interest. 　　3. Notwithstanding paragraphs (1) and (2), interest beneficially derived by (a) one of the Contracting States, or by an instrumentality of that Contracting State, not subject to tax by that Contracting State on its income, or (b) a resident of such Contracting State with respect to debt obligations guaranteed or insured by that Contracting State or an instrumentality thereof, shall be exempt from tax by the other Contracting State. 　　4. Interest paid by a resident of one of the Contracting States to a person other than a resident of the other Contracting State (and in the case of interest paid by a resident of Israel, to a person other than a citizen of the United States) shall be exempt from tax by the other Contracting State unless such interest is treated as income from sources within the other Contracting State under paragraph (2) of Article 4 (Source of Income). 　　5. Paragraphs (2), (3), and (4) shall not apply if the interest is treated, under paragraph (6) of Article 8 (Business Profits), as industrial or commercial profits attributable to a permanent establishment which the recipient has in the other Contracting State. In such a case, the provisions of Article 8 (Business Profits) shall apply. 　　6. Where an amount is paid to a related person and would be treated as interest but for the fact that it exceeds an amount which would have been paid to an unrelated person, the provisions of this Article shall apply only to so much of the amount as would have been paid to an unrelated person. In such a case the excess amount may be taxed by each Contracting State according to its own law, including the provisions of this Convention where applicable. 　　7. The term "interest" as used in this Convention means income from money lent and other income which under the taxation law of the Contracting State in which the income has its source is assimilated to income from money lent. ARTICLE 14 Royalties 　　1. Royalties derived by a resident of one of the Contracting States from sources within the other Contracting State- 　　(a) May be taxed by both Contracting States, but 　　(b) Shall not be taxed by the other Contracting State at a rate in excess of 10 percent of the gross amount of a copyright or film royalty or at a rate in excess of 15 percent of the gross amount of an industrial royalty. 　　2. For purposes of this Article- 　　(a) Copyright or film royalties are payments of any kind made as consideration for the use of, or the right to use, copyrights of literary, artistic, or scientific works, including copyrights of motion picture films or films or tapes used for radio or television broadcasting; 　　(b) Industrial royalties are payments of any kind made as consideration for the use of, or the right to use, patents, designs, models, plans, secret processes or formulae, trademarks, or other like property or rights and 　　(c) Copyright or film royalties and industrial royalties include gains derived from the sale, exchange, or other disposition of any such property or rights to the extent that the amounts realized on such sale, exchange, or other disposition for consideration are contingent on the productivity, use, or disposition of such property or rights. 　　3. Paragraph (1) (b) shall not apply if the royalty is treated, under paragraph (6) of Article 8 (Business Profits), as industrial or commercial profits attributable to a permanent establishment which the recipient has in the other Contracting State. In such a case, the provisions of Article 8 (Business Profits) shall apply. 　　4. Where an amount is paid to a related person and would be treated as a royalty but for the fact that it exceeds an amount which would have been paid to an unrelated person, the provisions of this Article shall apply only to so much of the amount as would have been paid to an unrelated person. In such a case, the excess amount may be taxed by each Contracting State according to its own law, including the provisions of this Convention where applicable. ARTICLE 15 Capital Gains 　　1. A resident of one of the Contracting States shall be exempt from tax by the other Contracting State on gains from the sale, exchange, or other disposition of capital assets unless- 　　(a) The gain is from the sale, exchange or other disposition of property described in Article 7 (Income from Real Property) situated within the other Contracting State, 　　(b) The gain is from the sale, exchange or other disposition of property described in paragraph (2) of Article 14 (Royalties), 　　(c) The gain is treated, under paragraph (6) of Article 8 (Business Profits), as industrial or commercial profits attributable to a permanent establishment which the resident has in such other Contracting State, 　　(d) The resident, being an individual, is present in the other Contracting State for a period or periods aggregating 183 days or more during the taxable year, or 　　(e) The gain is derived by a resident of the United States from the sale, exchange, or other disposition of stock in an Israeli corporation, but only if- 　　(i) The resident of the United States owns either actually or constructively within the 12-month period preceding such sale, exchange, or other disposition, stock possessing more than 50 percent of the voting power of the Israeli corporation, and 　　(ii) More than 50 percent of the fair market value of the Israeli corporation's gross assets used in its trade or business are physically located in Israel on the last day of each of the 3 taxable years preceding the sale, exchange, or other disposition (or, if the corporation has been in existence for less than 3 years, on the last day of each preceding taxable year of the corporation). 　　2. In the case of gains described in paragraph (1) (a), the provisions of Article 7 (Income from Real Property) shall apply. In the case of gains described in paragraph (1) (b), the provisions of Article 14 (Royalties) shall apply. In the case of gains described in paragraph (1) (c), the provisions of Article 8 (Business Profits) shall apply. ARTICLE 16 Independent Personal Services 　　1. Income derived by an individual who is a resident of one of the Contracting States from the performance of personal services in an independent capacity may be taxed by that Contracting State. Except as provided in paragraph (2), such income shall be exempt from tax by the other Contracting State. 　　2. Income derived by an individual who is a resident of one of the Contracting States from the performance of personal services in an independent capacity in the other Contracting State may be taxed by that other Contracting State, if the individual is present in that other Contracting State for a period or periods aggregating 183 days or more in the taxable year. ARTICLE 17 Dependent Personal Services 　　1. Except as provided in Article 2 (Governmental Functions), wages, salaries, and similar remuneration derived by an individual who is a resident of one of the Contracting States from labor or personal services performed as an employee, including income from services performed by an officer of a corporation or company, may be taxed by that Contracting State. Except as provided by paragraph (2) and in Articles 20 (Private Pensions and Annuities), 22 (Governmental Functions), 23 (Teachers), and 24 (Students and Trainees), such remuneration derived from sources within the other Contracting State may also be taxed by that other Contracting State. 　　2. Remuneration described in paragraph (1) derived by an individual who is a resident of one of the Contracting States shall be exempt from tax by the other Contracting State if- 　　(a) He is present in that other Contracting State for a period or periods aggregating less than 183 days in the taxable year; 　　(b) He is an employee of a resident of, or of a permanent establishment maintained in, the first-mentioned Contracting State; 　　(c) The remuneration is not borne as such by a permanent establishment which the employer has in that other Contracting State; and 　　(d) The remuneration is subject to tax in the first-mentioned Contracting State. 　　3. Remuneration derived by an employee of a resident of one of the Contracting States for labor or personal services performed as a member of the regular complement of a ship or aircraft operated in international traffic by a resident of that Contracting State may be taxed by that Contracting State. ARTICLE 18 Public Entertainers 　　Notwithstanding Article 16 (Independent Personal Services) and 17 (Dependent Personal Services), the income derived by an individual who is a resident of one Contracting State from his performance of personal services in the other Contracting State as a public entertainer, such as a theater, motion picture, radio or television artist, a musician, or an athlete, may be taxed by the other Contracting State, but only if the gross amount of such income exceeds 400 United States dollars or its equivalent in Israeli pounds for each day such person is present in the other Contracting State for the purpose of performing such services therein. ARTICLE 19 Amounts Received for Furnishing Personal Services of Others 　　1. Amounts received by a resident of one of the Contracting States in consideration of furnishing in the other Contracting State the personal services of one or more other persons, including a public entertainer referred to in Article 18 (Public Entertainers), shall not constitute industrial or commercial profits under Article 8 (Business Profits) to the extent that- 　　(a) (i) The person for whom the services were rendered designated the person or persons who would render the services, whether or not he had the legal right to do so and whether or not the designation was made formally; 　　(ii) The person for whom the services were rendered had the right to designate the person or persons who would render the services; or 　　(iii) By reason of the facts and circumstances the arrangement for personal services had the effect of designating the person or persons who would render the services; and 　　(b) The resident of the first-mentioned Contracting State directly or indirectly pays compensation for such services to any person, other than another resident of he first-mentioned Contracting State or of that other Contracting State who is subject to tax on such compensation. 　　2. Paragraph (1) shall not apply to any amount received if it is established to the satisfaction of the competent authority of that other Contracting State with respect to such amount that neither the creation nor organization of the resident of the first-mentioned Contracting State (where such resident is a corporation or other entity) nor the furnishing of the services through such resident has the effect of a substantial reduction of income, war profits, excess profits, or similar taxes. ARTICLE 20 Private Pensions and Annuities 　　1. Except as provided in Article 22 (Governmental Functions), pensions and other similar remuneration paid to an individual shall be taxable only in the Contracting State of which he is a resident. 　　2. Alimony and annuities paid to an individual who is a resident of one of the Contracting States shall be taxable only in that Contracting State. 　　3. Child support payments made by an individual who is a resident of one of the Contracting States to an individual who is a resident of the other Contracting State shall be exempt from tax in that other Contracting State. 　　4. The term "pensions and other similar remuneration", as used in this Article, means periodic payments other than social security payments covered in Article 21 (Social Security Payments) made (a) by reason of retirement or death and in consideration for services rendered, (b) by way of compensation for injuries or sickness received in connection with past employment, or (c) by reason of payments made under a plan benefiting self-employed individuals all or some of the contributions to which qualify for special tax treatment. 　　5. The term "annuities", as used in this Article, means a stated sum paid periodically at stated times during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). 　　6. The term "alimony", as used in this Article, means periodic payment made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support which payments are taxable to the recipient under the internal laws of the Contracting State of which he is a resident. 　　7. The term "child support payments", as used in this Article, means periodic payments for the support of a minor child made pursuant to a written separation agreement or a decree of divorce, separate maintenance, or compulsory support.