DEPARTMENT OF THE TREASURY TECHNICAL EXPLANATION OF THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF IRELAND FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS（十三） 　　Paragraph 3 　　Paragraph 3 does not have an analog in the OECD Model. Paragraph 3 provides that when information is requested by a Contracting State in accordance with this Article, the other Contracting State is obligated to obtain the requested information as if the tax in question were the tax of the requested State, even if that State has no direct tax interest in the case to which the request relates. The OECD Model does not state explicitly in the Article that the requested State is obligated to respond to a request even if it does not have a direct tax interest in the information. The OECD Commentary, however, makes clear that this is to be understood as implicit in the OECD Model. (See paragraph 16 of the OECD Commentary to Article 27.) Although Ireland has not entered an observation to the Commentary on this point, paragraph 10 of the Protocol states that the laws and practices of Ireland currently do not permit it to obtain information in cases where it does not have a tax interest. However, if the laws and practices of Ireland change in this respect, Ireland will carry out enquiries on behalf of the United States in such cases. 　　The first sentence of paragraph 3 of the U.S. Model, which provides the authority to obtain and provide information from financial institutions, is not included in the Convention. However, paragraph 6 of the Diplomatic Notes accompanying the Convention and Protocol sets forth Ireland’s agreement that the United States may, pursuant to a request under the provisions of the Irish Criminal Justice Act, 1994 (or any successor law), obtain information of financial institutions and depositions of witnesses for the purpose of investigating or prosecuting criminal fiscal offenses. The Irish negotiators confirmed that such requests may be made to the Irish Minister of Justice by the Department of Justice or the Internal Revenue Service. 　　Paragraph 3 further provides that the requesting State may specify the form in which information is to be provided (e.g., depositions of witnesses and authenticated copies of original documents) so that the information can be usable in the judicial proceedings of the requesting State. The requested State should, if possible, provide the information in the form requested to the same extent that it can obtain information in that form under its own laws and administrative practices with respect to its own taxes. In addition, Paragraph 6 of the diplomatic notes sets forth Ireland’s agreement that the United States may, pursuant to a request under the provisions of the Irish Criminal Justice Act, 1994 (or any successor law), obtain information of financial institutions and depositions of witnesses for the purpose of the investigation of criminal fiscal offenses. Such requests may be made whether the investigation is undertaken by the Department of Justice or the Internal Revenue Service. Paragraph 4 　　Finally, paragraph 4 provides that the competent authority of the requested State shall allow representatives of the applicant State to enter the requested State to interview individuals and examine a person’s books and records with that individual’s or person’s consent.Treaty Effective Dates and Termination in Relation to Competent Authority Dispute Resolution A tax administration may seek information with respect to a year for which a treaty was in force after the treaty has been terminated. In such a case the ability of the other tax administration to act is limited. The treaty no longer provides authority for the tax administrations to exchange confidential information. They may only exchange information pursuant to domestic law. 　　The competent authority also may seek information under a treaty that is in force, but with respect to a year prior to the entry into force of the treaty. The scope of the competent authorities to address such a case is not constrained by the fact that a treaty was not in force when the transactions at issue occurred, and the competent authorities have available to them the full range of information exchange provisions afforded under this Article. Where a prior treaty was in effect during the years in which the transaction at issue occurred, the exchange of information provisions of the current treaty apply. ARTICLE 28 Diplomatic Agents and Consular Officers 　　This Article confirms that any fiscal privileges to which diplomatic or consular officials are entitled under general provisions of international law or under special agreements will apply notwithstanding any provisions to the contrary in the Convention. The text of this Article is identical to the corresponding provision of the U.S. and OECD Models. The agreements referred to include any bilateral agreements, such as consular conventions, that affect the taxation of diplomats and consular officials and any multilateral agreements dealing with these issues, such as the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations. The U.S. generally adheres to the latter because its terms are consistent with customary international law. 　　The Article does not independently provide any benefits to diplomatic agents and consular officers. Article 19 (Government Service) does so, as do Code section 893 and a number of bilateral and multilateral agreements. Rather, the Article specifically reconfirms in this context the statement in paragraph 2 of Article 1 (General Scope) that nothing in the tax treaty will operate to restrict any benefit accorded by the general rules of international law or with any of the other agreements referred to above. In the event that there is a conflict between the tax treaty and international law or such other treaties, under which the diplomatic agent or consular official is entitled to greater benefits under the latter, the latter laws or agreements shall have precedence. Conversely, if the tax treaty confers a greater benefit than another agreement, the affected person could claim the benefit of the tax treaty. 　　Pursuant to subparagraph 5(b) of Article 1, the saving clause of paragraph 4 of Article 1 (General Scope) does not apply to override any benefits of this Article available to an individual who is neither a citizen of the United States nor has immigrant status there. 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 for the ratification of the Convention by both Contracting States according to their constitutional and statutory requirements and requires that instruments of ratification be exchanged as soon as possible. 　　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 advice and consent of the Senate 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 upon the exchange of instruments of ratification. The date on which a treaty enters into force is not necessarily the date on which its provisions take effect. Paragraph 2, therefore, also 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 next following the date on which the Convention enters into force. For example, if instruments of ratification are exchanged on April 25 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 next year. 　　For all other taxes, paragraph 2(b) specifies that the Convention will have effect, in the case of United States taxes, for taxable years beginning on or after January 1 of the year following entry into force and, in the case of Irish taxes, for financial years (in the case of the corporation tax) or years of assessment (in the case of income tax and capital gains tax) beginning on or after January 1 of the year following entry into force. Because the federal excise tax on insurance premiums is collected quarterly and is not a withholding tax, the effective date provided by paragraph 2(b) will apply to that tax. 　　As discussed under Articles 25 (Mutual Agreement Procedure) and 26 (Exchange of Information), the powers afforded the competent authority under these articles apply retroactively to taxable periods preceding entry into force. 　　Paragraph 3 As in many recent U.S. treaties, Paragraph 3 provides a "grace period" in the form of a general exception to the effective date rules of paragraph 2. Under this paragraph, if the prior Convention would have afforded greater relief from tax to a person entitled to its benefits than would be the case under this Convention, that person may elect to remain subject to all of the provisions of the prior Convention for a twelve-month period from the date on which this Convention would have had effect under the provisions of paragraph 2 of this Article. During the period in which the election is in effect, the provisions of the prior Convention will continue to apply only insofar as they applied prior to the entry into force of the Convention. 　　For example, under the Convention a non-publicly traded corporation resident in Ireland that is wholly owned by third-country residents and that earns portfolio dividends from passive investments in the United States would be denied U.S. treaty benefits with respect to those dividends under the provisions of Article 23 (Limitation on Benefits). Since the prior Convention contained no anti-treaty-shopping rule, so that the corporation would be entitled to the reduced U.S. withholding rate of 15 percent, this corporation may elect under the grace period rule to be subject to the rules of the prior Convention for one additional year from the effective date specified in paragraph 2(a), thereby receiving U.S. treaty benefits for that period. This rule gives those residents of a Contracting State that are subject to the Limitation on Benefits provision an additional year to restructure their activities in a manner that would entitle them to qualify for benefits. Under the prior Convention, foreign source income attributable to a U.S. permanent establishment was not subject to U.S. tax. If an Irish resident has a U.S. permanent establishment that earns Canadian source income, that income would be exempt under the prior Convention, but taxable under the Convention. The Irish resident claiming that the Canadian-source income is exempt may do so for one additional year after the first taxable year beginning on or after the first day of January following entry into force of the new treaty. 　　If the grace period is elected, all of the provisions of the prior Convention must be applied for that additional year. The taxpayer may not apply certain, more favorable, provisions of the prior Convention and, at the same time, apply other, more favorable, provisions of the Convention. Thus, an Irish enterprise with a permanent establishment in the United States cannot rely on the prior Convention to avoid the branch profits tax and at the same time claim exemption from the branch level interest tax on excess interest on the basis that Article 11 (Interest) of the Convention eliminates source-basis taxation of interest (and therefore the excess interest tax). The enterprise must choose one regime or the other. Paragraph 4 　　Paragraph 4 provides a rule to coordinate the termination of the prior Convention with the effective dates of the new treaty. The prior Convention will cease to have effect when the provisions of this Convention take effect in accordance with paragraphs 2 and 3 of the Article. Thus, for a person not taking advantage of the election in paragraph 3, the prior Convention will cease to have effect at the time, on or after January 1 of the year following entry into force of the Convention, when the provisions of the new Convention first have effect. For persons electingthe additional year of coverage of the prior Convention, the prior Convention will remain in effect for one additional year beyond the date specified in the preceding sentence. Paragraph 5 　　Paragraph 5 includes an additional transition rule with respect to the “derivative benefits” requirement of subparagraph 5 b) of Article 23 (Limitation on Benefits). Under this transition rule, an Irish company that is claiming the benefits of the Convention on the basis that it is owned by residents of EU or NAFTA countries may do so without regard to whether its owners would be entitled to benefits equivalent to those available under the Convention. This transition rule is available for a period of two years from when the Convention otherwise would have effect under the provisions of paragraphs 2 and 3. 　　For example, assume an Irish company owns 50 percent of a U.S. company from which it receives interest and dividends. The Irish company in turn is owned 30 percent by an Irish publicly traded company and 70 percent by a Canadian company and meets the base erosion standard of subparagraph 5 a) ii) of Article 23. If instruments of ratification were exchanged on November 15, 1997, the Convention will enter into force generally on January 1, 1998. Under the prior Convention, the Irish company was subject to U.S. withholding tax at a rate of 15% on dividends paid by the U.S. company because it did not meet the 95 percent ownership threshold to receive the direct dividend rate. That rate is reduced to 5% under the Convention for direct dividends. Accordingly, the Irish company does not elect to extend the effective date of the Convention pursuant to paragraph 3. However, as of January 1, 2000, the Irish company will no longer receive the benefits of the Convention with respect to interest paid by the U.S. company, because the Convention between the United States and Canada provides for a positive rate of withholding tax on interest and therefore the requirements of paragraph 5 b) of Article 23 will not be met. If, on the other hand, the Irish company owns 100 percent of the U.S. company, so that it qualified for the 5% direct dividend rate under the prior Convention, the Irish company could elect to apply the prior Convention for an additional year, as described above, so that it would not come into effect generally until January 1, 1999. In that case, the Irish company would receive benefits with respect to interest until January 1, 2001. ARTICLE 30 Termination 　　The Convention is to remain in effect indefinitely unless terminated by one of the Contracting States in accordance with the provisions of Article 30. The Convention may be terminated at any time after five years from the date on which it enters into force. If notice of termination is given, the provisions of the Convention with respect to withholding at source will case to have effect for amounts paid or credited on or after the first of January next following the expiration of the six months’ period of notice. For other taxes, the Convention will cease to have effect for taxable years beginning on or after the first day of January next following the expiration of the six months’ period of notice, in the case of the United States, and, in the case of Ireland, the Convention will cease to have effect for financial years (in respect of the corporation tax) and for years of assessment (in respect of the income and capital gains tax) beginning, ineach case, on or after the first of January next following the expiration of the six months’ notice period. 　　A treaty performs certain specific and necessary functions regarding information exchange and mutual agreement. In the case of information exchange the Convention's function is to override confidentiality rules relating to taxpayer information. In the case of mutual agreement its function is to allow competent authorities to modify internal law in order to prevent double taxation and tax avoidance. With respect to the effective termination dates for these aspects of the Convention, therefore, if a Convention is terminated as of January 1 of a given year, no otherwise confidential information can be exchanged after that date, regardless of whether the Convention was in force for the taxable year to which the request relates. Similarly, no mutual agreement departing from internal law can be implemented after that date, regardless of the taxable year to which the agreement relates. Therefore, for the competent authorities to be allowed to exchange otherwise confidential information or to reach a mutual agreement that departs from internal law, a Convention must be in force at the time those actions are taken and any existing competent authority agreement ceases to apply. 　　Article 30 relates only to unilateral termination of the Convention by a Contracting State. Nothing in that Article should be construed as preventing the Contracting States from concluding a new bilateral agreement, subject to ratification, that supersedes, amends or terminates provisions of the Convention without the six-month notification period. 　　Customary international law observed by the United States and other countries, as reflected in the Vienna Convention on Treaties, allows termination by one Contracting State at any time in the event of a "material breach" of the agreement by the other Contracting State.