BY THE PRESIDENT OF THE UNITED STATES OF AMERICA A PROCLAMATION CONSIDERING THAT: 　　The Convention between the United States of America and Italy for the Avoidance of Double Taxation with Respect to Taxes on Income and the Prevention of Fraud or Fiscal Evasion, together with a supplementary protocol and exchange of notes, was signed at Rome on April 17, 1984, the texts of which in the English and Italian languages are hereto annexed; 　　The Senate of the United States of America by its resolution of December 16, 1985, two-thirds of the Senators present concurring therein, gave its advice and consent to ratification of the Convention, together with the supplementary protocol and exchange of notes, subject to the following understanding: 　　''That the indirect credit available to a United States corporation with respect to dividends from a company which is a resident of Italy is not available if such company is a resident of the United States under United States law"; 　　The Convention, together with the supplementary protocol and exchange of notes, was ratified by the President of the United States of America, subject to the above understanding, on December 23, 1985, in pursuance of the advice and consent of the Senate, and was ratified on the part of Italy on December 13, 1985; 　　The instruments of ratification of the Convention, the supplementary protocol and exchange of notes were exchanged at Washington on December 30, 1985, and accordingly the Convention entered into force on that date, its provisions to have effect as specified in Article 28; 　　NOW, THEREFORE, I, Ronald Reagan, President of the United States of America, proclaim and make public the Convention, the supplementary protocol and exchange of notes to the end that they be observed and fulfilled with good faith on and after December 30, 1985, 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 ninth day of September in the year of our Lord one thousand nine hundred eighty six and of the Independence of the United States of America the two hundred eleventh. By the President: (s) Ronald Reagan. George P. Shultz, Secretary of State. CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF ITALY FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND THE PREVENTION OF FRAUD OR FISCAL EVASION 　　The Government of the United States of America and the Government of Republic of Italy, desiring to conclude a convention for the avoidance of double taxation with respect to taxes on income and the prevention of fraud or fiscal evasion, have agreed as follows: ARTICLE 1 Personal Scope 　　1. Except as otherwise provided in this Convention, this Convention shall apply to persons who are residents of one or both of the Contracting States. 　　2. Notwithstanding any provision of this Convention except paragraph 3 of this Article, a Contracting State may tax: 　　a) its residents (as determined under Article 4 (Resident)); and 　　b) its citizens by reason of citizenship as if there were no convention between the Government of the United States of America and the Government of Italy for the avoidance of double taxation with respect to taxes on income and the prevention of fraud or fiscal evasion. 　　3. The provisions of paragraph 2 shall not affect: 　　a) the benefits conferred by a Contracting State under paragraph 3 of Article 18 (Pensions, etc.), and under Articles 23 (Relief from Double Taxation), 24 (Non-Discrimination), and 25 (Mutual Agreement Procedure): and 　　b) the benefits conferred by a Contracting State under Articles 19 (Government Service), 20 (Professors and Teachers), 21 (Students and Trainees), and 27 (Diplomatic Agents and Consular Officials), upon individuals who are neither citizens of, nor have immigrant status in, that State. ARTICLE 2 Taxes Covered 　　1. This Convention shall apply to taxes on income imposed on behalf of a Contracting State. 　　2. The existing taxes to which this Convention shall apply are: 　　a) in the case of the United States: the Federal income taxes imposed by the Internal Revenue Code and the excise taxes imposed on insurance premiums paid to foreign insurers and with respect to private foundations, but excluding (notwithstanding paragraph 5 of Article 10 (Dividends)) the accumulated earnings tax and the personal holding company tax, (hereinafter referred to as "United States tax"); 　　b) in the case of Italy: 　　i) the individual income tax (l'imposta sul reddito delle persone fisiche); 　　ii) the corporation income tax (l'imposta sul reddito delle persone giuridiche); and 　　iii) the local income tax (l'imposta locale sui redditi) except to the extent imposed on cadastral income; even if they are collected by withholding taxes at the source (hereinafter referred to as "Italian tax"). 　　3. The Convention shall apply also to an identical or substantially similar taxes which are imposed by a Contracting State after the date of signature of this Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws and shall transmit to each other any significant official published material concerning the application of this Convention, including explanations, regulations, rulings, or judicial decisions. ARTICLE 3 General Definitions 　　1. For the purpose of this Convention, unless the context otherwise requires: 　　a) the term ''person'' includes an individual, a company, an estate, a trust, and any body of persons; 　　b) the term ''company'' means any body corporate or any entity which is treated as a body corporate for tax purposes; 　　c) the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State; 　　d) the term ''international traffic'' means any transport by a ship or aircraft, except where such transport is solely between places in the other Contracting State; 　　e) the term ''competent authority'' means: 　　i) in the United States: the Secretary of the Treasury or his delegate, and 　　ii) in Italy, the Ministry of Finance; 　　f) the term ''United States'' means the United States of America but does not include Puerto Rico, the Virgin Islands, Guam, or any other United States possession or territory. When used in a geographical sense, the term "United States"' includes any area beyond the territorial waters of the United States which, in accordance with customary international law and the laws of the United States concerning the exploration and exploitation of natural resources, may be designated as an area within which the United States may exercise rights with respect to the seabed and sub-soil and natural resources; 　　g) the term ''Italy'' means the Republic of Italy and includes any area beyond the territorial waters of Italy which in accordance with customary international law and the laws of Italy concerning the exploration and exploitation of natural resources, may be designated as an area within which Italy may exercise rights with respect to the seabed and sub-soil and natural resources. 　　h) the term "nationals" means: 　　i) all individuals possessing the citizenship of a Contracting State; and 　　ii) all legal persons, partnerships, and associations deriving their status as such from the law in force in a Contracting State. 　　2. As regards the application of this Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that State concerning the taxes to which this Convention applies. ARTICLE 4 Resident 　　1. For purposes of this Convention, the term ''resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature, provided, however, that: 　　a) this term does not include any person who is liable to tax in that State in respect only of income from sources in that State; and 　　b) in the case of income derived or paid by a partnership, estate, or trust, this term applies only to the extent that the income derived by such partnership, estate, or trust is subject to tax in that State, either in its hands or in the hands of its partners or beneficiaries. 　　2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows: 　　a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests); 　　b) if the State in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode; 　　c) if he has an habitual abode in both States or in neither of them, he shall be deemed a resident of the State of which he is a national; 　　d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 　　3. Where by reason of the provisions of paragraph 1 a person other than an individual or a company is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavor to settle the question and to determine the mode of application of the Convention to such person. ARTICLE 5 Permanent Establishment 　　1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business in which the business of the enterprise is wholly or partly carried on. 　　2. The term "'permanent establishment" shall include especially: 　　a) a place of management; 　　b) a branch; 　　c) an office; 　　d) a factory; 　　e) a workshop; 　　f) a mine, quarry, or other place of extraction of natural resources; and 　　g) a building site or construction or assembly project which exists for more than twelve months. 　　3. The term "permanent establishment" shall be deemed not to include: 　　a) the use of facilities solely for the purpose of storage, display, or delivery of goods or merchandise belonging to the enterprise; 　　b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display, or delivery; 　　c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; 　　d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise; 　　e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research, or for similar activities which have a preparatory or auxiliary character, for the enterprise. 　　4. A person acting in a Contracting State on behalf of an enterprise of the other Contracting State - other than an agent of an independent status to whom paragraph 5 applies - shall be deemed to be a permanent establishment in the first-mentioned State if he has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise. 　　5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent, or any other agent of an independent status, where such persons are acting in the ordinary course of their business. 　　6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. ARTICLE 6 Income from Immovable Property 　　1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State. 　　2. The term "immovable property" ("real property") shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, and rights to which the provisions of general law respecting landed property apply. Usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources. and other natural resources shall also be considered immovable property; ships, boats, and aircraft shall not be regarded as immovable property. 　　3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property. 　　4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services. ARTICLE 7 Business Profits 　　1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. 　　2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment and other associated enterprises. 　　3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses that are attributable to the activities of the permanent establishment, including a reasonable allocation of executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere. 　　4. No profits shall be attributable to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. 　　5. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. 　　6. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article. ARTICLE 8 Shipping and Air Transport 　　1. Profits of an enterprise of a Contracting State from the operation in international traffic of ships or aircraft shall be taxable only in that State. 　　2. The provisions of paragraph 1 shall also apply to profits derived from the participation in a pool, a joint business, or an international operating agency.