GENERAL EFFECTIVE DATE UNDER ARTICLE 28: 1 JANUARY 1996 TABLE OF ARTICLES Article 1---------------------------------General Scope Article 2---------------------------------Taxes Covered Article 3---------------------------------General Definitions Article 4---------------------------------Residence Article 5---------------------------------Permanent Establishment Article 6---------------------------------Business Profits Article 7---------------------------------Associated Enterprises Article 8---------------------------------Shipping and Air Transport Article 9---------------------------------Income from Real Property Article 10--------------------------------Dividends Article 11--------------------------------Interest Article 12--------------------------------Royalties Article 13--------------------------------Gains Article 14--------------------------------Independent Personal Services Article 15--------------------------------Income from Employment Article 16--------------------------------Directors' Fees Article 17--------------------------------Government Service Article 18--------------------------------Pensions. Etc. Article 19--------------------------------Students. Trainees and Researchers Article 20--------------------------------Other Income Article 21--------------------------------Limitation on Benefits Article 22--------------------------------Capital Article 23--------------------------------Relief from Double Taxation Article 24--------------------------------Non-discrimination Article 25--------------------------------Mutual Agreement Procedure Article 26--------------------------------Exchange of Information Article 27--------------------------------Diplomatic Agents and Consular Officers Article 28--------------------------------Entry into Force Article 29--------------------------------Termination Letter of Submittal---------------------of 9 September, 1994 Letter of Transmittal-------------------of 19 September, 1994 Protocol ---------------------------------of 24 October, 1993 Technical Changes---------------------of 1 August, 1994 Notes of Exchange 1-------------------of 7 September, 1994 Memorandum of Understanding-----of 15 September, 1994 Notes of Exchange 2-------------------of 15 August, 1994 Related Notes----------------------------of 10 July, 1995 Letter of Submittal (Notes)------------of 14 July, 1995 Letter of Transmittal (Notes)----------of 3 August, 1995 The "Saving Clause"--------------------Paragraph 3 of Article 1 MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF KAZAKHSTAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL, TOGETHER WITH THE PROTOCOL AND THE TWO RELATED EXCHANGES OF NOTES, SIGNED AT ALMATY ON OCTOBER 24, 1993 LETTER OF SUBMITTAL DEPARTMENT OF STATE, Washington, DC, September 9, 1994. 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 Republic of Kazakhstan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, together with the Protocol and two related exchanges of notes, signed at Almaty on October 24, 1993. 　　The Convention would replace, with respect to Kazakhstan, the existing income tax convention between the United States and the Union of Soviet Socialist Republics, signed at Washington on June 20, 1973, and would modernize tax relations between the two countries. It is expected that the Convention will be an important impetus to Kazakhstan's emergence as a market economy by encouraging and facilitating greater U.S. private sector investment in Kazakhstan. The Convention will establish a framework that we hope will contribute to the expansion of economic, scientific, technical and cultural cooperation between the two countries. 　　Like other U.S. income tax conventions, this bilateral Convention provides rules specifying when various categories of income derived by a resident of one country may be taxed by the other country. The Convention also confirms that the residence country will avoid international double taxation by granting a foreign tax credit, and it provides for administrative cooperation to avoid double taxation and prevent fiscal evasion of taxes. 　　The Convention limits the tax that may be imposed by the country where the income arises (the "source" country) on dividends, branch profits, interest, royalties, and capital gains derived by residents of the other country. These limits are generally consistent with those in other recent U.S. tax treaties. 　　Business profits derived by a resident of one country may be taxed by the other country only to the extent that the profits are attributable to a permanent establishment in that other country, and then only on a net basis with deductions for business expenses. The Convention defines a permanent establishment to include, inter alia, offices, factories and mines. A provision of the Protocol (point 8) ensures the deductibility of wage and interest expense in calculating the Kazakhstan tax on profits. That provision is important to the availability of a U.S. foreign tax credit. 　　The Convention provides conditions under which each country may tax income derived by individual residents of the other country from independent personal services or as employees, as well as pension income benefits. Social security benefits may be taxed only by the country which pays them.Special relief is granted to visiting students, trainees, and researchers. The provision in the 1973 convention of a two-year exemption for visiting teachers and journalists is not retained. 　　The benefits of the Convention are limited to residents of the two countries meeting certain standards designed to prevent residents of third countries from inappropriately using the Convention.Similar standards are found in other recent U.S. income tax conventions. 　　The Convention assures that the residence country will avoid double taxation of income that arises in the other country and has been taxed there in accordance with the Convention. In addition the Convention includes standard administrative provisions that will permit the tax authorities of the two countries to cooperate to resolve issues of potential double taxation and to exchange information relevant to implementing the Convention and the domestic laws imposing the taxes covered by the Convention. The non-discrimination provisions go beyond the standard provisions in including assurances that citizens and residents of one country will not be subjected by the source country to tax treatment more burdensome than that to which citizens and residents of that country or any third state are subjected. 　　The Convention will enter into force on the date of the exchange of instruments of ratification. The provisions concerning taxes on dividends, interest, and royalties will take effect on the first day of the second month following the exchange of instruments of ratification, and provisions concerning other taxes will take effect for taxable years beginning on or after January 1 following the exchange of instruments of ratification. Upon entry into force of the Convention, the 1973 tax treaty will cease to have effect between the United States and Kazakhstan. However, a taxpayer may elect to apply the 1973 treaty in full for one additional taxable year if its provisions are more favorable. 　　A Protocol and two exchanges of notes accompany the Convention. The Protocol clarifies the operation of certain provisions and denies treaty benefits with respect to dividends and interest paid by certain U.S. investment vehicles. Most significantly, point 8 of the Protocol guarantees the deductibility of wage costs and interest that might not otherwise be deductible under Kazakhstan law. One exchange of notes confirms that Kazakhstan and the United States share the same understanding of certain provisions of the Convention, including in particular, and understanding that the countries will exchange information under Article 26 irrespective of internal laws on bank secrecy. The other exchange of notes makes technical corrections to the Convention. 　　A technical memorandum explaining in detail the provisions of the Convention will be prepared by the Department of the Treasury and will be submitted separately to the Senate Committee on Foreign Relations. 　　The Department of the Treasury and the Department of State cooperated in the negotiation of the Convention. It has the full approval of both Departments. Respectfully submitted, WARREN CHRISTOPHER LETTER OF TRANSMITTAL THE WHITE HOUSE, September 19, 1994. To the Senate of the United States: 　　I transmit herewith for Senate advice and consent to ratification the Convention Between the Government of the United States of America and the Government of the Republic of Kazakhstan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, together with the Protocol and the two related exchanges of notes, signed at Almaty on October 24, 1993. Also transmitted for the information of the Senate is the report of the Department of State with respect to the Convention. 　　The Convention replaces, with respect to Kazakhstan, the 1973 income tax convention between the United States of America and the Union of Soviet Socialist Republics. It will modernize tax relations between the two countries and will facilitate greater private sector U.S. investment in Kazakhstan. 　　I recommend that the Senate give early and favorable consideration to the Convention, Protocol,　and the two related exchanges of notes and give its advice and consent to ratification. 　　　　　　　　　　　　　　　　　　　　　　　　　　WILLIAM J. CLINTON.