Convention, with Protocol, Signed at Washington on September 18, 1992; Transmitted by the President of the United States of America to the Senate on May 20, 1993 　　(Treaty Doc. No. 103-7, 103d Cong., 1st Sess.); 　　Reported favorably by the Senate Committee on Foreign Relations November 18, 1993 (S. Ex. Rept. No. 103-20, 103d Cong., 1st Sess.); 　　Advice and Consent to Ratification by the Senate November 20, 1993, Given Subject to the Following Understandings: 　　(a) That the phrase "both Contracting States shall apply that lower rate" in paragraph 8 (b) of the Protocol is understood to mean that both Contracting States agree to promptly amend the Convention to incorporate that lower rate; and 　　(b) That, while Mexico imposes no excise tax on insurance premiums paid to foreign insurers and has no immediate plans to do so, should Mexico enact such a tax in the future, Mexico will waive such tax on insurance premiums paid to insurers resident in the United States. 　　Ratifications Exchanged December 28, 1993, Confirming the Two Understandings Referred to Above; Entered into Force December 28, 1993; Effective January 1, 1994, for Most Provisions. GENERAL EFFECTIVE DATE UNDER ARTICLE 29: 1 JANUARY 1994 TABLE OF ARTICLES Article 1-----------------------------General Scope Article 2-----------------------------Taxes Covered by the Convention Article 3-----------------------------General Definitions: Article 4-----------------------------Residence Article 5-----------------------------Permanent Establishment Article 6-----------------------------Income from Immovable Property (Real Property) Article 7-----------------------------Business Profits Article 8-----------------------------Shipping and Air Transport Article 9-----------------------------Associated Enterprises Article 10----------------------------Dividends Article 11----------------------------Interest Article 11A--------------------------Branch Tax Article 12----------------------------Royalties Article 13----------------------------Capital Gains Article 14---------------------------Independent Personal Services Article 15-----------------------------Dependent Personal Services Article 16----------------------------Directors Fees Article 17----------------------------Limitation on Benefits Article 18----------------------------Artistes and Athletes Article 19----------------------------Pensions, Annuities, Alimony, and Child Support Article 20----------------------------Government Service Article 21----------------------------Students Article 22----------------------------Exempt Organizations Article 23----------------------------Other Income Article 24----------------------------Relief from Double Taxation Article 25----------------------------Non-Discrimination Article 26----------------------------Mutual Agreement Procedure Article 27----------------------------Exchange of Information Article 28----------------------------Diplomatic Agents and Consular Officers Article 29----------------------------Entry into Force Article 30----------------------------Termination Letter of Submittal-----------------of 11 May, 1993 Letter of Transmittal---------------of 20 May, 1993 Protocol 1----------------------------of 18 September, 1992 Protocol 2----------------------------of 8 September, 1994 Letter of Submittal (Protocol 2)--of 9 September, 1994 Letter of Transmittal (Protocol 2)-of 19 September, 1994 The "Saving Clause"----------------Paragraph 3 of Article 1 MESSAGE FROM THE PRESIDENT OF THE UNITED STSTAES TRANSMITTING 　　THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE UNITES MEXICAN STATES FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, TOGETHER WITH A RELATED PROTOCOL, SIGNED AT WASHINGTON ON SEPTEMBER 18, 1992 LETTER OF SUBMITTAL DEPARTMENT OF STATE, Washington, May 11, 1993. 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 United Mexican States for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related Protocol, signed at Washington on September 18, 1992. 　　The Convention contains provisions governing maximum rates of tax at source on payments of dividends, interest and royalties. These provisions are generally favorable for U.S. investors in Mexico because they provide certainty and in most cases substantially reduce the tax cost of investing there. 　　Business profits in general are taxable in the other country only to the extent attributable to a permanent establishment there, and then only on a net basis with deductions for business expenses. 　　Where the Convention requires Mexico to exempt or reduce its tax on Mexican income of a U.S. resident, Mexico also has agreed to provide relief from its assets tax when to impose the assets tax would negate the benefits of the Convention. 　　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 and social security benefits. Special relief is granted to visiting students, trainees, and researchers. Items of income not specifically dealt with may be taxed only in the country of residence. 　　The Convention provides that Mexico and the United States will recognize each other's public charities on a reciprocal basis, with respect to both exempting the organizations from tax and to allowing tax deductions for contributions to such organizations, subject in the latter case to limitations to the income arising in the other country. 　　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 United States income tax conventions. The Convention seeks to assure that the country of residence will avoid double taxation of income which arises in the other country and has been taxed there in accordance with the treaty's provisions. 　　In addition, the Convention includes standard administrative provisions which 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 Convention also includes non-discrimination provisions standards to treaties to avoid double taxation which apply to all taxes at all levels of government. 　　The Convention will enter into force on the date of the last notification that the constitutional requirements of each country have been satisfied. The provisions concerning taxes on dividends, interest and royalties will take effect on the first day of the second month following the date of entry into force if that occurs during the first six months of the calendar year, and otherwise, on the first day of the following January. Provisions concerning other taxes will take effect for taxable years beginning on or after January 1 following the date of entry into force. 　　A Protocol accompanies the Convention and forms an integral part of it. It clarifies the operation of certain provisions and denies treaty benefits with respect to dividends and interest paid by certain United States investment companies. 　　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. Enclosures: As stated. LETTER OF TRANSMITTAL THE WHITE HOUSE, May 20, 1993. 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 United Mexican States for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related Protocol, signed at Washington on September 18, 1992. Also transmitted for the information of the Senate is the report of the Department of State with respect to the Convention. 　　The income tax Convention, the first between the two countries, is intended to reduce the distortions (double taxation or excessive taxation) that can arise when two countries tax the same income, thereby enabling United States firms to compete on a more equitable basis in Mexico and enhancing the attractiveness of the United States to Mexican investors. The Convention is generally based on the Model Treaty of the Organization for Economic Cooperation and Development and recent income tax conventions of both parties. 　　I recommend that the Senate give early and favorable consideration to the Convention and related Protocol and give its advice and consent to ratification. WILLIAM J. CLINTON.