Convention Signed at Rabat August 1, 1977; 　　Ratification Advised by the Senate of the United States of America November 18, 1981, 　　Ratified by the President of the United States of America December 4, 1981; 　　Ratified by the Kingdom of Morocco; 　　Ratifications Exchanged at Washington December 30, 1981; 　　Proclaimed by the President of the United States of America January 27, 1982; Entered into Force December 30, 1981. GENERAL EFFECTIVE DATE UNDER ARTICLE 28: 1 JANUARY 1981 TABLE OF ARTICLES Article 1---------------------------------Taxes Covered Article 2---------------------------------General Definitions Article 3---------------------------------Fiscal Residence Article 4---------------------------------Permanent Establishment Article 5---------------------------------Source of Income Article 6---------------------------------Income from Real Property Article 7---------------------------------Business Profits Article 8---------------------------------Shipping and Air Transport Article 9---------------------------------Related Persons Article 10--------------------------------Dividends Article 11--------------------------------Interest Article 12--------------------------------Royalties Article 13--------------------------------Capital Gains Article 14--------------------------------Independent Personal Services Article 15--------------------------------Dependent Personal Services Article 16--------------------------------Artists and Athletes Article 17--------------------------------Governmental Functions Article 18--------------------------------Students and Trainees Article 19--------------------------------Private Pensions and Annuities Article 20--------------------------------General Rules of Taxation Article 21--------------------------------Relief from Double Taxation Article 22--------------------------------Nondiscrimination Article 23--------------------------------Diplomatic and Consular Officers Article 24--------------------------------Investment or Holding Companies Article 25--------------------------------Mutual Agreement Procedure Article 26--------------------------------Exchange of Information Article 27--------------------------------Extension to Territories Article 28--------------------------------Entry into Force Article 29--------------------------------Termination Letter of Submittal----------------------of 25 April, 1978 Letter of Transmittal--------------------of 2 May, 1978 Notes of Exchange---------------------of 1 August, 1977 Notes of Exchange (Agreement)-----of 25 October, 1979 Interpretive Note-----------------------of 17 April, 1981 The "Saving Clause"-------------------Paragraph 3 of Article 20 　　　　　　　　　　　　　　　MESSAGE 　　　　　　　　　　　　　　　FROM 　　　　　　　　THE PRESIDENT OF THE UNITED STATES 　　　　　　　　　　　　　TRANSMITTING 　　THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE KINGDOM OF MOROCCO FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME, SIGNED AT RABAT AUGUST 1, 1977, TOGETHER WITH A RELATED EXCHANGE OF NOTES LETTER OF SUBMITTAL DEPARTMENT OF STATE, Washington, D.C., April 25, 1978 THE PRESIDENT, The White House. 　　SIR: 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 United States and the Kingdom of Morocco for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Rabat August 1, 1977, together with a related exchange of notes. 　　The Convention with Morocco is the first such convention concluded by the United States directly with a developing country in Africa. It is similar in its essential respects to other treaties entered into by the United States in recent years and to the Model Draft Treaty developed by the Fiscal Committee of the Organization for Economic Cooperation and Development with some modifications to accommodate the special needs of Morocco as a developing country. 　　The Convention provides rules with respect to the taxation of business income, rentals of real property, dividends, interest, royalties, and personal service income, a guarantee of nondiscrimination and provisions for administrative cooperation, which for the most part are common to other U.S. income tax treaties. 　　The Convention provides reciprocal maximum rates of tax at source of 15 percent on dividends to portfolio investors, 10 percent on dividends to parent companies, 15 percent on interest (except interest paid to the other Government or one of its instrumentalities, which is exempt from tax at source), and 10 percent on royalties including film rentals. As a developing country, Morocco wanted a broad definition of royalties which would also include fees for technical services and equipment rentals. The Treaty provides that Morocco may impose the 10 percent tax on fees for technical studies performed for and paid for by the Government, but not in other cases. Equipment rentals may only be taxed to the extent that profit is attributable to maintaining substantial equipment for rental in the country for more than six months. 　　One unusual feature of the Moroccan Convention is that it provides a foreign tax credit for compulsory investment in Moroccan equipment bonds subject to certain conditions. However when the bonds are redeemed, the taxpayer must increase his taxable income accordingly. 　　The Convention does not contain the usual provision whereby Morocco would be asked to collect the additional U.S. withholding tax if residents of third countries who are not entitled to Treaty benefits use a Moroccan address and therefore get the reduced Treaty rates on dividends, interest and royalties. The Moroccans regarded this as a U.S. problem and could not agree to commit their limited administrative resources to collecting tax on behalf of the United States when the United States cannot agree in other situations to collect tax on behalf of Morocco. 　　The Convention and exchange of notes will enter into force on the exchange of instruments of ratification and will apply to withholding taxes on the first day of the following month and to other taxes for taxable years beginning on or after January 1, 1978. The Convention will remain in effect indefinitely unless terminated by either State by diplomatic notice given prior to June 30th of any year beginning with the fifth year following the year of ratification. In that event, it will cease to apply with respect to income of years beginning on or after the January 1 next following termination. 　　The exchange of notes confirms the United States commitment to resume discussions on the granting of a "tax-sparing" credit against United States tax for United States citizens and residents if the United States Senate should reconsider the merit of such a provision. 　　A technical memorandum explaining in detail the provisions and effect of the Convention is being prepared by the Department of the Treasury and will be submitted to the Senate Foreign Relations Committee for consideration in connection with the Convention. 　　The Department of the Treasury, with the cooperation of the Department of State, was primarily responsible for the negotiation of this Convention. It has the approval of both Departments. Respectfully submitted, CYRUS VANCE. LETTER OF TRANSMITTAL THE WHITE HOUSE, May 2, 1978. 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 Kingdom of Morocco for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Rabat on August 1, 1977. 　　There is no convention on this subject presently in force between the United States and Morocco. 　　The Convention follows generally the form and context of most conventions of this type recently concluded by the United States. However, it contains some modifications of the standard provisions to accommodate the special need of Morocco as a developing country to minimize any revenue loss. Its primary purpose is to identify clearly each country's interest in avoiding double taxation and preventing the illegal evasion of taxation. 　　For the information of the Senate, I also transmit the report of the Department of State on to the Convention. 　　This Convention would promote closer economic cooperation and more active trade between the United States and Morocco by assuring investors about their tax liability, reducing the foreign tax in many cases and providing for cooperation between the two countries to avoid double taxation. 　　I urge the Senate to act quickly on this Convention and to give its advice and consent to ratification. JIMMY CARTER. BY THE PRESIDENT OF THE UNITED STATES OF AMERICA A PROCLAMATION CONSIDERING THAT: 　　The Convention between the Government of the United States of America and the Government of the Kingdom of Morocco for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related exchange of notes, was signed at Rabat on August 1, 1977, the texts of which are hereto annexed; 　　The Senate of the United States of America by its resolution of November 18, 1981, twothirds of the Senators present concurring therein, gave its advice and consent to ratification of the Convention and related exchange of notes, subject to the following: 　　(1) reservation that foreign tax credits shall not be allowed after January 1, 1988, for loans which U.S. taxpayers are required to make to the Government of the Kingdom of Morocco. 　　(2) understanding that appropriate Congressional committees and the General Accounting Office shall be afforded access to the information exchanged under this treaty where such access is necessary to carry out their oversight responsibilities, subject only to the limitations and procedures of the Internal Revenue Code. 　　The Convention, together with a related exchange of notes, was ratified, subject to the aforesaid reservation and understanding by the President of the United States of America on December 4, 1981, in pursuance of the advice and consent of the Senate, and was ratified on the part of the Government of the Kingdom of Morocco; 　　The instruments of ratification of the Convention and related exchange of notes were exchanged at Washington on December 30, 1981, and accordingly the Convention entered into force on December 30, 1981, effective as specified in Article 28 of the Convention; 　　NOW, THEREFORE, I, Ronald Reagan, President of the United States of America, proclaim and make public the Convention and related exchange of notes to the end that they be observed and fulfilled with good faith on and after December 30, 1981, 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 twenty-seventh day of January in the year of our Lord one thousand nine hundred eighty-two and of the Independence of the United States of America the two hundred sixth. By the President: RONALD REAGAN WALTER J. STOESSEL, JR. Acting Secretary of State