CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND THE RUSSIAN FEDERATION FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL 　　The United States of America and the Russian Federation, confirming their desire to develop and strengthen the economic, scientific, technical and cultural cooperation between both States, and desiring to conclude a convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital, have agreed on the following: 　　　　　　　　　　　　　　　ARTICLE 1 　　　　　　　　　　　　　　General Scope 　　1. This Convention shall apply to persons who are residents of one or both of the Contracting States and to other persons as specifically provided in the Convention. 　　2. The Convention shall not restrict in any manner any exclusion, exemption, deduction, credit, or　other allowance now or hereafter accorded: 　　a) by the laws of either contracting State, or 　　b) by any other agreement between the Contracting States. 　　3. Notwithstanding any provision of the Convention except paragraph 4, a Contracting State may tax, in accordance with its domestic law, residents (as determined under Article 4 (Residence)) and citizens or former citizens of that State. 　　4. The following benefits shall be conferred by a Contracting State notwithstanding the provisions of paragraph 3: 　　a) under paragraph 2 of Article 7 (Adjustments to Income in Cases Where Persons Participate, Directly or Indirectly, in the Management, Control or Capital of Other Persons), paragraph b) of Article 17 (Pensions) and Articles 22 (Relief from Double Taxation), 23 (Nondiscrimination) and 24 (Mutual Agreement Procedure); and 　　b) under Articles 16 (Government Service), 18 (Students, Trainees and Researchers), and 26 (Members of Diplomatic Missions and Consular Officers) for individuals who are neither citizens of that State nor, in the case of the United States of America, individuals having immigrant status therein. 　　　　　　　　　　　　　ARTICLE 2 　　　　　　　　　　　　　Taxes Covered 　　1. The taxes to which this Convention shall apply are: 　　a) in the United States of America: the federal income taxes imposed by the Internal Revenue Code (but excluding the accumulated earnings tax, the personal holding company tax, and social security taxes) and the excise taxes imposed with respect to the investment income of private foundations (hereafter referred to as United States tax). 　　b) in the Russian Federation: taxes on profits and income provided by the laws "On Taxes on Profits from Enterprises and Organizations," "On Taxation of Income of Banks," "On Taxation of Income from Insurance Activities," and "On the Income Tax on Individuals" (hereafter referred to as Russian tax). 　　2. The Convention shall apply also to any substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes, including taxes which are substantially similar to those currently imposed by one Contracting State but not by the other Contracting State and which are subsequently imposed by the other State. 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 of any official published material concerning the application of the Convention, including explanations, regulations, rulings, or judicial decisions. 　　3. The Convention shall also apply to any tax on capital described in subparagraph g) of paragraph 1 of Article 3 (General Definitions) which is imposed by either Contracting State as of the date of signature of the Convention or thereafter, but only if such capital tax is provided by federal legislation. 　　　　　　　　　　　　　　ARTICLE 3 　　　　　　　　　　　　General Definitions 　　1. For the purposes of this Convention, unless the context otherwise requires: 　　a) the term "Contracting State" means the United States of America (the United States) or the Russian Federation (Russia) as the context requires; 　　b) 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 the territorial sea, and also the economic zone and continental shelf in which the United States, for certain purposes, may exercise sovereign rights and jurisdiction in accordance with international law and in which the tax legislation of the United States is in force; 　　c) the term "Russia" means the Russian Federation. When used in a geographical sense, the term "Russian Federation" or "Russia" includes the territorial sea, and also the economic zone and continental shelf in which the Russian Federation, for certain purposes, may exercise sovereign rights and jurisdiction in accordance with international law and in which the tax legislation of the Russian Federation is in force; 　　d) the term "person" means an individual, an estate, a trust, a partnership, a company and any other body of persons; 　　e) the term "company" means any entity which is treated as a body corporate for tax purposes. In the case of Russia this term means a joint stock company, a limited liability company or any other legal entity or other organization which is liable to a tax on profits; 　　f) the term "international traffic" means any transport by a ship or aircraft, except when such transport is solely between places in one of the Contracting States; 　　g) the term "capital" means movable and real property, and includes (but is not limited to) cash, stock or other evidences of ownership rights, notes, bonds or other evidences of indebtedness, and patents, trademarks, copyrights or other like right or property; 　　h) the term "competent authority" means: 　　(i) in the United States: the Secretary of the Treasury or his authorized representative; and 　　(ii) in Russia: the Ministry of Finance of the Russian Federation or its authorized representative. 　　2. As regards the application of the Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires or the competent authorities agree to a common meaning pursuant to the provisions of Article 24 (Mutual Agreement Procedure), have the meaning which it has under the laws of that State concerning the taxes to which this Convention applies. 　　　　　　　　　　　　ARTICLE 4 　　　　　　　　　　　　Residence 　　1. For the 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, citizenship, place of incorporation, or any other criterion of a similar nature. However, 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 or capital situated therein. In the case of income derived by a partnership, trust, or estate, residence is determined in accordance with the residence of the person liable to tax with respect to such income. 　　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 does not have 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 to be a resident of the State of which he is a citizen; 　　d) if each State considers him as its citizen or if he is a citizen 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 company is a resident of both Contracting States, the competent authorities of the Contracting States shall endeavor to settle the question by mutual agreement, but if the competent authorities are unable to reach such an agreement, the company shall be treated as a resident of neither Contracting State for the purposes of deriving benefits under this Convention. 　　4. 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 settle the question by mutual agreement and 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 through which a resident of a Contracting State, whether or not a legal entity, carries on business activities in the other Contracting State. 　　2. The term "permanent establishment" includes especially: 　　a) a place of management; 　　b) a branch; 　　c) an office; 　　d) a factory; 　　e) a workshop; and 　　f) a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources. 　　3. A building site or construction, installation or assembly project, or an installation or drilling rig or ship used for the exploration or exploitation of natural resources, constitutes a permanent establishment only if it lasts more than 18 months. 　　4. Notwithstanding the preceding provisions of this Article, the following kinds of activity of a person who is a resident of one Contracting State will not be treated as carried on in the other Contracting State through a permanent establishment: 　　a) the use of facilities solely for the purpose of storage, display, or delivery of goods or merchandise belonging to this person; 　　b) the maintenance of a stock of goods or merchandise belonging to this person solely for the purpose of storage, display, or delivery; 　　c) the maintenance of a stock of goods or merchandise belonging to this person solely for the purpose of processing by another person; 　　d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for this person; 　　e) the maintenance of a fixed place of business solely for the purpose of carrying on, for this person, any other activity of a preparatory or auxiliary character. 　　f) the maintenance of a fixed place of business by this person solely for the purpose of facilitating the conclusion of, or for the mere signing of, contracts in the name of this person concerning loans or the delivery of goods or merchandise or technical services; 　　g) the maintenance of a fixed place of business solely for any combination of the activities mentioned in subparagraphs a) to f). 　　5. Notwithstanding the provisions of paragraphs 1 and 2, where a person who is a resident of a Contracting State carries on activities in the other Contracting State through an agent, that person shall be deemed to have a permanent establishment in that other State in respect of any activities which the agent undertakes for that person, if the agent meets each of the following conditions: 　　a) he has an authority to conclude contracts in that other State in the name of that person; 　　b) he habitually exercises that authority; 　　c) he is not an agent of an independent status to whom the provisions of paragraph 6 apply; and 　　d) his activities are not limited to those mentioned in paragraph 4. 　　6. A resident of 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, provided that such persons are acting in the ordinary course of their business. 　　7. 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 　　　　　　　　　　　　　Business Profits 　　1. The business profits of a resident of a Contracting State shall be taxable only in that State unless the resident carries on or has carried on business in the other Contracting State through a permanent establishment situated therein. If the resident carries on or has carried on business as aforesaid, the business profits of the resident may be taxed in the other State but only so much of them as is attributable to the assets or activity of that permanent establishment. 　　2. Subject to the provisions of paragraph 3, where a resident of a Contracting State carries on or has carried 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 business profits which it might be expected to make if it were a distinct and independent person carrying on the same or similar activities under the same or similar conditions. 　　3. In determining the business profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment. There shall be allowed a reasonable allocation, between a resident of a Contracting State and its permanent establishment situated in the other Contracting State, of properly documented expenses. Such allocable expenses include executive and general administrative expenses, research and development expenses, interest, and charges for management, consultancy, or technical assistance, whether incurred in the State in which the permanent establishment is situated or elsewhere. The business profits attributed to a permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary. 　　4. No business profits shall be attributed to a permanent establishment of a person who is a resident of one Contracting State by reason of the mere purchase by the permanent establishment of goods or merchandise for that person. 　　5. For purposes of this Article, the term "business profits" includes, for example, profits from manufacturing, mercantile, agricultural, forestry, fishing, transportation, communication, or extractive activities, from the rental of tangible movable property, and from the furnishing of services of another person. It does not include income received by an individual for his performance of personal services (either as an employee or in an independent capacity). Income of an individual from the performance of services as an employee is dealt with in Article 14 (Income from Employment). Income of an individual from the performance of services in an independent capacity is dealt with in Article 13 (Independent Personal Services). 　　6. Where business profits include items of income which are dealt with separately in other Articles of the Convention, then the provisions of those Articles shall not be affected by the provisions of this Article. 　　　　　　　　　　　　　　　ARTICLE 7 　　　　　　Adjustments to Income in Cases Where Persons 　　　　　　Participate, Directly or Indirectly, in the 　　　　　　Management, Control or Capital of Other Persons 　　1. Where: 　　a) a person which is a resident of a Contracting State participates directly or indirectly in the management, control or capital of a person which is a resident of the other Contracting State; or 　　b) the same persons participate directly or indirectly in the management, control or capital of a resident of a Contracting State and any other person; and in either case conditions are made or imposed between the two persons in their commercial or financial relations which differ from those which would be made between independent persons, then any income which would have accrued to one of the persons, but by reason of those conditions has not so accrued, may be included in the income of that person and taxed accordingly. 　　2. Where, in accordance with the provisions of paragraph 1, income which has been included by a Contracting State in the income of a person is later also included by the other Contracting State in the income of another person, then the first State shall make a correlative adjustment to the amount of tax charged to the first person on such income. In determining this adjustment, due regard shall be paid to the other provisions of this Convention, and the competent authorities of the Contracting States shall consult each other as necessary. 　　3. The provisions of paragraph 1 shall not limit either Contracting State in applying its domestic law to make adjustments to income, deductions, credits, or allowances between persons, whether or not residents of a Contracting State, when necessary to prevent evasion of taxes or clearly to reflect the income of any such persons. 　　　　　　　　　　　　　　　ARTICLE 8 　　　　　　　　　　　　International Transport 　　1. Income of a resident of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State. 　　2. Income of a resident of a Contracting State from the following activities shall be taxable only in that State: 　　a) income from the rental of ships or aircraft operated in international traffic by the lessee; 　　b) income from the rental of ships and aircraft, whether or not operated in international traffic, if such rental activity is incidental to the operation of ships or aircraft in international traffic by the lessor; and 　　c) income (including demurrage) from the use, or rental for use, of containers in international traffic (including trailers, barges, and related equipment for the transport of containers). 　　3. The provisions of paragraphs 1 and 2 shall also apply to income from participation in a pool, a joint business, or an international transportation agency. 　　　　　　　　　　　　　　　　　ARTICLE 9 　　　　　　　　　　　　Income from Real Property 　　1. Income derived by a resident of a Contracting State from real property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State. 　　2. For purposes of this Convention, the term "real property" includes any interest owned or held in tenancy by any individual or any legal entity in land, unsevered products of land as well as any fixture built on that land (buildings, structures, etc.) and other property considered real property under the law of the Contracting State in which the property in question is situated. ships, boats and aircraft shall not be regarded as real property. 　　3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of real property. 　　4. A resident of a Contracting State who is liable to tax in the other Contracting State on income from real property situated in that other State may elect, subject to the procedures of the domestic law of that other State, to compute the tax on such income on a net basis as if such income were attributable to a permanent establishment in that other State. Any such election shall be binding for the taxable year of the election and all subsequent taxable years unless revoked pursuant to the procedures under the domestic law of the Contracting State in which the property is situated. 　　　　　　　　　　　　　ARTICLE 10 　　　　　　　　　　　　　Dividends 　　1. Dividends that are paid by a company which is a resident of a Contracting State and that are beneficially owned by a resident of the other Contracting State may be taxed in that other State. 　　2. However, such dividends may also be taxed in the first Contracting State, and according to the laws of that State, but the tax so charged shall not exceed: 　　a) 5 percent of the gross amount of the dividends if the beneficial owner is a company which owns at least 10 percent of the voting stock (or, in the case of Russia, if there is no voting stock, at least 10 percent of the statutory capital) of the company paying the dividends; and 　　b) 10 percent of the gross amount of the dividends in all other cases. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. 　　3. The term "dividends" as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. The term "dividends" also includes income from arrangements, including debt obligations, carrying the right to participate in profits, to the extent so characterized under the law of the Contracting State in which the income arises. In the case of Russia, this term includes income transmitted abroad to the foreign participants of an enterprise with foreign investments created under the laws of the Russian Federation. 　　4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on or has carried on business in the other Contracting State, of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs or has performed in that other State independent personal services from a fixed base situated therein, and the dividends are attributable to such permanent establishment or fixed base. In such case the provisions of Article 6 (Business Profits) or Article 13 (Independent Personal Services), as the case may be, shall apply. 　　5. A company which is a resident of a Contracting State and which has a permanent establishment in the other Contracting State or which is subject to tax on a net basis in that other State under Article 9 (Income from Real Property) or paragraph 3 of Article 19 (Other Income) may be subject in that other State to a tax in addition to the tax on profits. Such tax, however, may not exceed 5 percent of the portion of the profits of the company subject to tax in the other Contracting State which represents the "dividend equivalent amount" of such profits.