Protocol Amending the Convention… US and France... Taxes on Income and Capital, August 12, 2004

PROTOCOL

AMENDING THE CONVENTION BETWEEN

THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND

THE GOVERNMENT OF THE FRENCH REPUBLIC

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME AND CAPITAL,

SIGNED AT PARIS ON AUGUST 31, 1994

The Government of the United States of America and the Government of the French

Republic, desiring to amend the Convention Between the Government of the United States of

America and the Government of the French Republic for the Avoidance of Double Taxation

and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, signed at

Paris on August 31, 1994, have agreed as follows:

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ARTICLE I

1. Subparagraph (b) (iii) of paragraph 2 of Article 4 (Resident) of the Convention shall be
deleted and replaced by the following:
“(iii) in the case of the United States, a regulated investment company, a real
estate investment trust, and a real estate mortgage investment conduit; in the case
of France, a “société d’investissement à capital variable”; and any similar
investment entities agreed upon by the competent authorities of both Contracting
States;”.
2. Subparagraph (b) (iv) of paragraph 2 of Article 4 (Resident) of the Convention shall be
deleted and replaced, and new subparagraphs (b) (v) and (vi) of paragraph 2 of Article 4 are
added as follows:
“iv) a partnership or similar pass-through entity, an estate, and a trust (other
than one referred to in subparagraph (ii) or (iii) above), whether or not organized
or managed in one of the Contracting States, but only to the extent that the income
derived by such partnership, similar entity, estate, or trust is treated for taxation
purposes in that Contracting State as the income of a resident, either in the hands
of such partnership, entity, estate or trust, or in the hands of its partners,
beneficiaries or grantors, it being understood that a “société de personnes”, a
“fonds commun de placement”, a “groupement d’intérêt économique” (economic
interest group), or a “groupement européen d’intérêt économique” (European
economic interest group) that is constituted in France and has its place of effective
management in France and that is not subject to company tax therein shall be
treated as a partnership for purposes of United States tax benefits under this
Convention, provided that a partnership or similar pass-through entity, an estate
and a trust which is not organized or managed in one of the Contracting States
shall be entitled to the benefits of this convention with respect to the income or
gains derived by such entity arising in France if the following additional
conditions are satisfied:
(aa) the absence of contrary provisions in a double taxation convention

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between a Contracting State and the third State;
(bb) the fact that the partnership or similar pass-through entity, estate or trust
is not treated as a body corporate for tax purposes or otherwise liable to
tax on French source income either in its own hands or in the hands of its
partners, beneficiaries or grantors under the tax law of the third State;
(cc) a partner's, beneficiary’s, or grantor’s share of the income or gain of the
partnership or similar pass-through entity, estate or trust is taxed in the
same manner, including the nature or source of that income or gain and
the time when that income or gain is taxed, as would have been the case
if the income or gain had been derived directly, except to the extent
resulting from any difference in accounting methods, accounting periods,
or other similar difference; and
(dd) it is possible to exchange information concerning the partnership or
similar pass-through entity, estate or trust or partners, beneficiaries or
grantors under the terms of a double taxation convention between the
Contracting State in which the income or gain arises and the third State;
v) a partnership or similar pass-through entity, an estate, and a trust (other than
one referred to in subparagraph (ii) or (iii) above), which is organized in the
United States, shall be treated as a resident of the United States to the extent
provided in subparagraph (iv) above, and as a resident of France to the extent that
the income derived by such partnership, similar pass-through entity, estate or trust
arises in France and corresponds to the share of the profits or losses of such entity
which benefits a resident of France;
vi) it is understood that, for the purposes of the subparagraphs (iv) and (v)
above, the income derived by a partnership or similar pass-through entity, an
estate and a trust (other than one referred to in subparagraph (ii) or (iii) above), is
considered to be treated for taxation purposes in a Contracting State as the income
of a resident to the extent of this income which benefits a partner, beneficiary, or
grantor that is a pension trust, an other organization or a not-for-profit

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organization referred to in subparagraph (ii) above, notwithstanding that all or part
of this income of such trust, other organization, or not-for-profit organization is
exempt from income taxation in that State.”
ARTICLE II
The last sentence in the final paragraph of paragraph 2 of Article 10 (Dividends) of the
Convention shall be deleted and replaced by the following new sentence:
“In the case of dividends paid by a United States real estate investment trust, the
provisions of subparagraph (b) shall apply only if:
(i) the beneficial owner of the dividends is an individual holding an interest
of not more than 10 percent in such real estate investment trust;
(ii) the dividends are paid with respect to a class of stock that is publicly
traded and the beneficial owner of the dividends is a person holding an
interest of not more than 5 percent of any class of the real estate
investment trust’s stock; or
(iii) the beneficial owner of the dividends is a person holding an interest of
not more than 10 percent in the real estate investment trust and the value
of no single interest in the real estate investment trust’s real property
exceeds 10 percent of the real estate investment trust’s total interests in
real property.”
ARTICLE III
Article 18 (Pensions) of the Convention shall be deleted and replaced by the following:
“ARTICLE 18 - Pensions
1. Payments under the social security legislation or similar legislation of a Contracting
State to a resident of the other Contracting State, and pension distributions and other similar
remuneration arising in one of the Contracting States in consideration of past employment paid
to a resident of the other contracting State, whether paid periodically or in a lump sum, shall be
taxable only in the first-mentioned State. For purposes of this paragraph, pension distributions

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and other similar remuneration shall be deemed to arise in a Contracting State only if paid by a
pension or other retirement arrangement established in that State.
2. (a) Where an individual renders personal services and is a resident of a Contracting
State but not a national of that State, and that individual is a participant in a pension
or other retirement arrangement that is established, maintained, and recognized for tax
purposes in the other Contracting State:
(i) contributions paid by, or on behalf of, such individual to such pension or
retirement arrangement shall be deductible from the income taxable in the
first-mentioned State as if the contributions had been paid to a pension or
other retirement arrangement that is established, maintained, and
recognized for tax purposes in that State, subject to the same monetary
limits provided for by the law of that State; and
(ii) in the case of dependent personal services, any benefits accrued under
such arrangement or payments made to such an arrangement by or on
behalf of the individual’s employer shall be excluded from the
individual’s income taxable in the first-mentioned State and shall be
allowed as a deduction in computing the profits of the employer in that
State as if the contributions had been paid to a pension or other
retirement arrangement that is established, maintained, and recognized
for tax purposes in that State, subject to the same monetary limits
provided for by the law of that State.
(b) The provisions of this paragraph shall not apply unless:
(i) contributions by or on behalf of the individual to the pension or other
retirement arrangement (or to another similar arrangement for which this
arrangement was substituted) were made before he arrived in the first-
mentioned State; and
(ii) the competent authority of the first-mentioned State agrees that the
arrangement generally corresponds to a pension or other retirement
arrangement established, maintained, and recognized for tax purposes in

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the first-mentioned State.
(c) For purposes of this paragraph:
(i) in the case of the United States, it is understood that a French pension or
other retirement arrangement organized under the French social security
legislation shall be considered to generally correspond to a pension or
other retirement arrangement established, maintained, and recognized for
tax purposes in the United States; and
(ii) in the case of France, it is understood that the social security or similar
legislation of the United States, qualified plans under section 401(a) of
the Internal Revenue Code, individual retirement plans (including
individual retirement plans that are part of a simplified employee pension
plan that satisfies section 408(k), individual retirement accounts,
individual retirement annuities, and section 408(p) accounts), section
403(a) qualified annuity plans, and section 403(b) plans shall be
considered to generally correspond to a pension or other retirement
arrangement established, maintained, and recognized for tax purposes in
France; and
(iii) a pension or other retirement arrangement is recognized for tax purposes
in a Contracting State if the contributions to the arrangement would
qualify for tax relief in that State.”
ARTICLE IV
1. Paragraphs 2 and 3 of Article 19 (Public Remuneration) of the Convention shall be
deleted.
2. A new paragraph 2 of Article 19 (Public Remuneration) of the Convention shall be
added as follows:
“2. The provisions of Articles 14 (Independent Personal Services), 15 (Dependent
Personal Services), 16 (Directors’ Fees), and 17 (Artistes and Sportsmen) shall apply to
remuneration paid in respect of services rendered in connection with a business carried on

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by a Contracting State, a political subdivision (in the case of the United States) or local
authority thereof, or an agency or instrumentality of that State, subdivision, or authority.”
ARTICLE V
1. Subparagraph (b) (iv) of paragraph 2 [Paragraph 1 in French language] of Article 24
(Relief From Double Taxation) of the Convention shall be deleted.
2. Subparagraphs (b) (v) and (b) (vi) of paragraph 2 [Paragraph 1 in French language] of
Article 24 (Relief From Double Taxation) of the Convention shall be renumbered as
subparagraphs (b) (iv) and (b) (v), respectively.
3. Subparagraph (c) of paragraph 1 [Paragraph 2 in French language] of Article 24
(Relief From Double Taxation) of the Convention shall be deleted and replaced by the
following:
“(c) In the case of an individual who is both a resident and citizen of the United
States and a national of France, the provisions of paragraph 2 of Article 29
(Miscellaneous Provisions) shall apply to remuneration described in paragraph 1 of
Article 19 (Public Remuneration), but such remuneration shall be treated by the United
States as income from sources within France.”
ARTICLE VI
1. The last sentence of Paragraph 2 of Article 29 (Miscellaneous Provisions) of the
Convention shall be deleted and replaced by the following:
“For this purpose, the term “citizen” shall include a former citizen or long-term resident
whose loss of such status had as one of its principal purposes the avoidance of tax (as
defined under the laws of the United States), but only for a period of ten years following
such loss.”
2. Paragraph 3 of Article 29 (Miscellaneous Provisions) of the Convention shall be deleted
and replaced by the following:
“ 3. The provisions of paragraph 2 shall not affect:
(a) the benefits conferred under paragraph 2 of Article 9 (Associated

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Enterprises), under paragraph 3 (a) of Article 13 (Capital Gains), under paragraph 1 of
Article 18 (Pensions), and under Articles 24 (Relief From Double Taxation), 25
(Non-Discrimination), and 26 (Mutual Agreement Procedure); and
(b) the benefits conferred under paragraph 2 of Article 18 (Pensions), and under
Articles 19 (Public Remuneration), 20 (Teachers and Researchers), 21 (Students and
Trainees), and 31 (Diplomatic and Consular Officers), upon individuals who are neither
citizens of, nor have immigrant status in, the United States.”
ARTICLE VII
1. The Contracting States shall notify each other when their respective constitutional and
statutory requirements for the entry into force of this Protocol have been satisfied. The
Protocol shall enter into force on the date of receipt of the later of such notifications.
2. Except as provided in paragraph 3, the provisions of this Protocol shall have effect:
(a) in respect of taxes withheld at source, for any amount paid or credited on or after the
first day of the second month next following the date on which the Protocol enters into force;
and
(b) in respect of other taxes, for taxable periods beginning on or after the first day of
January next following the date on which the Protocol enters into force.
3. The provisions of Article I, paragraph 2, of this Protocol, except to the extent such
paragraph treats a “fonds commun de placement” as a partnership for purposes of United States
tax benefits under this Convention, shall have effect:
(a) in respect of taxes withheld at source, for any amount paid or credited on or after
February 1, 1996; and
(b) in respect of other taxes, for taxable periods beginning on or after January 1, 1996.

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IN W I TNESS W H EREOF, the undersigned, bein g duly authorized thereto, have signed
this Protocol.
Done at W a shington, this ei ghth day of Dece mbe r , 2004, in duplicate, in the English
and French languages, each text being equally authentic.
FOR THE GOVERNMENT FOR THE GOVERNMENT
OF THE UNITED STATES OF AMERICA OF THE FRENCH REPUBLIC