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HMRC internal manual

Double Taxation Relief Manual

USA: Double taxation agreement, Article 2: Taxes covered

  1. This Convention shall apply to taxes on income and on capital gains imposed on behalf of a Contracting State irrespective of the manner in which they are levied.
  2. There shall be regarded as taxes on income and on capital gains all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of property.
  3. The existing taxes to which this Convention shall apply are:

(a) in the case of the United States:

(i) the Federal income taxes imposed by the Internal Revenue Code (but excluding social security taxes); and

(ii) the Federal excise taxes imposed on insurance policies issued by foreign insurers and with respect to private foundations;

(b) in the case of the United Kingdom:

(i) the income tax;

(ii) the capital gains tax;

(iii) the corporation tax; and

(iv) the petroleum revenue tax.

  1. This Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of this Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any changes that have been made in their respective taxation or other laws that significantly affect their obligations under this Convention.

Further clarification of the Article is provided by the following:

With reference to Article 2 (Taxes Covered):

it is understood that, if a political sub-division or local authority of the United States seeks to impose tax on the profits of any enterprise of the United Kingdom from the operation of ships or aircraft in international traffic, in circumstances where the Convention would preclude the imposition of a Federal income tax on those profits, the United States Government will use its best endeavours to persuade that political sub-division or local authority to refrain from imposing tax.