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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
Updated
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USA: Double taxation agreement, Article 8: Shipping and air transport

  1. Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.
  2. For the purposes of this Article, profits from the operation of ships or aircraft include profits derived from the rental of ships or aircraft on a full (time or voyage) basis. They also include profits from the rental of ships or aircraft on a bareboat basis if the rental income is incidental to profits from the operation of ships or aircraft in international traffic. Profits derived by an enterprise from the inland transport of property or passengers within either Contracting State shall be treated as profits from the operation of ships or aircraft in international traffic if such transport is undertaken as part of international traffic conducted by such enterprise.
  3. Profits of an enterprise of a Contracting State from the use, maintenance, or rental of containers (including trailers, barges and related equipment for the transport of containers) used in international traffic shall be taxable only in that State.
  4. The provisions of paragraphs 1 and 3 of this Article shall also apply to profits from participation in a pool, a joint business, or an international operating agency.

Further clarification of paragraph 2 is provided by the following:

With reference to paragraph 2 of Article 8 (Shipping and Air Transport):

it is understood that income earned by an enterprise from the inland transport of property or passengers within either Contracting State falls within Article 8 if the transport is undertaken as part of the international transport of property or passengers by the enterprise. Thus, if an enterprise of a Contracting State contracts to carry property from the other State to the first-mentioned State and, as part of that contract, it transports the property by truck from its point of origin to an airport in the other State (or it contracts with a trucking company to carry the property to the airport) the income earned by the enterprise from the overland leg of the journey would be taxable only in the first-mentioned State. Similarly, it is understood that Article 8 also would apply to income from lighterage undertaken as part of the international transport of goods.