TREATIES AND OTHER INTERNATIONAL ACTS SERIES 13077 

________________________________________________________________________ 

TAXATION 

Shipping and Aircraft 

 Agreement Between the 

UNITED STATES OF AMERICA 

and SAUDI ARABIA 

Signed at Riyadh December 11, 1999 

 

 
 NOTE BY THE DEPARTMENT OF STATE 

 Pursuant to Public Law 89—497, approved July 8, 1966 

(80 Stat. 271; 1 U.S.C. 113)—

“. . .the Treaties and Other International Acts Series issued 

under the authority of the Secretary of State shall be competent 

 evidence . . . of the treaties, international agreements other than 

treaties, and proclamations by the President of such treaties and 

international agreements other than treaties, as the case may be, 

therein contained, in all the courts of law and equity and of maritime 

jurisdiction, and in all the tribunals and public offices of the 

United States, and of the several States, without any further proof 

or authentication thereof.” 
 SAUDI ARABIA 

 Taxation: Shipping and Aircraft 

Agreement signed at Riyadh December 11, 1999; 

Entered into force January 31, 2000. 
AN AGREEMENT BETWEEN 

THE GOVERNMENT OF THE UNITED STATES OF AMERICA

AND

THE GOVERNMENT OF THE KINGDOM OF SAUDI ARABIA

FOR

RECIPROCAL EXEMPTION OF TAXES ON INCOME FROM THE

INTERNATIONAL OPERATION OF A SHIP OR SHIPS OR AIRCRAFT

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

Kingdom of Saudi Arabia, hereinafter "the Contracting Parties", desiring to conclude an

Agreement for reciprocal exemption with respect to taxes levied on income from the

international operation of a ship or ships or aircraft,

Have agreed as follows:
2

Article I

TAXES COVERED

1. This Agreement shall apply to all taxes on income derived from the international

operation of a ship or ships or aircraft imposed by each Contracting Party

irrespective of the manner in which such taxes are levied.

2. There shall be regarded as taxes on income derived from the international

operation of a ship or ships or aircraft all taxes imposed on the total of such

income or imposed on elements of such income.

3. The taxes to which this Agreement shall apply are:

a) In the case of the Kingdom of Saudi Arabia, any Saudi tax described in

paragraphs 1 and 2 (hereinafter referred to as "Saudi tax"); and

b) In the case of the United States, Federal income taxes described in

paragraphs 1 and 2 imposed by the U.S. Internal Revenue Code,

including the tax on gross income imposed by section 887 and, as

provided in section 884(d)(2), the branch profits tax (hereinafter referred

to as "United States tax").
3

Article II

DEFINITIONS 

1.	In this Agreement, unless the context otherwise requires:

a) The terms "a Contracting Party" and "the other Contracting Party" mean

the Government of the Kingdom of Saudi Arabia or the Government of the

United States of America, as the context requires;

b) The term "tax" means "Saudi tax" or "United States tax", as the context

requires;

c) The term "operation of a ship or ships or aircraft" means the

transportation by sea or air, as the context requires, of persons, baggage,

livestock, goods, merchandise or mail, including the sale of tickets and

similar documents used for the purpose of such transport, and other

directly related activities, carried on by the owner, lessor, or charterer of a

ship or aircraft;

d) The term "international operation" or "international transport" means

operation as defined in paragraph (c), except where the operation of the

ship or aircraft is solely between places in a Contracting Party;

e) The term "income derived from the international operation of a ship or

ships or aircraft" includes:

i) Income derived from the rental on a full (time or voyage) basis of a

ship or ships or aircraft used in international transport;

ii) Income derived from the rental on a bareboat basis of a ship or

ships or aircraft used in international transport;

iii) Income derived from the rental of containers and related equipment

used in international transport that is incidental to income from the
4

international operation of a ship or ships or aircraft;

iv) Gains from the sale or other alienation of a ship or ships or aircraft

used in international transport;

v) Income derived from the international operation of a ship or ships

or aircraft by an individual resident of a Contracting Party, or a

corporation organized in a Contracting Party, engaged in the

international operation of a ship or ships or aircraft from its

participation in a pool, an alliance, joint businesses, international

operating agency, or other venture that is itself engaged in the

international, operation of a ship or ships or aircraft;

f) For Saudi tax purposes, open taxable years are taxable years for which

taxes have not been paid for any reason. For U.S. tax purposes, open

taxable years are taxable years for which the statute of limitations is not

closed.

g) The term "competent authority" means:

i) In the case of Saudi Arabia, the Ministry of Finance & National

Economy; and

ii) In the case of the United States, the Secretary of the Treasury or

his delegate.

2.	In the application of the provisions of this Agreement by a Contracting Party any

term not otherwise defined shall, unless the context otherwise requires, have the

meaning which it has at that time under the laws of that Contracting Party

relating to the taxes which are the subject of this Agreement.
5

Article III

SHIPPING AND AIR TRANSPORT

1. Income derived from the international operation of a ship or ships or aircraft by a

corporation organized in a Contracting Party and engaged in the international

operation of a ship or ships or aircraft shall be exempt from tax by the other

Contracting Party.

2. In order for a corporation organized in a Contracting Party to claim benefits

under this agreement, it must satisfy any ownership or public trading

requirements, as well as any filing requirements, of the other Contracting Party.

3. Corporations of a Contracting Party engaged in the international operation of

aircraft include those airlines designated under the Air Transport Agreement

between the Contracting Parties or whose flights are otherwise authorized by the

civil aviation authority of the receiving Contracting Party.
6

Article IV

CONSULTATION. SETTLEMENT OF DISPUTES AND

AMENDMENT PROCEDURE 

1. Consultation may be requested in writing at any time by either Contracting Party.

Such consultation shall commence within sixty (60) days of the date of such

written request.

2. The competent authorities of the Contracting Parties shall endeavor to resolve

by mutual agreement any dispute regarding the interpretation or application of

this Agreement and shall not refer any such dispute to any international tribunal

or third party for settlement.

3. This Agreement may be amended by written agreement of the Contracting

Parties.
7

Article V

ENTRY INTO FORCE

1	The Contracting Parties shall notify each other in writing through diplomatic

channels when their respective legal procedures for entry into force have been

met with respect to this Agreement.

2.	The Agreement shall enter into force as of the date of the latter of the

notifications required pursuant to paragraph 1 of this Article V and the provisions

of this Agreement shall have effect with respect to all taxable years beginning on

or after January 1, 1999, and to all prior open taxable years.
8

Article VI

TERMINATION 

This Agreement may be terminated by either Contracting Party giving written notice

of termination through diplomatic channels or as a consequence of a legislative act by a

Contracting Party. In the case of termination by written notice through diplomatic

channels, the Agreement shall cease to have effect for taxable periods beginning on or

after 1 January of the calendar year next following the date on which notice of termination

was given. If this Agreement is terminated as a consequence of any legislative act, the

Contracting Party concerned shall give as much notice of termination as feasible and such

termination shall take effect as determined by such legislative act.

IN WITNESS WHEREOF, the undersigned being duly authorized by their respective

Governments, have signed the present Agreement.

DONE at Riyadh this eleventh day of December one thousand nine hundred and

ninety-nine, corresponding to the third day of Ramadan, one thousand four hundred and

twenty, in the Arabic and English languages.

FOR THE GOVERNMENT OF THE

UNITED STATES OF AMERICA:

Wyche Fowler, Jr.

United States Ambassador

to the Kingdom of Saudi Arabia

FOR THE GOVERNMENT OF THE

KINGDOM OF SAUDI ARABIA:

Dr. Ibrahim Abdulaziz Al-Assaf

Minister of Finance and

National Economy