U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

49–112 

" ! SENATE 109TH CONGRESS

2d Session 

TREATY DOC. 

2006

109–18 

PROTOCOL AMENDING TAX CONVENTION WITH 

FINLAND 

MESSAGE 

FROM

THE PRESIDENT OF THE UNITED STATES 

TRANSMITTING

PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE REPUBLIC OF FINLAND FOR THE AVOIDANCE OF 

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION 

WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL, 

SIGNED AT HELSINKI MAY 31, 2006 (THE ‘‘PROTOCOL’’) 

SEPTEMBER 29, 2006.—Protocol was read the first time, and together with 

the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate 


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LETTER OF TRANSMITTAL 

THE WHITE HOUSE, September 29, 2006. 

To the Senate of the United States: 

I transmit herewith, for Senate advice and consent to ratification, a Protocol Amending the Convention Between the Government of the United States of America and the Government of the 

Republic of Finland for the Avoidance of Double Taxation and the 

Prevention of Fiscal Evasion with Respect to Taxes on Income and 

on Capital, signed at Helsinki May 31, 2006 (the ‘‘Protocol’’). Also 

transmitted for the information of the Senate is the report of the 

Department of State with respect to the Protocol. 

The Protocol eliminates the withholding tax on certain cross-border dividend payments. Like a number of recent U.S. tax agreements, the proposed Protocol provides for the elimination of the 

withholding tax on dividends arising from certain direct investments and cross-border dividend payments to pension funds. The 

Protocol also eliminates the withholding tax on cross-border royalty 

payments. In addition, the Protocol modernizes the Convention to 

bring it into closer conformity with current U.S. tax-treaty policy, 

including strengthening the treaty’s provisions preventing so-called 

treaty shopping. 

I recommend that the Senate give early and favorable consideration to the Protocol and give its advice and consent to ratification. 

GEORGE W. BUSH. 


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(V)

LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, 

Washington, August 1, 2006. 

The PRESIDENT, The White House. 

THE PRESIDENT: I have the honor to submit to you, with a view 

to its transmission to the Senate for advice and consent to ratification, a Protocol Amending the Convention Between the Government of the United States of America and the Government of the 

Republic of Finland for the Avoidance of Double Taxation and the 

Prevention of Fiscal Evasion with Respect to Taxes on Income and 

on Capital signed at Helsinki May 31, 2006 (the ‘‘Protocol’’). 

The Protocol eliminates the withholding tax on certain cross-border dividend payments. Like a number of recent U.S. tax agreements, the proposed Protocol provides for the elimination of the 

withholding tax on dividends arising from certain direct investments and cross-border dividend payments to pension funds. The 

Protocol also eliminates the withholding tax on cross-border royalty 

payments. In addition, the Protocol also modernizes the Convention 

to bring it into closer conformity with current U.S. tax-treaty policy, including strengthening the treaty’s provisions preventing socalled treaty shopping. 

The Protocol was concluded in recognition of the importance of 

the United States’ economic relations with Finland. The Department of the Treasury and the Department of State cooperated in 

the negotiation of the Protocol. It has the full approval of both Departments. 

Respectfully submitted. 

CONDOLEEZZA RICE. 

Enclosures. 

KEY PROVISIONS OF THE U.S.-FINLAND INCOME TAX PROTOCOL

The Protocol to the income tax Convention with Finland was negotiated to bring the current Convention, concluded in 1989, into 

closer conformity with current U.S. tax treaty policy. There are, as 

with all bilateral tax conventions, some variations from these 

norms. In the Protocol, these differences reflect particular aspects 

of Finnish law and treaty policy, the interaction of U.S. and Finnish law, and U.S.-Finnish economic relations. 

The most important aspect of the Protocol relates to the taxation 

of cross-border dividend payments. Under the Protocol, most dividends paid by a subsidiary in one country to its parent in the other 

country will be exempt from withholding tax in the subsidiary’s 

home country, rather than being subject to the current treaty’s 


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maximum withholding tax rate for direct dividends of five percent. 

The proposed Protocol also provides for a withholding rate of zero 

on cross-border dividend payments to pension funds. Eliminating 

withholding taxes on cross-border direct dividends and cross-border 

dividend payments to pension funds is consistent with an overall 

view that investment income should be taxed by the country of residence, not the country of source. 

The Protocol also eliminates the withholding tax on cross-border 

royalty payments. The existing treaty’s maximum withholding tax 

rate for cross-border royalty payments is five percent. 

In addition, the Protocol strengthens the treaty’s provisions preventing so-called treaty shopping, which is the inappropriate use of 

a tax treaty by third-country residents. 

The Protocol also updates the current treaty to reflect U.S. and 

Finnish legislative changes since 1989. For example, the Protocol 

updates the ‘‘saving clause’’ to provide that former citizens or longterm residents of the United States may, for the period of ten years 

following the loss of such status, be taxed in accordance with the 

laws of the United States. 

The proposed Protocol will enter into force upon the exchange of 

instruments of ratification. It will generally have effect, with respect to taxes withheld at source, for amounts paid or credited on 

or after the first day of the second month next following the date 

upon which the Protocol enters into force and, with respect to other 

taxes, for taxable years beginning on or after the first day of January next following the date upon which the Protocol enters into 

force. However, the proposed Protocol will have effect with respect 

to taxes withheld at source on direct dividends and dividends paid 

to pension funds for income derived on or after the first day of January 2007, provided that this Protocol enters into force before December 31, 2007. 


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