U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

49–112 

" ! SENATE 109TH CONGRESS

2d Session 

TREATY DOC. 

2006

109–19 

PROTOCOL AMENDING TAX CONVENTION WITH 

DENMARK 

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 KINGDOM OF DENMARK FOR THE AVOIDANCE 

OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED AT COPENHAGEN MAY 2, 2006 (THE ‘‘PROTOCOL’’), WITH A RELATED EXCHANGE OF NOTES 

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

the accompanying papers, referred to the Committee on Foreign Relations and order 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 

Kingdom of Denmark for the Avoidance of Double Taxation and the 

Prevention of Fiscal Evasion with Respect to Taxes on Income 

signed at Copenhagen May 2, 2006 (the ‘‘Protocol’’). A related exchange of notes is enclosed for the information of the Senate. 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. 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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LETTER OF SUBMITTAL 

THE SECRETARY 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 

Kingdom of Denmark for the Avoidance of Double Taxation and the 

Prevention of Fiscal Evasion with Respect to Taxes on Income, 

signed at Copenhagen May 2, 2006 (the ‘‘Protocol’’). A related exchange of notes is also enclosed. 

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

tax on dividends arising from certain direct investments and crossborder dividend payments to pension funds. 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 so-called treaty shopping. 

The Protocol was concluded in recognition of the importance of 

the United States’ economic relations with Denmark. 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.-DENMARK INCOME TAX PROTOCOL

The proposed Protocol to the income tax Convention with Denmark was negotiated to bring the current Convention, concluded in 

1999, 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 Danish law and treaty policy, the interaction of 

U.S. and Danish law, and U.S.-Danish 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 

maximum withholding tax rate for direct dividends of five percent. 


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The Protocol also provides for a withholding rate of zero on crossborder 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 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 

Danish legislative changes since 1999. 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 receipt of the 

later of the notifications to be exchanged between the United 

States and Denmark stating that their respective requirements for 

entry into force of this Protocol have been complied with by each 

of the two countries. It will have effect, with respect to taxes withheld at source, for amounts derived on or after the first day of the 

second month next following the date on which the Protocol enters 

into force and, with respect to other taxes, for taxable periods beginning on or after the first day of January next following the date 

upon which the Protocol enters into force. 

EXECUTIVE SUMMARY

MAJOR FEATURES OF THE PROPOSED PROTOCOL TO THE INCOME TAX

CONVENTION BETWEEN THE UNITED STATES AND DENMARK

The proposed Protocol to the income tax Convention with Denmark was negotiated to bring the current convention, concluded in 

1999, 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 proposed Protocol, these differences reflect particular aspects of Danish law and treaty policy, the interaction of U.S. and Danish law, and U.S.-Danish economic relations. 

TAXATION OF INVESTMENT INCOME

The withholding rates on investment income in the proposed Protocol are the same or lower than those in the existing Convention. 

Whereas the existing Convention allows for taxation at source of 

five percent on direct dividends (i.e., where a 10 percent ownership 

threshold is met) and 15 percent on all other dividends, the proposed Protocol provides for a withholding rate of zero on dividends 

from certain 80 percent-owned corporate subsidiaries. Consistent 

with the U.S. Model convention, the withholding rates for direct 

dividends that do not qualify for the zero rate and for portfolio dividends remain unchanged. 

Anti-Abuse Provisions 

The Protocol also strengthens the treaty’s ‘‘Limitation on Benefits’’ Article and brings it into closer conformity with current U.S. 


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treaty policy. This updated provision is designed to deny ‘‘treatyshoppers’’ the benefits of the Convention. 

The current treaty preserves the U.S. right to tax former citizens 

whose loss of citizenship had, as one of its principal purposes, the 

avoidance of tax. The proposed Protocol updates this provision to 

reflect legislative changes since 1999. The Protocol provides that a 

former citizen or long-term resident 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. 

Entry into Force 

The proposed Protocol will enter into force upon the receipt of the 

later of the notifications stating the requirements of ratification 

have been complied with by each of the two countries. It will have 

effect, with respect to taxes withheld at source, for amounts derived on or after the first day of the second month next following 

the date on which the Protocol enters into force and, with respect 

to other taxes, for taxable periods beginning on or after the first 

day of January next following the date upon which the Protocol enters into force. 


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