U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

29–112

" SENATE ! 108TH CONGRESS

2d Session 

TREATY DOC. 

2004

108–25

PROTOCOL AMENDING TAX CONVENTION 

WITH THE NETHERLANDS

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

PROTOCOL AMENDING THE CONVENTION BETWEEN THE UNITED 

STATES OF AMERICA AND THE KINGDOM OF THE NETHERLANDS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE 

PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON 

INCOME (INCLUDING EXCHANGE OF NOTES WITH ATTACHED 

UNDERSTANDING), SIGNED AT WASHINGTON ON MARCH 8, 2004 

(THE ‘‘PROTOCOL’’).

JULY 16, 2004.—Convention 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 


E:\Seals\Congress.#13
(III)

LETTER OF TRANSMITTAL 

THE WHITE HOUSE, July 16, 2004. 

To the Senate of the United States: 

I transmit herewith for Senate advice and consent to ratification, 

the Protocol Amending the Convention Between the United States 

of America and the Kingdom of the Netherlands for the Avoidance 

of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Washington, DC., on March 8, 

2004. Transmitted for the Senate’s information is an exchange of 

notes with an attached Understanding, which provides clarification 

with respect to the application of the Convention, as amended, in 

specific cases. Also transmitted for the information of the Senate 

is the report of the Department of State with respect to the Protocol. 

The Protocol would bring the existing Convention into closer conformity with current U.S. tax treaty policy. As modified by the Protocol, the Convention would be similar to tax treaties between the 

United States and other developed nations. The Protocol was concluded in recognition of the importance of the United States’ economic relations with the Netherlands. 

The Protocol would modify the treatment of certain cross-border 

dividend payments and would modernize the Convention’s antitreaty-shopping provisions. The Protocol also would liberalize provisions in the existing Convention regarding the mutual recognition 

of each country’s pension plans. Other provisions in the Protocol 

update the Convention to take account of changes in law in the two 

countries over the last 10 years. The exchange of notes with an attached Understanding provides guidance to taxpayers and each 

government regarding the intended interpretation of certain provisions of the existing Convention, as amended. 

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

GEORGE W. BUSH. 

(V)

LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, May 24, 2004. 

The PRESIDENT, The White House. 

MR. 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 United 

States of America and the Kingdom of the Netherlands for the 

Avoidance of Double Taxation and the Prevention of Fiscal Evasion 

with Respect to Taxes on Income, signed at Washington on March 

8, 2004 (the ‘‘Protocol’’). Also enclosed for the information of the 

Senate is an exchange of notes with an attached Understanding, 

which provides clarification with respect to the application of the 

Convention, as amended, in specified cases. 

The proposed Protocol was negotiated to bring the existing Convention, concluded in 1992, into closer conformity with current U.S. 

tax treaty policy. The proposed Protocol was concluded in recognition of the importance of the United States’ economic relations with 

the Netherlands. 

Article 3 of the proposed Protocol, which modifies Article 10 of 

the Convention, provides for the elimination of withholding taxes 

on certain types of cross-border direct dividends. Under the existing Convention, dividends may be taxed by the country of source 

at a maximum rate of 5 percent on direct dividends (where the recipient of the dividends owns at least 10 percent of the company 

paying the dividends) and 15 percent on all other dividends. Pursuant to the proposed Protocol, the withholding tax will be eliminated 

entirely with respect to dividends from certain 80-percent owned 

corporate subsidiaries. The other rules will, however, remain in 

place with respect to those dividends that do not quality for this 

elimination. 

The dividends article of the proposed Protocol also updates the 

provisions applicable to dividends paid by U.S. Regulated Investment Companies (RICs) and Real Estate Investment Trusts 

(REITs) to make them consistent with current U.S. treaty policy. 

The new provision reflects a change in approach adopted in 1997, 

which is intended to prevent the use of structures designed to avoid 

U.S. withholding taxes on outbound dividends while providing appropriate benefits to portfolio investors in RICs and REITs. 

Article 7 of the proposed Protocol includes a revised ‘‘Limitation 

on Benefits’’ provision, which is designed to deny ‘‘treaty-shoppers’’

the benefits of the Convention. The new provision corresponds 

more closely to those in recent U.S. treaties than did the provision 

in the existing Convention. 

VI

The existing Convention preserves the U.S. right to tax former 

citizens whose loss of citizenship had, as one of its principal purposes, the avoidance of tax. In order to take account of section 877 

of the Internal Revenue Code as amended in 1996, Article 6 of the 

proposed Protocol expands this right to include taxation of former 

long-term residents whose loss of such status had, as one of its 

principal purposes, the avoidance of tax. 

Article 5 of the proposed Protocol includes provisions intended to 

coordinate the two countries’ rules regarding earnings and accretions of pension plans and cross-border contributions to pension 

plans. In addition, the proposed Protocol extends certain benefits 

regarding cross-border pension contributions that exist in the current treaty to U.S. citizens residing in the Netherlands who contribute to Netherlands pension plans. 

The exchange of notes with an attached Understanding accompanying the proposed Protocol provides additional explanations and 

guidance regarding the agreed interpretation of the Convention, as 

amended. 

The United States and the Netherlands will notify each other 

when their respective constitutional requirements for entry into 

force of the proposed Protocol have been satisfied. The proposed 

Protocol will enter into force on the date of the later of such notifications. It will have effect, with respect to taxes withheld at source, 

on the first day of the second month next following the date of 

entry into force. With respect to other types of taxes it will have 

effect for taxable periods beginning on or after January 1 of the 

year following the date of entry into force.

The Department of the Treasury and the Department of State cooperated in the negotiation of the proposed Protocol. It has the full 

approval of both Departments. 

Respectfully submitted, 

COLIN L. POWELL. 

(1)


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