U.S. income tax treaty with Uzbekistan

The IRS lists the 1973 income tax treaty with the USSR as applicable to Uzbekistan. The treaty has documents, articles, specified income rules, and citizenship provisions for U.S. citizens.

Treaty documents and protocols

The IRS lists one document for Uzbekistan, an income tax treaty it labels 1973. It is the convention between the United States and the Soviet Union on matters of taxation, signed at Washington on June 20, 1973, with notes of exchange. The IRS tables treat that treaty as the one that applies to Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and Uzbekistan. There is no protocol, no technical explanation and no later bilateral convention with Uzbekistan in the IRS list.^[1]^[2]^[4]

The treaty entered into force on January 29, 1976, and its Article XIII gives it effect for income derived from January 1, 1976, the date in the PDF heading. IRS Table 3, which lists the treaty under the Commonwealth of Independent States, shows a general effective date of January 1, 1987 instead. The two dates differ by eleven years, and both are shown here.^[4]^[2]

The treaty is narrow. It exempts only listed items, such as certain royalties, interest on trade financing and some related income, and sets no general dividend or interest rates. IRS Table 1 shows the 30 percent statutory rate for dividends and general interest for these countries, with the interest exemption limited to trade financing between the United States and the member state and excluding general banking interest.^[5]^[2]

Convention structure

The convention text includes fourteen articles. Its opening provisions identify the taxes covered and define terms used in the convention. The later articles address income categories, citizenship, application, non-discrimination, procedure between competent authorities, information exchange, entry into force, and termination.

Article I, Taxes Covered; Article II, General Definitions; Article III, Income Subject to Tax; Article IV, Income of Representation.^[2]
Article V, Shipping and Aircraft; Article VI, Exemptions; Article VII, Taxation on Citizens; Article VIII, Application of Treaty.^[2]
Article IX, Exemption of Transaction Giving Rise to Exempt Income; Article X, Non-Discrimination; Article XI, Mutual Agreement Procedure.^[2]
Article XII, Exchange of Information; Article XIII, Entry into Force; Article XIV, Termination.^[2]

Income rules in Article III

The convention text does not provide separate articles titled dividends, interest, or royalties. Article III, titled Income Subject to Tax, includes a category for rentals and royalties and a separate category for certain trade financing interest. It does not state a general dividend rate or a general interest rate. The listed categories, when derived from sources in one contracting state by a resident of the other, are taxable only in that other state.^[2]

For royalties, Article III covers payments for the use or right to use specified property and rights. Its list includes literary works, artistic works, and scientific works. It also covers copyrights, inventions, industrial designs, processes, formulae, computer programs, marks, equipment, and know-how. The article applies its stated exclusive-tax rule to rentals and royalties when the cross-border residence and source conditions are met. The same rule applies to other payments for the use or right to use the listed property and rights. Gains from sales or exchanges of such rights or property are covered, whether or not payment depends on their use or disposition.^[2]

For interest, the specified category is narrower. Article III covers interest on credits, loans, and other indebtedness connected with financing trade between the United States and the USSR. It excludes interest received by a resident of the other contracting state from conducting a general banking business in the first contracting state. The convention gives no percentage rate for this category. Instead, it provides for exclusive taxation, subject to the banking business exception.^[2]

The article also specifies a 36-month limit for income from engineering, architectural services, designing services, and other technical services connected with an installation contract. The services must be carried out at one location, and the contract must be with a resident of the first contracting state.^[2]

Residence and exchange of information

Article II defines a resident of the United States to include a corporation or other organization treated as a corporation for U.S. tax purposes and created or organized under U.S. or state law, and an individual resident in the United States for purposes of its tax. It defines a resident of the Soviet Union to include qualifying legal entities or organizations created under Soviet or republic law and an individual resident there for tax purposes. The convention does not set out a rule for resolving a person's residence when that person is resident in both countries.^[2]

Article XII, Exchange of Information, is short. The competent authorities are to notify each other every year of amendments to the tax laws covered by Article I and of new taxes of the kind described there, by sending the texts, and to tell each other of any material about applying the convention. It does not provide for exchanging taxpayer information on request.^[2]

Limitation on benefits and citizens

The convention text has no article titled Limitation on Benefits. Article X, Non-Discrimination, addresses tax treatment of a citizen of one contracting state who resides in the other. It says that person may not be subjected there to more burdensome taxes than a resident citizen of that state carrying on the same activities. A second paragraph addresses a citizen resident in the other state or a representation established there, comparing their treatment with citizens or representations of residents of third states carrying on the same activities. It also says the provision does not require extending benefits granted by special agreements with a third state.^[2]

The citizenship rule appears in Article VII, Taxation on Citizens. The convention states that it does not restrict a contracting state's right to tax its own citizen. For a U.S. citizen, Article VII therefore preserves the United States' right to tax that citizen. A saving clause in most U.S. income tax treaties preserves U.S. taxation of U.S. citizens and residents as if the treaty had not come into effect, subject to listed exceptions. Article VII serves as the convention's saving clause.^[2]^[3]

In more detail

The IRS identifies Uzbekistan as one of the former Soviet republics covered by the treaty with the Commonwealth of Independent States, formerly known as the USSR.

Questions and answers

Which treaty documents does the IRS Uzbekistan page list?

The IRS lists an Income Tax Treaty PDF identified as 1973. It does not list a separate protocol or technical explanation.^[1]

Does the convention state a general dividend rate?

The convention text does not contain a separate dividends article or state a general dividend rate. Article III instead sets out specified income categories and their treatment.^[2]

What royalty payments are addressed in Article III?

The article covers payments for the use or right to use specified works and rights, as well as equipment and know-how. Its exclusive-tax rule applies when the income is sourced in one contracting state and derived by a resident of the other.^[2]

What interest is covered by the convention text?

Article III addresses interest on credits, loans, and other indebtedness connected with financing trade between the United States and the USSR. It excludes the stated case of a resident receiving the interest through a general banking business in the other state.^[2]

What does the convention say about a person resident in both countries?

Article II defines residents of each state, including individuals resident there for purposes of its tax. The convention text does not state a dual-residence tie-breaker rule.^[2]

What does the citizenship provision say for a U.S. citizen?

Article VII says the convention does not restrict a contracting state's right to tax its citizen. Under the saving clause in most U.S. treaties, the United States keeps its right to tax its citizens and residents as if the treaty had not come into effect, subject to listed exceptions.^[2]^[3]

Which treaty applies, and when did it take effect?

The IRS lists the 1973 convention between the United States and the Soviet Union as the treaty for Uzbekistan. It entered into force on January 29, 1976. IRS Table 3 shows a general effective date of January 1, 1987, while the treaty gives effect to income derived from January 1, 1976.^[2]^[4]

Related glossary terms

Limitation on benefits: A limitation on benefits article sets conditions for entities in a treaty country to qualify for certain treaty benefits under the applicable U.S. tax treaty.
Treaty rate table: A treaty rate table summarizes income categories and tax rates or exemptions under U.S. income tax treaties. The IRS explains the tables' scope and limits.