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II SÉRIE-A — NÚMERO 58

the Convention at any time after 5 years from the date on which the Convention enters intoforce, provided that at least 6 months, prior notice of termination has been given through diplomatic channels. In such event, the Convention shall

cease to have effect:

a) In respect of taxes withheld at source, for amounts paid or credited on or after the first day of January next following the expiration of the 6-month

period;

b) In respect of other taxes, for taxable years beginning on or after the first day of January next following the expiration of the 6-month period.

In witness whereof, the undersigned, being duly authorized by their respective Governments, have signed this Convention.

Done at Washington, in duplicate, in the Portuguese and english languages, both texts being equally authentic, this 6th day of September, 1994.

For The Portuguese Republic:

Francisco Knopfli, Ambassador of Portugal.

For The United States of America:

John Kornblum, Deputy Assistant Secretary of

State.

PROTOCOL

At the signing today of the Convention between the Portuguese Republic and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, the Contracting States have agreed upon the following provisions, which shall form an integral part of die Convention:

1 —With reference to article 1, «Personal Scope*:

a) — i) It is understood that the Convention will not impose a tax that is not otherwise imposed under the laws of the Contracting State concerned. This means that the Convention shall not restrict in any manner any exclusion, exemption, deduction, credit, other allowance, or tax incentive now or hereafter accorded by the laws of the Contracting States. The Convention shall not restrict the benefits conferred under any other agreement between the Contracting States that entered into force prior to the date of signature of this Protocol.

ii) Notwithstanding any other agreement to which the Contracting States may be parties, a dispute concerning whether a measure is within the scope of this Convention shall be considered only by the competent authorities of the Contracting States, as defined in subparagraph 1, i), of article 3, «General definitions*, of this Convention, and the procedures under this Convention exclusively shall apply to the under this Convention exclusively shall apply to the dispute.

Hi) Unless the competent authorities determine that a taxation measure is not within the scope of this Convention, the nondiscrimination obligations of this Convention exclusively shall apply with respect to that measure, except for such national treatment or most-favored-nation obligations as may apply to trade in goods under the General Agreement ov\ Tariffs and Trade. No national treatment or most-favored-nation obligation of any other agreement shall apply with respect to that measure.

iv) For the purpose of this paragraph, a «measure» is a law, regulation, rule, procedure, decision, administrative action, or any other form of measure.

b) Notwithstanding any provision of the Convention except paragbraph c) of this provision, a Contracting State may tax its residents (as determined under article 4, «Residence»), and the United Stales may tax its citizens, as if the Convention had not come into effect. For this purpose, the term «citizen» shall include a former citizen whose loss of citizenship had as one of its principal purposes the avoidance of tax, but only for a period of 10 years following such loss. For the application of the preceding sentence to a resident of Portugal, the competent authorities shall consult under article 27, «Mutual agreement procedure*, upon request by the Portuguese competent authority, on the purposes of such loss of citizenship.

c) The provisions of the preceding subparagraph b) shall not affect:

0 The benefits conferred by a Contracting State under paragraph 2 of article 9, «Associated enterprises*, under paragraph 3 of article 14, «Capi-tal gains*, under paragraphs 1, b), and 4 of article 20, «Pensions, annuities, alimony, and child support*, and under articles 25, «Relief from double taxation*, 26, «Non-discrimination», and 27, «Mu-tual agreement procedure*; and

ii) The benefits conferred by a Contracting State under articles 21, «Government service*, 22, «Teach-ers and researchers*, 23, «Students and trainees*, and 29, «Diplomatic agents and consular officers*, upon individuals who are neither citizens of, nor have immigrant status in, that State.

2 — With reference to article 2, «Taxes covered*:

a) Article 2 does not apply to social security contributions established under Portuguese law.

b) Notwithstanding the provisions of paragraph 1, b), of article 2:

0 A company that is a resident of Portugal shall be exempt from the United States personal holding company tax in any taxable year only if all its stock is owned by one or more individuals, who are not residents or citizens of the United States, in their individual capacities for that entire year; and

it) A company that is a resident of Portugal shall be exempt from the accumulated earnings tax in any taxable year only if it is a company described to paragraph 1, c), of article 17, «Limitation on benefits*.

3 — With reference to paragraph I of article 4, «Resi-dence»:

d) The term «resident of a Contracting State* applies to partnerships, similar pass-through entities, estates, and trusts only to the extent that income derived by such partnership, similar entity, estate, or bust is subject to tax in that State as the income of a resident, either in its hands or the hands of its partners or beneficiaries.

b) The term «resident of a Contracting State* includes:

i) Any not-for-profit organization constituted and maintained in that State, provided that tine laws of such State or of a political or administrative subdivision thereof limit the use of the organization's resources, both currently and upon