The Secretary of State to the Ambassador in Germany ( Houghton )
Sir: With reference to your telegram No. 21, of January 21st, 4 p.m.,90 concerning the taxing by Germany of earnings derived from the operation of ships documented under the laws of the United States, the Department desires to advise you that a communication, dated March 3, 1924, of which a copy is enclosed for your information, has been received from the Treasury Department90 stating that before making a rule on this subject, the latter desires to secure additional information from the German Government. Accordingly, [Page 192] please make a formal response to the Foreign Office’s note of January 19, 1924 substantially as follows:91
In the Ordinance of August 10, 1923, it is noted “that in the case of companies operated for profit, whose domicile and place of management is in the United States of America, the income which is derived exclusively from the operation of ships, shall not be subjected to the corporation tax. A corporation tax return for the aforesaid income is not to be required of North American companies which maintain in this country a branch or other place of operation or a continuous [permanent] representative.”
Under this provision of the Ordinance of August 10, 1923, it appears that an American corporation whose place of management, for instance, is in London, might possibly be taxed while an American corporation whose place of management is in the United States or Germany, would be exempted. In order for individual Germans and German shipping companies to be entitled, under the provisions of American law, to the benefits of reciprocity in the matter of exemption from taxation, it would be necessary for the ordinance of August 10, 1923, to apply to all corporations organized in the United States regardless of the place of management.
Moreover, in order to enable the Government of the United States to pass upon the question as to whether equivalent exemption is applicable from January 1, 1921, the Treasury Department states that it will be necessary for the German Government to show that citizens of the United States non-resident as to Germany and domestic corporations have not been subjected to income and corporation tax since January 1, 1921, on the earnings derived from the operation of ships, and that they are exempt from such taxes and will not be required to pay the income and corporation tax on any income earned since January 1, 1921.
Please request the Foreign Office to expedite consideration of your response. When the Foreign Office shall have again replied, a copy thereof should be mailed to the Department with the following additional material bearing upon this subject.
- A copy of the Ordinance of January 5, 1924, exempting citizens of the United States not residing in Germany from tax on earnings derived from operation of ships:
- Translated copy of Section 108, subdivisional, of the Federal Tax Law of Germany.
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