811.512351 Shipping/8

The Secretary of State to the French Ambassador ( Claudel )

Excellency: With further reference to your Embassy’s note of March 11, 1927,14 relative to a proposed agreement for the reciprocal exemption from taxation of earnings derived from shipping, I have the honor to inform you that I am now in receipt of a communication from the Treasury Department dated April 9, 1927,14 concerning the matter, from which I quote the following:

“By a note from the French Embassy dated August 19, 1926, and its enclosure, this Government was informed that the French Parliament on April 29, 1926, inserted in the French Law of Finance, Article 5, which is translated as follows:

‘Profits made by the navigation concerns established abroad and derived from the operation of foreign ships are exempt from taxation on condition that the country whose flag is displayed by those ships grants a like exemption to French navigation concerns.

‘The modus of this exemption and the taxes coming thereunder shall be fixed by each country through a diplomatic agreement. They will form the subject of a decree countersigned by the Minister of Finance and referred within three months to the Legislature for its ratification.

‘The profits made in countries that agreed to reciprocate, exception as provided in the foregoing paragraph for navigation concerns which have their headquarters in France, shall be included in the bases of the tax on the industrial and commercial profits due from those concerns.’

“By a note dated January 19, 1927,14 the French Embassy transmitted to this Government the form and provisions of a decree which the French Government is ready to issue in connection with the agreement of exemption and inquiry was made whether the decree would satisfy the equivalent exemption requirements of the laws of the United States, as provided by section 213 (b) (8) of the Revenue Acts of 1921, 1924, and 1926.15 The proposed decree is as follows:

‘Citizens of the United States of America that have not their domicile on the territory of the French Republic as also corporations organized in the United States of America that are conducting within the territory of the French Republic shipping business with vessels sailing under the American flag, shall be exempted from any tax on the profits derived exclusively from the shipping.

‘That exemption which, as a measure of reciprocity, will take effect on January 1, 1921, has in particular to do with the tax on industrial and commercial profits assessed under Title 1 of the law of July 31, 1917 and the income tax provided by the law of June 29, 1872 and the decree of December 6, 1872 upon foreign corporations, the stock of which is not listed, but bearing on real or personal property lying in France.’

“By a note dated March 11, 1927, copy of which was enclosed in your letter referred to, dated March 26, 1927,14 the French Government certified to this Government that since January 1, 1921, there has not been collected in France a tax upon the revenue of American citizens not domiciled in France, or of corporations organized under the laws of the United States, derived from the operation of ships.

“I have the honor to advise you, therefore, that if the proposed decree is adopted in the form in which it is submitted, it will meet the [Page 705] equivalent exemption requirements of section 213 (b) (8) of the Revenue Acts of 1921, 1924, and 1926”.

It will be observed that the Treasury Department holds that if the proposed decree, transmitted in your note of January 19, 1927, is adopted in the form in which it is submitted, it will meet the equivalent exemption requirements of section 213 (b) (8) of the Revenue Acts of this Government of 1921, 1924, and 1926.

Accept [etc.]

For the Secretary of State:
Joseph C. Grew
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