811.512356 Double/5
The Secretary of State to the Netherland Minister (Van Haersma de With)
Shi: I have the honor to refer to the Legation’s note No. 2948, of November 2, 1934, in further relation to double taxation.
There is now given for your information the pertinent portions of a report on this subject which has been received from the competent authority of this Government:
“In a previous report there were quoted the provisions of section 131 (a) (3) of the Revenue Act of 1934 to the effect that an alien residing in the United States, in computing his Federal income tax, was permitted to credit such tax with the amount of any income, war-profits or excess-profits taxes paid or accrued during the taxable year to any foreign country, if the foreign country of which such alien resident was a citizen or subject, in imposing such taxes, allows a similar credit to citizens of the United States residing in such country.
“It was noted that a person residing in Netherlands India was allowed a credit for foreign tax on certain types of foreign income specified in Article 1 of the ordinance of May 5, 1934 issued by the Netherland Indian Government. It was concluded that if a person residing in Netherlands India was only entitled to a credit for foreign tax paid on the types of foreign income enumerated, he would not be allowed a credit for foreign tax paid on types of foreign income which were not enumerated. Accordingly, it was held that the Netherland Indian Government did not satisfy the similar credit requirement of section 131 (a) (3) of the Revenue Act of 1934, and that therefore a citizen of that country residing in the United States, in computing his Federal income tax, is not entitled to a credit on account of income, war-profits or excess-profits taxes paid or accrued to any foreign country.
“The Counselor of the Netherland Legation inquires what particular types of income the Treasury Department considers as not mentioned in the list of credit allowances contained in the ordinance in question.
[Page 610]“Among the items of income not mentioned in the ordinance referred to are salaries, wages, or compensation paid for services performed and not paid out of the treasury of a foreign public body, pensions not paid out of the treasury of a foreign public body, interest on mortgages, notes, bonds, and other interest-bearing obligations, dividends on stock of corporations, royalties, and profits derived from the sale of real and personal property, all of which are included in the term ‘income’ in the interpretation and administration of the United States income tax laws.”
Should the Legation still deem it desirable to discuss this matter orally with an officer of the Treasury Department, I shall be glad to arrange for a conference.
Accept [etc.]