811.512356 Double/16
The Secretary of State to the Netherland Chargé (Van Breugel Douglas)
The Secretary of State presents his compliments to the Chargé d’Affaires ad interim of the Netherlands and, with further reference to the Minister’s note of September 8, 1936, concerning double taxation, quotes below the essential portions of a letter which has now been received from the Treasury Department:
“The Minister for the Netherlands observes that American citizens residing in the Netherlands and/or the Netherlands Indies are granted exemption from taxation on the most important sources of income derived not only from the United States but from all countries other than the Netherlands or their possessions.
Under the existing Federal income tax laws and the regulations promulgated thereunder an alien residing in the United States in computing his Federal income tax liability is 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 is a citizen or subject in imposing such taxes allows a similar credit to citizens of the United States residing in such country. Section 131 of the Revenue Act of 193610 and the corresponding section in prior revenue acts.
A country satisfies the similar credit requirement of section 131 supra either by allowing to citizens of the United States residing in such country a credit for the amount of income taxes paid to the United States, or, in imposing such taxes, by exempting from taxation the incomes received from sources within the United States by citizens of the United States residing in such country.
The phrase ‘the incomes received from sources within the United States’ means any item of income which may be received from sources within the United States. See Article 131 of Regulations 86 promulgated under the Revenue Act of 1934 and the corresponding articles in the regulations promulgated under prior revenue acts (the regulations under the Revenue Act of 1936 are now in course of preparation).
Items of income from sources within the United States not included in the resolution of April 17, 1928 (Official Gazette No. 76) and the ordinance of May 5, 1934 (Indian Official Gazette No. 921) are subject to taxation in the hands of American citizens residing in the [Page 395] Netherlands and/or the Netherlands Indies. For that reason it cannot be said that the Governments of the Netherlands and the Netherlands Indies satisfy the similar credit requirements of section 131 supra for any taxable period since the passage of the resolution of April 17, 1928, and the ordinance of May 5, 1934.”
The Department is constrained to adhere to the position stated in its letters of October 2, 1934,11 December 19, 1934,12 April 8, 1936, and May 15, 1936.”13
[An order rescinding exemption from taxation granted to American citizens residing in the Netherlands was published in the Netherland State Journal No. 63, April 5, 1937 (811.512356 Double/17).]
- Approved June 22, 1936; 49 Stat. 1648.↩
- See note of October 16, 1934, to the Netherland Chargé, Foreign Relations, 1935, vol. ii, p. 607.↩
- See note of January 26, 1935, to the Netherland Minister, ibid., p. 609.↩
- Neither printed.↩