811.512356 Double/73

The Secretary of State to the Netherlands Minister ( Van Haersma de With )

Sir: With reference to recent negotiations at Washington between representatives of the United States and the Netherlands looking to the conclusion of a tax convention between the two countries, I have the honor to enclose herewith a draft of such a convention as would be acceptable to this Government.20

During these negotiations, as you know, substantial agreement was reached on all but two questions, the one relating to the status of joint accounts involving securities transactions on the exchanges of the [Page 616] respective countries, the other concerning the application of the proposed convention to the United States so-called personal holding companies. The first question concerns the elimination of existing international double taxation with respect to such joint accounts and their relation to the definition of permanent establishment. The second question concerns the taxation by the United States of personal holding companies and of United States citizen and resident shareholders of foreign personal holding companies. After careful consideration a solution of the two issues has been reached on bases which it is believed are mutually satisfactory to both governments. The provision with respect to joint accounts has been placed in the last sentence of paragraph 2 (a) of the Protocol and the provision with respect to personal holding companies in paragraph 8 of the Protocol.

In addition to those provisions there have been made a number of minor changes in terminology in the draft as prepared by the negotiators. It is believed that they will be satisfactory to the Government of the Netherlands since they do not involve any change in substance.

In the event your Government approves of the enclosed draft I shall be glad to have arrangements made for the signing of the convention and protocol.

Accept [etc.]

For the Secretary of State:
R. Walton Moore

[Although the Chargé in the Netherlands reported in his despatch No. 757, May 27, 1939 (811.512356 Double/77), that the Netherlands Government stated that the matter of the tax convention was pending as far as the Netherlands was concerned, there were no further negotiations prior to the German invasion of the Netherlands.]

  1. Not printed.