U.S. income tax treaty with Georgia

For Georgia the IRS lists the 1973 convention with the Soviet Union, which exempts only specified items such as certain royalties and trade-financing interest.

Treaty documents and protocols

The IRS lists one document for Georgia, an income tax treaty it labels 1973. It is the convention between the United States and the Soviet Union on matters of taxation, signed at Washington on June 20, 1973, with notes of exchange. The IRS tables treat that treaty as the one that applies to Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and Uzbekistan. There is no protocol, no technical explanation and no later bilateral convention with Georgia in the IRS list.^[1]^[2]^[4]

The treaty entered into force on January 29, 1976, and its Article XIII gives it effect for income derived from January 1, 1976, the date in the PDF heading. IRS Table 3, which lists the treaty under the Commonwealth of Independent States, shows a general effective date of January 1, 1987 instead. The two dates differ by eleven years.^[4]^[2]

The treaty is narrow. It exempts only listed items, such as certain royalties, interest on trade financing and some related income, and sets no general dividend or interest rates. IRS Table 1 shows the 30 percent statutory rate for dividends and general interest for these countries, with the interest exemption limited to trade financing between the United States and the member state and excluding general banking interest.^[5]^[2]

Convention structure

The convention table of articles names fourteen articles, followed by notes and letters. The article titles, in order, are Taxes Covered; General Definitions; Income Subject to Tax; Income of Representation; Shipping and Aircraft; Exemptions; Taxation on Citizens; Application of Treaty; Exemption of Transaction Giving Rise to Exempt Income; Non-Discrimination; Mutual Agreement Procedure; Exchange of Information; Entry into Force; and Termination. The table also labels Article VII as the Saving Clause.^[2]

The treaty text presents the income rules mainly in Article III, titled Income Subject to Tax. Article II supplies general definitions, including the meanings of resident of the Soviet Union and resident of the United States. Article IV addresses commercial activity income through a representation, and Article VI sets out exemptions for specified individuals and circumstances. The structure therefore places income categories, definitions and particular exemptions in separate articles.^[2]

Royalties, interest and dividends

Article III includes royalties among categories of income sourced in one state and derived by a resident of the other. For the listed categories, it states that the income is taxable only in the other state. The royalties category covers payments for rights to use specified creative works, inventions, industrial property, software, marks, equipment, and know-how.^[2]

Article III does not set a percentage rate for those royalties. Instead, it allocates taxing rights to the other Contracting State for the listed source and residence relationship. The clause also covers gains from the sale or exchange of the listed rights or property, whether or not the amount received depends in whole or in part on the use or disposition of the rights or property.^[2]

The interest category is narrower. It covers interest on credit, loans and other indebtedness connected with financing trade between the United States and the Soviet Union. The stated rule does not apply where the recipient is a resident of the other state conducting a general banking business in the first state. The convention does not give a separate numerical interest rate in this provision.^[2]

The article's listed categories do not include dividends, and the article table does not name a dividends article. The convention provides no separate dividend rate or conditions specific to dividends.^[2]

Residence and dual residence

Article II defines residents for purposes of the convention, but the convention contains no separate residence article or rule for resolving residence when a person is resident in both countries. It defines a Soviet Union resident as a qualifying legal entity or organization created under Soviet or Union Republic law, or an individual resident there for tax purposes. A United States resident is a qualifying corporation or organization created under U.S. law, or an individual resident in the United States for its tax purposes.^[2]

Article II also defines a Contracting State as the United States or the Soviet Union, depending on context. It names the Soviet Union Ministry of Finance as that state's competent authority and the U.S. Secretary of the Treasury or delegate as the U.S. competent authority.

Exchange of information

Article I identifies the covered taxes as taxes and dues provided for under the Soviet Union's all-union legislation and under the U.S. Internal Revenue Code. It also says the convention applies to substantially similar taxes imposed in addition to or in place of those existing taxes. Article XII refers back to those categories when describing the information notices.^[2]

Article XII, Exchange of Information, is short. The competent authorities are to notify each other every year of amendments to the tax laws covered by Article I and of new taxes of the kind described there, by sending the texts, and to tell each other of any material about applying the convention. It does not provide for exchanging taxpayer information on request.^[2]

Limitation on benefits

The convention's table of articles has no article titled Limitation on Benefits. Article II defines residents, and Article III applies its income rules to residents of the other Contracting State.^[2]

The saving clause and U.S. citizens

The convention table identifies Article VII, Taxation on Citizens, as the Saving Clause. Article VII states that the convention does not restrict a Contracting State's right to tax its own citizen.^[2]

Under IRS guidance, a saving clause preserves U.S. taxation of U.S. citizens and residents as if the treaty had not come into effect, subject to listed exceptions.

Questions and answers

Which Georgia treaty documents does the IRS page list?

It lists an Income Tax Treaty entry marked 1973. Georgia is among the former Soviet Republics covered by the treaty with the Commonwealth of Independent States, formerly known as the Union of Soviet Socialist Republics.^[1]

Does the convention set a dividend rate?

The article table has no separately titled dividends article, and Article III's listed income categories do not include dividends. The convention gives no dividend-specific rate or conditions.^[2]

What does the treaty say about royalties?

Article III includes specified royalties among income sourced in one state and derived by a resident of the other. It says the listed categories are taxable only in that other state, and gives no percentage rate for royalties.^[2]

What interest does Article III address?

It addresses interest on credit, loans or other indebtedness connected with financing trade between the United States and the Soviet Union. The stated category excludes receipts by a resident of the other state conducting a general banking business in the first state.^[2]

How does the convention define a resident?

Article II defines a U.S. resident to include a corporation or organization created under U.S. law and an individual resident in the United States for its tax purposes. The convention states no rule for a person resident in both countries.^[2]

What does the saving clause state for a U.S. citizen?

Article VII says the convention does not restrict a Contracting State's right to tax its own citizen. Under IRS guidance, the saving clause preserves U.S. taxation of U.S. citizens and residents as if the treaty had not come into effect, subject to listed exceptions.^[2]^[3]

Which treaty applies, and when did it take effect?

The IRS lists the 1973 convention between the United States and the Soviet Union as the treaty for Georgia. It entered into force on January 29, 1976. Article XIII gives the treaty effect for income derived from January 1, 1976, while IRS Table 3 shows a general effective date of January 1, 1987.^[2]^[4]

Related glossary terms

Treaty rate table: A treaty rate table summarizes income categories and tax rates or exemptions under U.S. income tax treaties. The IRS explains the tables' scope and limits.