Page:United States Statutes at Large Volume 47 Part 2.djvu/997

DorBLE INCOME TAX-SHIPPING PROFITS-GREAT BRITAIN. 2587 Arrangement between the United States Qf America and Great Britain A~~J,~N~;:nber and Northern Ireland for relief from aouble income tax on s~ipping Januau la, 'Fe~ profits. Effected by exchange oj notes, signed August 11,1924, Novem- 13 , arch 18, 19211. ber 18, 1924, November 26, 1924, January 15, 1925, February 13, 1925, and }.farch 16, 1926. The Acting Secretary oj State to the Briti8h Ambassador DEPARTMENT OF STATE, WASHINGTON, August 11, 1924. EXCELLENCY: Referring to the Embassy's note No 138 of February 11 1924 Double Income tax , . . . , , on shipping profits. and to preVIOUS correspondence relatmg to a proposed arrangement Reciprocal exemp- b hI IR h. - fhU'dS d tion United States, etween t e ntema evenue aut ontles 0 t e lllte tates an GrMt Britain and Grellt Britain with a 'View to granting relief from double income Northern Ireland. taxation in cases where the profits arising from the business of shipping are chargeable to both British income tax and to income tax payable in the United States, I have the honor to inform you of the receipt of a letter on the subject from the Secretary of the Treasury. It appears therefrom that Section 213(b)(8) of the Revenue Act 43\~I~\;:'i ~;pv~: of 1921 which has been reenacted as Section 213(b)(8) of the Rev- vol.45,PP.s47,8t9: ' enue Act of 1924 exempts from tax so much of the income of a nonresident alien or foreign corporation as is derived from the opera- tion of a ship or ships documented under the laws of a foreign country if that foreign country in turn exempts from tax so much of the income of a citizen of the United States nonresident in such country and of a corporation organized in the United States as is derived from the operation of a ship or ships documented under the laws of the United States. The question of the exemption from tax of income derived from the operation of British 'Vessels has, as the Embassy has observed, :previously been discussed by officials of the Treasury Department WIth Sir Percy Thompson, Deputy Chairman of the British Board of Inland Revenue, who came to the United States for that purpose. I am informed that these discussions proved fruitless because Sir Percy Thompson did not feel at liberty to recede from the British position that the taxability of a corpora- tion as a resident of the United Kingdom should depend not upon the place of incorporation but upon the place" where its real business is carried on and tha.t * * * is carried on where the control and management of the company abide". (American Thread Company v. Joyce, 6 T.e ., 163, 164.) The navigation laws of the United States require that a corpora- tion owning a vessel of the United States be a corporation or~anized in the United States and that its president and managing dIrectors be citizens of the United States, but there is no requirement that the president and managing directors be residents of this country. It was conceivable therefore that the president and managing directors might reside in the United Kingdom, hold their meetings there, and there exercise control of the corporation. In such a case the cor- poration would, under British law, have been deemed a resident of the United Kingdom and as such subject to tax upon all its income.