PARTIAL TERMINATION OF U.S.-NETHERLANDS INCOME TAX CONVENTION AFFECTS CERTAIN REVENUE RULINGS.

Rev. Rul. 89-110

This revenue ruling discusses how the partial termination of the United States-Netherlands Income Tax Convention, T.D. 5778, 1950-1 C.B. 92, as supplemented by the Protocol of June 15, 1955 and extended on November 10, 1955 to the Netherlands Antilles, 1956-2 C.B. 1116, and as modified and supplemented by the Protocol of October 23, 1963, 1965-1 C.B. 624, (treaty), ¹ affects certain revenue rulings. The treaty was terminated by a notice delivered to the Kingdom of the Netherlands on June 29, 1987. A note delivered July 10, 1987, modified the notice of termination to exclude Article VIII and certain ancillary provisions from its scope. The termination, as modified, took effect on January 1, 1988.

As a result of the partial termination, Rev. Rul. 79-65, 1979-1 C.B. 458, is modified and clarified in that it will no longer apply to dividends paid to a Netherlands Antilles corporation after December 31, 1987. However, the principles stated therein will continue to apply to similar provisions in other tax treaties.

Also as a result of the partial termination, two revenue rulings, which had applied for purposes of Article VIII and certain other articles of the treaty, are modified and clarified in that they will not apply to payments after December 31, 1987, other than interest covered by Article VIII. These revenue rulings are Rev. Rul. 65-16, 1965-1 C.B. 626 and Rev. Rul. 77-435, 1977-2 C.B. 491.

Similarly, three additional revenue rulings which had applied to Article VIII of the treaty, and the principles of which had applied to similar provisions in the treaty and in other treaties, are modified and clarified in that the revenue rulings will continue to apply to Article VIII for payments made after December 31, 1987, and the principles thereof will continue to apply to similar provisions under other treaties. These revenue rulings are Rev. Rul. 84-152, 1984-2 C.B. 381, Rev. Rul. 84-153, 1984-2 C.B. 383, and Rev. Rul. 85- 163, 1985-2 C.B. 349.

Finally, two revenue rulings, which only apply to Article VIII of the treaty, are not affected by the partial notice of termination. Rev. Rul. 79-251, 1979-2 C.B. 271, and Rev. Rul. 66-362, 1966-2 C.B. 565, remain in effect. Their status is unchanged.

EFFECT ON OTHER DOCUMENTS

The following revenue rulings are modified and clarified, to the extent described above:

Rev. Rul. 79-65, 1979-1 C.B. 458;

Rev. Rul. 65-16, 1965-1 C.B. 626;

Rev. Rul. 77-435, 1977-2 C.B. 491;

Rev. Rul. 84-152, 1984-2 C.B. 381;

Rev. Rul. 84-153, 1984-2 C.B. 383; and

Rev. Rul. 85-163, 1985-2 C.B. 349.

DRAFTING INFORMATION

The principal author of this revenue ruling is Patricia C. Bray of the Office of the Associate Chief Counsel (International). For further information call Ms. Bray at (202) 566-6645 (not a toll-free call).

¹ Aruba was formerly a part of the Netherlands Antilles until January 1, 1986, when it became a separate member country of the Kingdom of the Netherlands and, thus, a separate partner to the treaty. For purposes of this revenue ruling the term "Netherlands Antilles" will also include Aruba.