Message to the Senate Transmitting the Estate Tax Convention Between the United States and the Netherlands.

To the Senate of the United States:

With a view to receiving the advice and consent of the Senate to ratification, I transmit herewith the convention between the United States of America and the Kingdom of the Netherlands for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on estates and inheritances, signed at Washington on July 15, 1969, and the related protocol signed on the same date.

I transmit also, for the information of the Senate, the report of the Secretary of State with respect to the convention and protocol.

The purposes of this convention are the same as those of the twelve other estate tax conventions now in force between the United States and other countries, namely, to minimize the burdens of double taxation at death and to prevent fiscal evasion with respect to taxes on estates and inheritances. In accomplishing these purposes, the convention departs from the pattern of our existing estate tax conventions in order (a) to take into account problems which employees of international businesses assigned to foreign countries have encountered under previous conventions, (b) to follow the direction indicated by the Foreign Investors Tax Act of 1966 in assisting our balance of payments by minimizing deterrents to foreign investment in the United States, and (c) to conform to the extent practicable with the provisions of the Draft Double Taxation Convention on Estates and Inheritances published in 1966 by the Organization for Economic Cooperation and Development.

The convention contains four principal innovations:

1. The seven year domiciliary rule, whereby a decedent who is considered by each country as having been domiciled therein at death will generally be deemed to have been domiciled only in the country of which he was a citizen if he had been resident in the other country for less than seven years without the intent to remain there indefinitely.

2. As a corollary of the seven year domiciliary rule, the convention provides that if a citizen of one country was resident in the other country seven or more years, the country of citizenship grants a credit for the death taxes of the other country. In these cases, jurisdiction to tax real property and business assets will be retained by the country in which such property is situated, with the other country providing appropriate credits.

3. The convention exempts tangible and intangible personal property (to the extent such property is not a business asset of a permanent establishment) from taxation by either country if the decedent is neither a domiciliary nor a citizen of such country. This exemption complements on a bilateral basis the liberalized treatment afforded foreign investors in the United States by the Foreign Investors Tax Act of 1966, aids our balance of payments by removing deterrents to investments in the United States, and reduces estate tax formalities for Dutch investors in the United States.

4. Under the convention, the Netherlands provides treatment analogous to the relatively liberal United States exemptions which the Federal estate tax law grants to estates of foreigners, by granting Americans who are not residents of the Netherlands (and who are taxable only on real estates and business assets situated in the Netherlands) an exemption for small estates and an exemption which corresponds to our marital deduction.

The related protocol, containing ten numbered paragraphs, sets forth understanding concerning certain matters of interpretation and application of the convention.

The convention and protocol have the approval of the Department of State and the Department of the Treasury. The Treasury will provide a detailed technical explanation of the convention at the time of the hearings before the Senate Foreign Relations Committee.

I recommend that the Senate give early and favorable consideration to the convention and protocol with the Netherlands.

RICHARD NIXON

The White House

October 13, 1969