CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF

AMERICA AND THE GOVERNMENT OF UKRAINE FOR THE AVOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME AND CAPITAL

GENERAL EFFECTIVE DATE UNDER ARTICLE 29: 1 JANUARY 2001

TABLE OF ARTICLES

Article 1---------------------------------General Scope

Article 2---------------------------------Taxes Covered

Article 3---------------------------------General Definitions

Article 4---------------------------------Residence

Article 5---------------------------------Permanent Establishment

Article 6---------------------------------Income from Real Property

Article 7---------------------------------Business Profits

Article 8---------------------------------Shipping and Air Transport

Article 9---------------------------------Associated Enterprises

Article 10--------------------------------Dividends

Article 11--------------------------------Interest

Article 12--------------------------------Royalties

Article 13--------------------------------Gains from the Alienation of Property

Article 14--------------------------------Independent Personal Services

Article 15--------------------------------Dependent Personal Services

Article 16--------------------------------Directors' Fees

Article 17--------------------------------Artistes and Sportsmen

Article 18--------------------------------Government Service

Article 19--------------------------------Pensions

Article 20--------------------------------Students, Trainees and Researchers

Article 21--------------------------------Other Income

Article 22--------------------------------Limitation on Benefits

Article 23--------------------------------Property

Article 24--------------------------------Relief from Double Taxation

Article 25--------------------------------Non-discrimination

Article 26--------------------------------Mutual Agreement Procedure

Article 27--------------------------------Exchange of Information

Article 28--------------------------------Diplomatic Agents and Consular Officers

Article 29--------------------------------Entry into Force

Article 30--------------------------------Termination

Letter of Submittal---------------------of September 9, 1994

Letter of Transmittal-------------------of September 14, 1994

Protocol----------------------------------of March 4, 1994

Notes of Exchange---------------------of May 26 and June 6, 1995

The “Saving Clause”-------------------Paragraph 3 of Article 1

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES

OF AMERICA AND THE GOVERNMENT OF UKRAINE FOR THE AVOIDANCE

OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH

RESPECT TO TAXES ON INCOME AND CAPITAL,

WITH PROTOCOL, SIGNED AT WASHINGTON ON MARCH 4, 1994

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, September 9, 1994.

THE PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you, with a view to its transmission to the

Senate for advice and consent to ratification, the Convention between the Government of the

United States of America and the Government of Ukraine for the Avoidance of Double Taxation

and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, together with

a related Protocol, signed at Washington on March 4, 1994.

The Convention would replace, with respect to Ukraine, the existing income tax convention

between the United States and the Union of Soviet Socialist Republics, signed at Washington on

June 20, 1973, and would modernize tax relations between the two countries. It is hoped and

expected that the Convention will be an important impetus to Ukraine's emergence as a market

economy by encouraging and facilitating greater U.S. private sector investment in Ukraine. The

Convention will establish a framework that we hope will contribute to the expansion of

economic, scientific, technical and cultural cooperation between the two countries.

Like other U.S. income tax conventions, this bilateral Convention provides rules specifying

when various categories of income derived by a resident of one country may be taxed by the

other country. The Convention also confirms that the residence country will avoid international

double taxation by granting a foreign tax credit, and it provides for administrative cooperation to

avoid double taxation and prevent fiscal evasion of taxes.

The Convention limits the tax that may be imposed by the country where the income arises

(the "source" country) on dividends, branch profits, interest, royalties, and capital gains derived

by residents of the other country. These limits are consistent with those in other recent U.S. tax

treaties.

Business profits derived by a resident of one country may be taxed by the other country only

to the extent that the profits are attributable to a permanent establishment in that other country,

and then only on a net basis with deductions for business expenses. The Convention defines a

permanent establishment to include, inter alia, offices, factories and mines. A provision of the

Protocol (point 7) ensures the deductibility of wage and interest expense in calculating the

Ukraine tax on profits. That provision is important to the availability of a U.S. foreign tax credit.

The Convention provides conditions under which each country may tax income derived by

individual residents of the other country from independent personal services or as employees, as

well as pension income benefits. Social security benefits may be taxed only by the country which

pays them. Special relief is granted to visiting students, trainees, and researchers. The provision

in the 1973 convention of a two year exemption for visiting teachers and journalists is not

retained.

The benefits of the Convention are limited to residents of the two countries meeting certain

standards designed to prevent residents of third countries from inappropriately using the

Convention. Similar standards are found in other recent U.S. income tax conventions.

The Convention assures that the residence country will avoid double taxation of income that

arises in the other country and has been taxed there in accordance with the Convention. In

addition, the Convention includes standard administrative provisions that will permit the tax

authorities of the two countries to cooperate to resolve issues of potential double taxation and to

exchange information relevant to implementing the Convention and the domestic laws imposing

the taxes covered by the Convention. The non-discrimination provisions go beyond the standard

provisions in including assurances that citizens and residents of one country will not be subjected

by the source country to tax treatment more burdensome than that to which citizens and residents

of that country or any third state are subjected.

The Convention will enter into force on the date of the exchange of instruments of

ratification. The provisions concerning taxes on dividends, interest, and royalties will take effect

on the first day of the second month following the exchange of instruments of ratification, and

provisions concerning other taxes will take effect for taxable years beginning on or after January

1 following the exchange of instruments of ratification. Upon entry into force of the Convention,

the 1973 tax treaty will cease to have effect between the United States and Ukraine. However, a

taxpayer may elect to apply the 1973 treaty in full for one additional taxable year if its provisions

are more favorable.

A Protocol accompanies the Convention and forms an integral part of it. The Protocol

clarifies the operation of certain provisions and denies treaty benefits with respect to dividends

and interest paid by certain U.S. investment companies. Most significantly, point 7 of the

Protocol guarantees the deductibility of wage costs and interest that might not otherwise be

deductible under Ukraine law.

A technical memorandum explaining in detail the provisions of the Convention will be

prepared by the Department of the Treasury and will be submitted separately to the Senate

Committee on Foreign Relations.

The Department of the Treasury and the Department of State cooperated in the negotiation of

the Convention. It has the full approval of both Departments.

Respectfully submitted,

WARREN CHRISTOPHER.

LETTER OF TRANSMITTAL

THE WHITE HOUSE, September 14, 1994.

To the Senate of the United States:

I transmit herewith for Senate advice and consent to ratification the Convention Between the

Government of the United States of America and the Government of Ukraine for the Avoidance

of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and

Capital, with Protocol, signed at Washington on March 4, 1994. Also transmitted for the

information of the Senate is the report of the Department of State with respect to the Convention.

The Convention replaces, with respect to Ukraine, the 1973 income tax convention between

the United States of America and the Union of Soviet Socialist Republics. It will modernize tax

relations between the two countries and will facilitate greater private sector United States

investment in Ukraine.

I recommend that the Senate give early and favorable consideration to the Convention and

related Protocol and give its advice and consent to ratification.

WILLIAM J. CLINTON.

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF

AMERICA AND THE GOVERNMENT OF UKRAINE FOR THE AVOIDANCE OF

DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT

TO TAXES

ON INCOME AND CAPITAL

The Government of the United States of America and the Government of Ukraine,

confirming their desire to develop and strengthen the economic, scientific, technical and cultural

cooperation between both States, and desiring to conclude a convention for the avoidance of

double taxation and the prevention of fiscal evasion with respect to taxes on income and capital,

have agreed as follows:

ARTICLE 1

General Scope

1. This Convention shall apply to persons who are residents of one or both of the Contracting

States and to other persons as specifically provided in the Convention.

2. The Convention shall not restrict in any manner any exclusion, exemption, deduction,

credit, or other allowance now or hereafter accorded:

a) by the laws of either Contracting State; or

b) by any other agreement between the Contracting States.

3. Notwithstanding any provision of the Convention except paragraph 4, a Contracting State

may tax, in accordance with its domestic law, residents (as determined under Article 4

(Residence)) of that State, and in the case of the United States, its citizens and former citizens.

4. The following benefits shall be conferred by a Contracting State notwithstanding the

provisions of paragraph 3:

a) under paragraph 2 of Article 9 (Associated Enterprises), paragraph 1 of Article

19 (pensions) and Articles 24 (Relief from Double Taxation), 25 (Non-discrimination)

and 26 (Mutual Agreement Procedure)and

b) under Articles 18 (Government Service), 20 (Students, Trainees and

Researchers), and 28 (Diplomatic Agents and Consular Officers) for individuals who are

neither citizens of that State nor, in the case of the United States of America, individuals

having immigrant status therein.

ARTICLE 2

Taxes Covered

1. The taxes to which this Convention shall apply are:

a) in the United States of America: the Federal income taxes imposed by the

Internal Revenue Code (but excluding the accumulated earnings tax, the personal holding

company tax, and social security taxes) and the excise taxes imposed with respect to the

investment income of private foundations (hereafter referred to as U.S. tax).

b) in Ukraine: the tax on income (profits) of enterprises and the income tax on

citizens of Ukraine, foreign citizens, and stateless persons.

2. The Convention shall apply also to any substantially similar taxes which are imposed after

the date of signature of the Convention in addition to, or in place of, the existing taxes, including

taxes which are substantially similar to those currently imposed by one Contracting State but not

by the other Contracting State and which are subsequently imposed by the other State. The

competent authorities of the Contracting States shall notify each other of any significant changes

which have been made in their respective taxation laws and of any official published material

concerning the application of the Convention, including explanations, regulations, rulings, or

judicial decisions.

3. The Convention shall also apply to any tax on property described in subparagraph (h) of

paragraph 1 of Article 3 (General Definitions) which is imposed by either Contracting State after

the date of signature of the Convention, but only if such tax is provided by the legislation of such

Contracting State.

ARTICLE 3

General Definitions

1. For the purposes of this Convention, unless the context otherwise requires:

a) the term "Contracting State" means the United States of America (the United

States) or Ukraine, as the context requires;

b) the term "United States" means the United States of America, but does not

include Puerto Rico, the virgin Islands, Guam, or any other United States possession or

territory. When used in a geographical sense, the term "United States" includes the

territorial sea, and any area outside the territorial sea which in accordance with

international law has been or may hereafter be designated an area in which the United

States may exercise rights with respect to the seabed and subsoil and their natural

resources;

c) the term "Ukraine," when used in a geographical sense, includes the territorial

sea, and any area outside the territorial sea which in accordance with international law

has been or may hereafter be designated an area in which Ukraine may exercise rights

with respect to the seabed and subsoil and their natural resources;

d) the term "national" means:

i) any individual possessing the nationality of a Contracting State;

ii) any legal person, partnership or association deriving its status as such

from the laws in force in a Contracting State.

e) the term "person" means an individual, an estate, a trust, a partnership, a

company and any other body of persons;

f) the term "company" means any entity or organization which is treated as a body

corporate for tax purposes. In the case of Ukraine, this term means a joint stock company,

a limited liability company or any other legal entity or other organization which is liable

to a tax on profits;

g) the term "international traffic" means any transport by a ship or aircraft, except

when such transport is solely between places in one of the Contracting States;

h) the term "property" means movable and real property, and includes (but is not

limited to) cash, stock or other evidences of ownership rights, notes, bonds or other

evidences of indebtedness, and patents, trademarks, copyrights or other like right or

property;

i) the terms "enterprise of a Contracting State" and "enterprise of the other

Contracting State" mean respectively an enterprise carried on by a resident of a

Contracting State and an enterprise carried on by a resident of the other Contracting

State;

j) the term "competent authority" means:

i) in the United States: the Secretary of the Treasury or his authorized

representative; and

ii) in Ukraine: the Minister of Finance or his authorized representative.

2. As regards the application of the Convention by a Contracting State, any term not defined

therein shall, unless the context otherwise requires or the competent authorities agree to a

common meaning pursuant to the provisions of Article 26 (Mutual Agreement Procedure), have

the meaning which it has under the laws of that State concerning the taxes to which the

Convention applies.

ARTICLE 4

Residence

1. For the purposes of this Convention, the term "resident of a Contracting State" means any

person who, under the laws of that State, is liable to tax therein by reason of his domicile,

residence, Citizenship, place of incorporation, or any other criterion of a similar nature.

However, this term does not include any person who is liable to tax in that State in respect only

of income from sources in that State or property situated therein.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both

Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident of the State in which he has a permanent

home available to him; if he has a permanent home available to him in both States, he

shall be deemed to be a resident of the State with which his personal and economic

relations are closer (center of vital interests);

b) if the State in which he has his center of vital interests cannot be determined, or

if he does not have a permanent home available to him in either State, he shall be deemed

to be a resident of the State in which he has an habitual abode;

c) if he has an habitual abode in both States or in neither of them, he shall be

deemed to be a resident of the State of which he is a citizen;

d) if each State considers him as its citizen or if he is a citizen of neither of them,

the competent authorities of the Contracting States shall settle the question by mutual

agreement.

3. Where, by reason of the provisions of paragraph 1, a person other than an individual is a

resident of both Contracting States, the competent authorities of the Contracting States shall

endeavor to settle the question by mutual agreement and determine the mode of application of

the Convention to such person.

ARTICLE 5

Permanent Establishment

1. For the purposes of this Convention, the term "permanent establishment" means a fixed

place of business through which a resident of a Contracting State, whether or not a legal entity,

either wholly or in part carries on its business activities in the other Contracting State.

2. The term "permanent establishment" includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop;

f) a mine, an oil or gas well, a quarry, or any other place of extraction of natural

resources; and

g) a store or any premises used as a sales outlet.

3. A building site or construction, installation or assembly project, or an installation or

drilling rig or ship used for the exploration or development of natural resources, constitutes a

permanent establishment only if it lasts more than 6 months.

4. Notwithstanding the preceding provisions of this Article, the term "permanent

establishment" shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display, or delivery of

goods or merchandise belonging to the resident;

b) the maintenance of a stock of goods or merchandise belonging to the resident

solely for the purpose of storage, display, or delivery;

c) the maintenance of a stock of goods or merchandise belonging to the resident

solely for the purpose of processing by another person;

d) the maintenance of a fixed place of business solely for the purpose of

purchasing goods or merchandise, or of collecting information, for the resident;

e) the maintenance of a fixed place of business solely for the purpose of carrying

on, for the resident, any other activity of a preparatory or auxiliary character;

f) the maintenance of a fixed place of business solely for any combination of the

activities mentioned in subparagraphs a) through a).

5. Notwithstanding the provisions of paragraphs 1 and 2, where a resident of a Contracting

State carries on activities in the other Contracting State through an agent, that resident shall be

deemed to have a permanent establishment in that other State in respect of any activities which

the agent undertakes for that resident, if the agent meets each of the following conditions:

a) he has an authority to conclude contracts in that other State in the name of the

resident;

b) he habitually exercises that authority;

c) he is not an agent of an independent status to whom the provisions of paragraph

6 apply; and

d) his activities are not limited to those mentioned in paragraph 4.

6. A resident of a Contracting State shall not be deemed to have a permanent establishment in

the other Contracting State merely because it carries on business in that other State through a

broker, general commission agent, or any other agent of an independent status, provided that

such persons are acting in the ordinary course of their business.

7. The fact that a company which is a resident of a Contracting State controls or is controlled

by a company which is a resident of the other Contracting State, or which carries on business in

that other State (whether through a permanent establishment or otherwise), shall not of itself

constitute either company a permanent establishment of the other.

ARTICLE 6

Income from Real Property

1. Income derived by a resident of a Contracting State from real property (including income

from agriculture or forestry) situated in the other Contracting State may be taxed in that other

State.

2. The term "real property" shall have the meaning which it has under the law of the

Contracting State in which the property in question is situated. The term shall in any case include

property accessory to real property, livestock and equipment used in agriculture and forestry,

rights to which the provisions of general law respecting landed property apply, usufruct of real

property and rights to variable or fixed payments as consideration for the working of, or the right

to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not

be regarded as real property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, leasing or

subleasing, or use in any other form of real property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income from real property of

an enterprise and to income from real property used for the performance of independent personal

services.

5. A resident of a Contracting State who is liable to tax in the other contracting State on

income from real property situated in that other State may elect, subject to the procedures of the

domestic law of that other State, to compute the tax on such income on a net basis as if such

income were attributable to a permanent establishment in that other State. Any such election

shall be binding for the taxable year of the election and all subsequent taxable years unless

revoked pursuant to the procedures under the domestic law of the contracting State in which the

property is situated.

ARTICLE 7

Business Profits

1. The business profits of a resident of a Contracting State shall be taxable only in that State

unless the resident carries on or has carried on business in the other Contracting State through a

permanent establishment situated therein. If the resident carries on or has carried on business as

aforesaid, the business profits of the resident nay be taxed in the other State but only so much of

them as is attributable to the assets or activities of that permanent establishment.

2. Subject to the provisions of paragraph 3, where a resident of a Contracting State carries on

or has carried on business in the other Contracting State through a permanent establishment

situated therein, there shall in each Contracting State be attributed to that permanent

establishment the profits that it might be expected to make if it were a distinct and independent

person engaged in the same or similar activities under the same or similar conditions, and dealing

wholly independently with the enterprise of which it is a permanent establishment and any other

enterprise that is an associated enterprise within the meaning of Article 9 (Associated

Enterprises).

3. In determining the business profits of a permanent establishment, there shall be allowed as

deductions expenses that are incurred for the purposes of the permanent establishment including

executive and general administrative expenses so incurred, whether in the State in which the

permanent establishment is situated or elsewhere. However, no such deduction shall be allowed

in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by

the permanent establishment to the head office of the enterprise or any of its other offices, by

way of royalties, fees or other similar payments in return for the use of patents or other rights, or

by way of commission, for specific services performed or for management, or by way of interest

on moneys lent to the permanent establishment.

4. The business profits attributed to a permanent establishment shall be determined by the

same method year by year unless there is good and sufficient reason to the contrary.

5. No business profits shall be attributed to a permanent establishment by reason of the mere

purchase by that permanent establishment of goods or merchandise for the resident.

6. For purposes of this Article, the term "business profits" means profits derived from the

active conduct of business. It includes, for example, profits from manufacturing, mercantile,

fishing, transportation, communication, or extractive activities, from the rental of tangible

movable property, and from the furnishing of services of another person. It does not include

income received by an individual for his performance of personal services (either as an employee

or in an independent capacity). Income of an individual from the performance of services as an

employee is dealt within Article 15 (Dependent personal Services). Income of an individual from

the performance of services in an independent capacity is dealt within Article 14 (Independent

personal Services).

7. Where business profits include items of income which are dealt with separately in other

Articles of the Convention, then the provisions of those Articles shall not be affected by the

provisions of this Article.

ARTICLE 8

Shipping and Air Transport

1. Income of a resident of a Contracting State from the operation of ships or aircraft in

international traffic shall be taxable only in that State.

2. Income of a resident of a Contracting State from the following activities shall be taxable

only in that State:

a) income from the rental of ships or aircraft operated in international traffic by

the lessee;

b) income from the rental of ships and aircraft, whether or not operated in

international traffic, if such rental activity is incidental to the operation of ships or aircraft

in international traffic by the lessor;

c) income (including demurrage) from the use, or rental for use, of containers in

international traffic (including trailers, barges, and related equipment for the transport of

containers), and gain from the alienation of such containers and related equipment, if

such gain is incidental to the income described in this subparagraph (c); and

d) gain from the alienation of ships or aircraft operated in international traffic, if

such gain is incidental to income from the operation of ships or aircraft in international

traffic.

3. The provisions of paragraphs 1 and 2 shall also apply to income from participation in a

pool, a joint business, or an international transportation agency.

ARTICLE 9

Associated Enterprises

1. Where:

a) a person which is a resident of a Contracting State participates directly or

indirectly in the management, control or capital of a person which is a resident of the

other Contracting State; or

b) the same persons participate directly or indirectly in the management, control

or capital of a resident of a Contracting State and any other person;

and in either case conditions are made or imposed between the two persons in their commercial

or financial relations which differ from those which would be made between independent

persons, then any income which would have accrued to one of the persons, but by reason of

those conditions has not so accrued, may be included in the income of that person and taxed

accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State, and taxes

accordingly, profits on which an enterprise of the other Contracting State has been charged to tax

in that other State, and the profits so included are profits which would have accrued to the

enterprise of the first-mentioned State if the conditions made between the two enterprises had

been those which would have been made between independent enterprises, then that other State

shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In

determining such adjustment, due regard shall be paid to the other provisions of this Convention

and the competent authorities of the Contracting States shall if necessary consult each other.

3. The provisions of paragraph 1 shall not limit either Contracting State in applying its

domestic law to make adjustments to income, deductions, credits, or allowances between

persons, whether or not residents of a Contracting State, when necessary to prevent evasion of

taxes or clearly to reflect the income of any such persons.

ARTICLE 10

Dividends

1. Dividends that are paid by a company that is a resident of a contracting State and that are

beneficially owned by a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the first Contracting State, and according to

the laws of that State, but the tax so charged shall not exceed:

a) 5 percent of the gross amount of the dividends, if the beneficial owner is a

company that owns at least 10 percent of the voting stock (or, if the company does not

have voting stock, at least 10 percent of the authorized capital) and, in the case of

Ukraine, nonresidents of Ukraine own at least 20 percent of the voting stock (or if the

company does not have voting stock, at least 20 percent of the authorized capital);

b) 15 percent of the gross amount of the dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits out of which

the dividends are paid.

3. The term "dividends" as used in this Article means income from shares or other rights, not

being debt-claims, participating in profits, as well as income from other corporate rights which is

subjected to the same taxation treatment as income from shares by the laws of the State of which

the company making the distribution is a resident. The term "dividends" also includes income

from arrangements, including debt obligations, carrying the right to participate in profits, to the

extent so characterized under the law of the Contracting State in which the income arises. In the

case of Ukraine, this term includes income transmitted abroad to the foreign participants of a

joint venture created under the laws of Ukraine.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the

dividends, being a resident of a Contracting State, carries on or has carried on business in the

other Contracting State, of which the company paying the dividends is a resident, through a

permanent establishment situated therein, or performs or has performed in that other State

independent personal services from a fixed base situated therein, and the dividends are

attributable to such permanent establishment or fixed base. In such case the provisions of Article

7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall

apply.

5. A company that is a resident of a Contracting State and that has a permanent establishment

in the other Contracting State or that is subject to tax on a net basis in that other State under

Article 6 (Income from Real Property) or paragraphs 1. or 2 of Article 13 (Gains from the

Alienation of Property) may be subject in that other State to a tax in addition to the tax on profits.

Such tax, however, may not exceed 5 percent of the portion of the profits after deducting the

taxes imposed on profits imposed thereon in that other State and after adjustment for increases or

decreases in the assets of the company subject to tax in the other Contracting State that

represents the "dividend equivalent amount" of such profits.

ARTICLE 11

Interest

1. Interest derived and beneficially owned by a resident of a Contracting State may be taxed

only in that State.

2. The term "interest" as used in this Convention means income from debt-claims of every

kind, whether or not secured by mortgage and unless described in paragraph 3 of Article 10

(Dividends), whether or not carrying a right to participate in the debtor's profits, and in

particular, income from government securities, and income from bonds or debentures, including

premiums or prizes attaching to such securities, bonds, or debentures as well as all other income

that is treated as income from money lent by the taxation law of the Contracting State in which

the income arises.

3. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being

a resident of a Contracting State, carries on or has carried on business in the other Contracting

State through a permanent establishment situated therein, or performs or has performed in that

other state independent personal services from a fixed base situated therein, and the interest is

attributable to such permanent establishment or fixed base. In such case the provisions of Article

7 (Business Profits) or Article 14 (Independent personal Services), as the case may be, shall

apply.

4. Where, by reason of a special relationship between the payer and the beneficial owner or

between both of them and some other person, the amount of the interest, having regard to the

debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the

payer and the beneficial owner in the absence of such relationship, the provisions of this Article

shall apply only to the last-mentioned amount. In such case the excess part of the payments shall

be taxable according to the laws of each Contracting State, due regard being had to the other

provisions of the Convention.

ARTICLE 12

Royalties

1. Royalties beneficially owned by a resident of a contracting State may be taxed in that

State.

2. However, such royalties may also be taxed in the Contracting State in which they arise and

according to the laws of that State, but if the beneficial owner is a resident of the other

contracting State the tax so charged shall not exceed 10 percent of the gross amount of the

royalties.

3. The term "royalties" as used in this Convention means payments of any kind received as a

consideration for the use of, or the right to use, any copyright of literary, artistic, or scientific

work, including computer programs, videocassettes, and cinematograph films and tapes for radio

and television broadcasting; any patent, trademark, design or model, plan, secret formula or

process, or other like right or property; or information concerning industrial, commercial, or

scientific experience.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the

royalties, being a resident of a contracting State, carries on or has carried on business in the other

Contracting State through a permanent establishment situated therein, or performs or has

performed in that other State independent personal services from a fixed base situated therein,

and the right or property in respect of which the royalties are paid is effectively connected with

such permanent establishment or fixed base. In such case the provisions of Article 7 (Business

Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.

5. a) Royalties shall be deemed to arise in a Contracting State when the payer is that

State itself, a political subdivision, a local authority or a resident of that State. However,

where the person paying the royalties, whether he is a resident of a Contracting State or

not, has in a Contracting State a permanent establishment or a fixed base in connection

with which the liability to pay the royalties was incurred, and such royalties are borne by

such permanent establishment or fixed base, then such royalties shall be deemed to arise

in that State in which the permanent establishment or fixed base is situated.

b) where subparagraph a) does not operate to deem royalties as arising in either

Contracting State and the royalties relate to the use of, or the right to use, in one of the

Contracting States any property or right described in paragraph 3, they shall be deemed to

arise in that State.

6. Where, by reason of a special relationship between the payer and the beneficial owner or

between both of them and some other person, the amount of the royalties, having regard to the

use, right, or information for which they are paid, exceeds the amount which would have been

agreed upon by the payer and the beneficial owner in the absence of such relationship, the

provisions of this Article shall apply only to the last-mentioned amount. In such case the excess

part of the payments shall be taxable according to the laws of each contracting State, due regard

being had to the other provisions of the Convention.

ARTICLE 13

Gains from the Alienation of Property

1. Gains derived by a resident of a Contracting State from the alienation of real property

referred to in Article 6 (Income from Real Property) and situated in the other Contracting State

may be taxed in that other State.

2. Gains from the alienation of:

a) shares of the stock of a company (whether or not a resident of a Contracting

State) the property of which consists principally of real property situated in a Contracting

State; or

b) a participation in a partnership, trust, or estate (whether or not a resident of a

Contracting State) to the extent attributable to real property situated in a Contracting

State

may be taxed in that State. For the purposes of this paragraph, the term "real property" includes

the shares of company referred to in subparagraph (a) or a participation in a partnership, trust, or

estate referred to in subparagraph (b), and in the case of the United States includes a United

States real property interest, as defined in section 897 of the Internal Revenue Code (or any

successor statute).

3. Gains from the alienation of personal property that are attributable to a permanent

establishment which an enterprise of a Contracting State has in the other Contracting State, or

that are attributable to a fixed base available to a resident of a Contracting State in the other

Contracting State for the purpose of performing independent personal services, and gains from

the alienation of such a permanent establishment (alone or with the whole enterprise) or such a

fixed base, may be taxed in that other State.

4. Gains from the alienation of any property other than property referred to in paragraphs 1

through 3 shall be taxable only in the Contracting State of which the alienator is a resident.

ARTICLE 14

Independent Personal Services

1. Income derived by an individual who is a resident of a Contracting State from the

performance of personal services in an independent capacity shall be taxable only in that State,

unless

a) such services are performed or were performed in the other Contracting State;

and

b) the income is attributable to a fixed base that the individual has or had

regularly available to him in that other State.

In such a case, the income attributable to that fixed base may be taxed in that other State in

accordance with principles similar to those of Article 7 (Business profits) for determining the

amount of business profits and attributing business profits to a permanent establishment.

2. The term "independent personal services" includes especially independent scientific,

literary, artistic, educational or teaching activities, as well as the independent services of

physicians, lawyers, engineers, architects, dentists, and accountants.

ARTICLE 15

Dependent Personal Services

1. Subject to the provisions of Articles 18 (Government Service) , and 19 (pensions) ,

salaries, wages, and other similar remuneration derived by a resident of a Contracting State in

respect of an employment shall be taxable only in that State unless the employment is exercised

in the other Contracting State. If the employment is so exercised, such remuneration as is derived

therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a

resident of a Contracting State in respect of an employment exercised in the other Contracting

State shall be taxable only in the first-mentioned State if

a) the recipient is present in the other State for a period or periods not exceeding

in the aggregate 163 days in the taxable year concerned; and

b) the remuneration is paid by, or on behalf of, an employer Who is not a resident

of the other State; and

c) the remuneration is not borne by a permanent establishment or a fixed base that

the employer has in the other State.

3. Remuneration derived by a resident of a Contracting State that would otherwise be taxable

in the other Contracting State under the preceding provisions of this Article may be taxed only

in' the first-mentioned State when the remuneration is in respect of employment as a member of

the regular complement of a ship or aircraft operated in international traffic.

ARTICLE 16

Directors' Fees

Directors' fees and similar payments derived by a resident of a Contracting State in his

capacity as a member of the board of directors or similar body of a company that is a resident of

the other Contracting State may be taxed in that other State except to the extent that they are

remuneration for services rendered in the first-mentioned State.

ARTICLE 17

Artistes and Sportsmen

1. Notwithstanding the provisions of Articles 14 (Independent Personal Services) and 15

(Dependent Personal Services), income derived by a resident of a Contracting State as an

entertainer, such as a theater, motion picture, radio or television artiste, or a musician, or as a

sportsman, from his personal activities as such exercised in the other Contracting State, may be

taxed in that other State.

2. Where income in respect of activities exercised by an entertainer or a sportsman in his

capacity as such accrues not to the entertainer or sportsman himself but to another person, that

income may, notwithstanding the provisions of Articles 7 (Business Profits), 14 (Independent

Personal Services) and 15 (Dependent Personal Services), be taxed in the Contracting State in

which the activities of the entertainer or sportsman are exercised. or purposes of the preceding

sentence, income of an entertainer or sportsman shall be deemed not to accrue to another person

if it is established that neither the entertainer or sportsman, nor persons related thereto,

participate directly or indirectly in the profits of such other person in any manner, including the

receipt of deferred remuneration, bonuses, fees, dividends, partnership distributions or other

distributions.

3. Notwithstanding the provisions of paragraphs 1 and 2, income derived by a resident of a

Contracting State as an entertainer or sportsman shall be exempt from tax by the other

Contracting State if the visit to that other State is substantially supported by public funds of the

first-mentioned State or a political subdivision or local authority thereof or is made pursuant to a

specific arrangement agreed to by the Governments of the Contracting States.

ARTICLE 18

Government Service

1. a) Remuneration, Other than a pension, paid from the public funds of a

Contracting State, a political subdivision or local authority thereof to an individual in

respect of services rendered in the discharge of functions of a governmental nature shall

be taxable only in that State.

b) However, such remuneration shall be taxable only in the other Contracting

State if the services are rendered in that State and the individual is a resident of that State

who:

i) is a citizen of that State, or

ii) did not become a resident of that State solely for the purpose of

rendering the services.

2. a) Any pension paid by, or out of funds created by, a Contracting State, a political

subdivision or local authority of that State to an individual in respect of services rendered

to that State, subdivision, or authority shall be taxable only in that State.

b) However, such pension may also be taxed in the other Contracting State if the

individual is a resident of, and a citizen of, that other State.

3. Notwithstanding the provisions of paragraphs 1 and 2, the provisions of Article 14

(Independent Personal Services), Article 15 (Dependent Personal Services), or Article 19

(Pensions), as the case may be, shall apply to remuneration paid in respect of services rendered

in connection with a business.

ARTICLE 19

Pensions

1. Social security benefits and other public pensions paid by a Contracting State, other than

in consideration of past employment, may be taxed only in that State.

2. Subject to the provisions of Article 18 (Government Service), pensions and other similar

remuneration derived and beneficially owned by a resident of a Contracting State in

consideration of past employment may be taxed only in that State.

ARTICLE 20

Students, Trainees and Researchers

1. An individual who is a resident of a Contracting State at the beginning of his visit to the

other Contracting State and who is temporarily present in that other State for the primary purpose

of:

a) studying at a university or other accredited educational institution in that other

State, or

b) securing training required to qualify him to practice a profession or

professional specialty, or

c) studying or doing research as a recipient of a grant, allowance, or other similar

payments from a governmental, religious, charitable, scientific, literary, or educational

organization,

shall be exempt from tax by that other State with respect to payments from abroad for the

purpose of his maintenance, education, study, research, or training, and with respect to the grant,

allowance, or other similar payments.

2. The exemption in paragraph 1 shall apply only for such period of time as is ordinarily

necessary to complete the study, training or research, except that no exemption for training or

research shall extend for a period exceeding five years.

3. This Article shall not apply to income from research if such research is undertaken not in

the public interest but primarily for the private benefit of a specific person or persons.

ARTICLE 21

Other Income

1. Items of income of a resident of a Contracting State, wherever arising, not dealt within the

foregoing Articles of this Convention shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income if the beneficial owner of the

income, being a resident of a Contracting State, carries on or has carried on business in the other

Contracting State through a permanent establishment situated therein, or performs or has

performed in that other State personal services in an independent capacity from a fixed base

situated therein, and the income is attributable to such permanent establishment or fixed base. In

such case the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal

Services), as the case may be, shall apply.

ARTICLE 22

Limitation on Benefits

1. A person that is a resident of a Contracting State and derives income from the other

Contracting State shall be entitled under this Convention to relief from taxation in that other

State only if such person is:

a) an individual;

b) engaged in the active conduct of business in the first-mentioned State (other

than the business of making or managing investments, unless these activities are banking

or insurance activities carried on by a bank or insurance company), and the income

derived from that other State is connected with, or is incidental to, that business;

c) a company the shares of which are traded in the first-mentioned State' on a

substantial and regular basis on an officially recognized securities exchange or a

company which is wholly owned, directly or indirectly, by another company that is a

resident of the first-mentioned State and the shares of which are so traded;

d) a not-for-profit organization that is generally exempt from income taxation in

its Contracting State of residence, provided that more than half of the beneficiaries,

members or participants, if any, in such organization are entitled, under this Article, to

the benefits of this Convention; or

e) a person that satisfies both of the following conditions:

i) more than 50 percent of the beneficial interest in such person, or in the

case of a company, more than 50 percent of the number of shares of each class of

the company

s shares; is owned directly or indirectly by persons entitled to the

benefits of this Convention under subparagraphs a), c) or d), and

ii) not more than 50 percent of the gross income of such person is used,

directly or indirectly, to meet liabilities (including liabilities for interest or

royalties) to persons not entitled to the benefits of this Convention under

subparagraphs a), c) or d).

2. A person that is not entitled to the benefits of the Convention pursuant to the provisions of

paragraph 1 may, nevertheless, be granted the benefits of the Convention if the competent

authority of the State in which the income arises so determines.

3. For purposes of subparagraph (e) (ii) of paragraph 1, the term "gross income" means gross

receipts, or where a person is engaged in a business which includes the manufacture or

production of goods, gross receipts reduced by the direct costs of labor and materials attributable

to such manufacture or production and paid or payable out of such receipts.

ARTICLE 23

Property

1. Real property referred to in Article 6 (Income from Real Property) owned by a resident of

a Contracting State and situated in the other Contracting State, may be taxed in that other State.

2. Movable property forming part of the business property of a permanent establishment

which a resident of a Contracting State has in the other Contracting State, or by movable

property pertaining to a fixed base available to a resident of a Contracting State in the other

Contracting State for the purpose of performing independent personal services, may be taxed in

that other State.

3. Ships, aircraft, and containers owned by a resident of a Contracting State and operated in

international traffic, and movable property pertaining to the operation of such ships, aircraft, and

containers shall be taxable only in that State.

4. All other elements of property of a resident of a Contracting State shall be taxable only in

that State.

ARTICLE 24

Relief from Double Taxation

In accordance with the provisions and subject to the limitations of the law of each

Contracting State (as it may be amended from time to time without changing the general

principle hereof), each State shall allow to its residents (and, in the case of the United States, its

citizens), as a credit against the tax on income, the income tax paid to the other Contracting State

by such residents (and, in the case of the United States, also such citizens).

ARTICLE 25

Non-discrimination

1. A citizen of a Contracting State shall not be subjected in the other Contracting State to any

taxation or any requirement connected, therewith which is other or more burdensome than the

taxation and connected requirements to which a citizen of that other State or of a third State, who

is in the same circumstances, is or may be subjected. This provision shall apply to persons who

are not residents of one or both of the Contracting States.

2. A resident of a Contracting State that has a permanent establishment in the other

Contracting State shall not, in that other State and with respect to income attributable to that

permanent establishment, be subjected to more burdensome taxes than are generally imposed on

residents of that other State or of a third State that are carrying on the same activities.

3. Except where the provisions of paragraph 1 of Article 9 (Associated Enterprises),

paragraph 4 of Article 11 (Interest), or paragraph 6 of Article 12 (Royalties) apply, interest,

royalties, and other disbursements paid by a resident of a Contracting State to a resident of the

other Contracting State shall, for the purposes of determining the taxable profits of the first-

mentioned resident, be deductible under the same conditions as if they had been paid to a

resident of the first-mentioned State. Similarly, any debts of a resident of a Contracting State to a

resident of the other Contracting State shall, for the purposes of determining the taxable capital

of the first-mentioned resident, be deductible under the same conditions as if they had been

contracted to a resident of the first-mentioned State.

4. A company that is a resident of a Contracting State, the capital of which is wholly or partly

owned or controlled, directly or indirectly, by one or more residents of the other Contracting

State, shall not be subjected in the first-mentioned State to any taxation or any requirement

connected therewith that is more burdensome than the taxation and connected requirements to

which other similar companies that are residents of the first-mentioned State (whether owned by

residents of that State or of a third State) are or may be subjected.

5. Nothing in this Article shall prevent a Contracting State from imposing the tax described

in paragraph 5 of Article 10 (Dividends).

6. This provision shall not be construed as obliging a Contracting State to grant to citizens or

residents of the other Contracting State tax benefits granted by special agreements to citizens or

residents of 'a third State.

7. The provisions of this Article, notwithstanding the provisions of Article 2 (Taxes

Covered), shall apply to taxes of every kind and description imposed by a Contracting State or a

political subdivision or local authority thereof.

ARTICLE 26

Mutual Agreement Procedure

1. Where a person considers that the actions of one or both of the Contracting States result or

will result for him in taxation not in accordance with the provisions of this Convention, he may,

irrespective of the remedies provided by the domestic law of those States, present his case to the

competent authority of the Contracting State of which he is a resident or citizen.

2. The competent authority shall endeavor, if the objection appears to it to be justified and if

it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement

with the competent authority of the other Contracting State, with a view to the avoidance of

taxation which is not in accordance with the Convention. Any agreement reached shall be

implemented notwithstanding any time limits or other procedural limitations in the domestic law

of the Contracting States.

3. The competent authorities of the Contracting States shall endeavor to resolve by mutual

agreement any difficulties or doubts arising as to the interpretation or application of the

Convention. In particular the competent authorities of the Contracting States may agree:

a) to the same attribution of income, deductions, credits, or allowances of a

resident of a Contracting State to its permanent establishment situated in the other

Contracting State;

b) to the same allocation of income, deductions, credits, or allowances between

persons;

c) to the same characterization of particular items of income;

d) to the same application of source rules with respect to particular items of

income; and

e) to a common meaning of a term.

They may also consult together for the elimination of double taxation in cases not provided for in

the Convention.

4. The competent authorities of the Contracting States may communicate with each other

directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

ARTICLE 27

Exchange of Information

1. The competent authorities of the Contracting States shall exchange such information as is

necessary for carrying out the provisions of this Convention or of the domestic laws of the

Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder

is not contrary to the Convention. The exchange of information is not restricted by Article 1

(General Scope). Any information received by a Contracting State shall be treated as confidential

in the same manner as information obtained under the domestic laws of that State and shall be

disclosed only to persons or authorities (including courts and administrative bodies) involved in

the assessment, collection, or administration of, the enforcement or prosecution in respect of, or

the determination of appeals in relation to, the taxes covered by the Convention. Such persons or

authorities shall use the information only for such purposes. They may disclose the information

in public court proceedings or in judicial decisions.

2. In no case shall the provisions of paragraph 1 be construed so as to impose on a

Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and

administrative practice of that or of the other Contracting State;

b) to supply information which is not obtainable under the laws or in the normal

course of the administration of that or of the other Contracting State;

c) to supply information which would disclose any trade, business, industrial,

commercial, or professional secret or trade process, or information the disclosure of

which would be contrary to public policy.

3. If information is requested by a Contracting State in accordance with this Article, the other

Contracting State shall obtain the information to which the request relates in the same manner

and to the same extent as if the tax of the first-mentioned State were the tax of that other State

and were being imposed by that other State. If specifically requested by the competent authority

of a Contracting State, the competent authority of the other Contracting State shall provide

information under this Article in the form of depositions of witnesses and authenticated copies of

complete original documents (including books, papers, statements, records, accounts, and

writings), to the same extent such depositions and documents can be obtained under the laws and

administrative practices of that other State with respect to its own taxes.

4. For the purposes of this Article, the Convention shall apply, notwithstanding the

provisions of Article 2 (Taxes Covered), to taxes of every kind imposed by a Contracting State.

ARTICLE 28

Diplomatic Agents and Consular Officers

Nothing in this Convention shall affect the fiscal privileges of members of diplomatic

missions and consular officers or employees of a consular establishment under the general rules

of international law or under the provisions of special agreements.

ARTICLE 29

Entry into Force

1. This Convention shall be subject to ratification in each Contracting State and instruments

of ratification shall be exchanged at Kiev as soon as possible.

2. The Convention shall enter into force on the date of the exchange of instruments of

ratification and its provisions shall have effect:

a) in respect of taxes withheld at source on dividends, interest or royalties, for

amounts paid or credited on or after the first day of the second month following the

month in which the Convention enters into force;

b) in respect of other taxes, for taxable periods beginning on or after the first of

January following the date on which the Convention enters into force.

3. The Convention between the United States of America and the Union of Soviet Socialist

Republics on Matters of Taxation, signed on June 20, 1973, ("the l973 Convention") shall cease

to have effect when the provisions of this Convention take effect in accordance with this Article.

4. Where any greater relief from tax would have been afforded to a person entitled to the

benefits of the 1973 Convention under that Convention than under this Convention, the 1973

Convention shall, at the election of such person, continue to have effect in its entirety for the first

taxable year with respect to which the provisions of this Convention would otherwise have effect

under paragraph 2; or, in the case of a person claiming the benefits of Article III (1) (d) of the

1973 Convention at the time of entry into force of this Convention, the 1973 Convention shall, at

the election of such person continue to have effect, in its entirety, for the duration of the period

of benefits provided by that subparagraph.

ARTICLE 30

Termination

1. This Convention shall remain in force until terminated by a Contracting State. Either

contracting State may terminate the Convention at any time after 5 years from the date on which

the Convention enters into force, by giving, through diplomatic channels, at least 6 months prior

notice of termination in writing. In such event, the Convention shall cease to have effect:

a) in respect of taxes withheld at source, for amounts paid or credited on or after

the first of January following the expiration of the 6-month period;

b) in respect of other taxes, for taxable periods beginning on or after the first of

January following the expiration of the 6 month period.

IN WITNESS WHEREOF, the undersigned, being duly authorized by their respective

Governments, have signed this Convention.

DONE at Washington, this fourth day of March, 1994, in duplicate, in the English and

Ukrainian languages, both texts being equally authentic.

FOR THE GOVERNMENT OF THE FOR THE GOVERNMENT OF

UNITED STATES OF AMERICA: UKRAINE:

(s) William J. Clinton (s) Leonid Kravchuk

PROTOCOL

At the signing today of the Convention between the Government of the United States of

America and the Government of Ukraine for the Avoidance of Double Taxation and the

Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, the undersigned have

agreed upon the following provisions, which shall form an integral part of the Convention:

1. With regard to Article 4,

In the case of income derived by a partnership, trust, or estate, residence is determined in

accordance with the residence of the person liable to tax with respect to such income.

2. With regard to Article 7,

(a) A Contracting State's right to impose tax under Article 7 on a resident of the

other Contracting State extends only to profits attributable to a permanent establishment

in the first State. A resident of the other State may earn income from more than one

investment or activity; under Article 7, income from any particular investment or activity,

whether from a source in the first State or elsewhere, must be separately tested to

determine whether it may be included in profit attributable to a permanent establishment

in the first State.

Whether profits are attributable to a permanent establishment is determined on the basis of

the actual facts of an investment. In particular, profits are attributable to a permanent

establishment only if the profits are derived from the assets employed by, or the activities

engaged in by, the permanent establishment. Profits derived from other assets or activities are not

attributable to the permanent establishment.

Example. A company resident in a contracting State is engaged in oil and gas exploration,

development and production activities on a worldwide basis. The company is producing

oil and gas through wells located in the other Contracting State. The company is also

engaged in exploration in the other State. The exploration activities are not carried on at

the site of the wells, are not conducted by the employees of the well sites, do not use

assets from the well site and are concluded within 6 months. The company also

occasionally rents drilling equipment not currently being used in its exploration activities

to third parties for use in the other State. Under subparagraph 2(f) of Article 5, the wells

located in the other State constitute a permanent establishment; the profits attributable to

that permanent establishment may be taxed by the other State under Article 7. Under

paragraph 3 of Article 5, the exploration activities do not constitute a permanent

establishment in the other State, and the expenses associated with such activities may not

be deducted in determining the profits from the wells taxable in the other State. The

rental of the drilling equipment does not constitute a permanent establishment in the other

State, and the income from such rental is not derived from the assets or activities of the

well site. The rental income is therefore not taxable in the other State.

(b) A resident of a Contracting State maintaining a permanent establishment in the

other Contracting State may also maintain offices in other countries, including a home

office in the first State and offices in third countries. In computing the profits of the

permanent establishment, properly substantiated payments to third parties by the home

office or by offices in third countries should be taken into account to the extent such

payments relate to the assets or activities of the permanent establishment, or to the extent

that such payments relate to the assets or activities of the resident as a whole and are

reasonably allocable to the permanent establishment. It is not necessary that such

payments actually be reimbursed by the permanent establishment to the home offices or

the office in the third country.

3. With regard to Article 10,

In the case of dividends from a United States Regulated Investment Company, subparagraph

(b), and not subparagraph (a), of paragraph 2 shall apply. In the case of dividends from a United

States Real Estate Investment Trust, the rate of tax applicable under domestic law shall apply.

4. With regard to Article 11,

Notwithstanding the provisions of paragraph 1, the United States may tax an excess inclusion

with respect to a Real Estate Mortgage Investment Conduit ("REMIC") in accordance with its

domestic law.

5. With regard to Article 14,

Taxes withheld at the source in a Contracting State at the rates provided by domestic law will

be refunded in a timely manner on application by the taxpayer if the right to collect the said taxes

is limited by the provisions of the Convention, including Article 14.

6. With regard to Article 22,

The term "officially recognized securities exchange" means the NASDAQ System owned by

the National Association of Securities Dealers, Inc., of the United States, any stock exchange

registered with the U.S. Securities Exchange Commission as a national securities exchange for

purposes of the Securities Exchange Act of 1934, and any other exchanges agreed to by the

competent authorities of both Contracting States.

7. With regard to Article 24,

(a) Ukraine agrees that:

i) an entity 'that is a resident of Ukraine and at least 20 percent

beneficially owned by residents of the United States and that has total corporate

capital of at least $100,000 (or the equivalent in Ukrainian currency),

ii) a permanent establishment in Ukraine of a United States resident, or

iii) an individual who is a U.S. citizen or resident and who carries on

activities in Ukraine as an entrepreneur (other than as a juridical person),

shall, in computing the taxes covered in paragraph 1(b) of Article 2 (Taxes Covered), be

permitted deductions for interest (whether paid to a bank or another person and without regard to

the term of the loan) and for actual wages and other remuneration for personal services (provided

by persons other than an entrepreneur referred to in subparagraph (iii), above). Based on the

above, the United States agrees that such taxes are income taxes for purposes of Article 24

(Relief from Double Taxation).

b) The 20 percent beneficial ownership requirement referred to in subparagraph

(a) (i) may be owned indirectly by residents of the United States but only if the indirect

ownership is through residents of the United States or Ukraine.

c) For purposes of this Article, the U.S. recipient of a dividend, interest, or a

royalty that may be taxed by Ukraine in accordance with Articles 10 (Dividends), 11

(Interest) or 12 (Royalties) shall be deemed to be liable for such tax if such recipient

elects to include in his (or its) gross income for the purposes of United States tax the

amounts of such tax paid to Ukraine.

d) Both sides agree that a "fictitious" or "tax sparing" credit shall not be required

for taxes that were forgiven as part of an incentive program under which one Contracting

State grants a tax holiday to a resident of the other Contracting State. However, the

Convention shall be promptly amended to incorporate a tax sparing credit provision if the

United States hereafter amends its laws to authorize the provision of such credits, or if the

United States reaches agreement on the provision of a tax sparing credit with any other

country. It is understood that such amendment would be subject to ratification by each

Contracting State.

NOTES OF EXCHANGE

EXCHANGE OF NOTES RELATING TO THE TAX CONVENTION WITH UKRAINE

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

TRANSMITTING

AN EXCHANGE OF NOTES DATED AT WASHINGTON MAY 26 AND JUNE 6, 1995,

RELATING TO THE CONVENTION (SEE TREATY DOC. 10-30)

BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA

AND THE GOVERNMENT OF UKRAINE FOR THE AVOIDANCE OF DOUBLE

TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT

TO TAXES ON INCOME AND CAPITAL, TOGETHER WITH A RELATED PROTOCOL,

SIGNED AT WASHINGTON ON MARCH 4, 1994

LETTER OF SUBMITTAL

DEPARTMENT OF STATE,

Washington, June 10, 1995.

The PRESIDENT,

The White House.

THE PRESIDENT: I have the honor to submit to you an exchange of notes, dated at

Washington May 26 and June 6, 1995, with a view to transmission of these notes to the Senate

for advice and consent to ratification in connection with the Senate's consideration of the

Convention between the Government of the United States of America and the Government of

Ukraine for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with

Respect to Taxes on Income and Capital, together with a related Protocol, signed at Washington

on March 4, 1994 (the "Taxation Convention"). This exchange of notes addresses the interaction

between the Taxation Convention and other treaties and agreements that have provisions

affecting taxes.

The United States is a party to the General Agreement on Trade in Services ("GATS"),

annexed to the Agreement Establishing the World Trade Organization, done at Marrakesh April

15, 1994. GATS entered into force on January 1, 1995. Although the United States is a party to

GATS, the Government of Ukraine is not yet a party. The exchange of notes ensures first that, if

Ukraine accedes to the GATS and GATS obligations become applicable between the United

States and Ukraine, the dispute resolution mechanisms of the Taxation Convention would govern

national treatment disputes regarding taxation measures. The exchange of notes further provides

that the non-discrimination provisions of the Taxation Convention, rather than the national or

most-favored-nation treatment obligations of any other agreement (except for the General

Agreement on Tariffs and Trade, if it applies between the United States and Ukraine, and the

Agreement on Trade Relations Between the United States and Ukraine, signed on May 6, 1992)

will apply to taxation measures except those outside the scope of the Taxation Convention.

Provisions similar to those in this exchange of notes are included in the taxation conventions

between the United States and Portugal, Sweden, and France, which have been transmitted to the

Senate.

The Department of Treasury and the Department of State cooperated in the negotiation of the

Convention and the most recent exchange of notes. The notes have the full approval of both

Departments.

Respectfully submitted,

PETER TARNOFF.

LETTER OF TRANSMITTAL

THE WHITE HOUSE, June 28, 1995.

To the Senate of the United States:

I transmit herewith an exchange of notes dated at Washington May 26 and June 6, 1995, for

Senate advice and consent to ratification in connection with the Senate's consideration of the

Convention Between the Government of the United States of America and the Government of

Ukraine for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with

Respect to Taxes on Income and Capital, together with a related Protocol, signed at Washington

on March 4, 1994 ("the Taxation Convention"). Also transmitted for the information of the

Senate is the report of the Department of State with respect to the exchange of notes.

This exchange of notes addresses the interaction between the Taxation Convention and other

treaties that have tax provisions, including in particular the General Agreement on Trade in

Services (GATS), annexed to the Agreement Establishing the World Trade Organization, done at

Marrakesh April 15, 1994.

I recommend that the Senate give favorable consideration to this exchange of notes and give

its advice and consent to ratification in connection with the Taxation Convention.

WILLIAM J. CLINTON.

DEPARTMENT OF STATE,

Washington, May 26, 1995.

His Excellency YURIY SHCHERBAK,

Ambassador of Ukraine.

EXCELLENCY: I have the honor to refer to the Convention between the Government of the

United States of America and the Government of Ukraine for the Avoidance of Double Taxation

and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, together with

a related Protocol, signed at Washington on March 4, 1994 ('Taxation Convention") and the

General Agreement on Trade in Services ("GATS").

The Government of the United States is a Party to the GATS, annexed to the Agreement

Establishing the World Trade Organization, done at Marrakesh April 15, 1994. The Government

of Ukraine is not yet a party to the GATS. The United States and Ukraine have, however,

considered the relationship between the Taxation Convention and the GATS in the event that the

GATS applies between them, particularly with regard to the Consultation provision in Article

XXII of the GATS and the Most-Favored-Nation and National Treatment provisions in Articles

II and XVII of the GATS. In addition, the United States and Ukraine have considered the

relationship between the Taxation Convention and other agreements that apply between them

and that have provisions concerning national treatment or most-favored-nation treatment.

To address these issues, I have the honor to propose that:

(1) notwithstanding Article XXII and footnote 11 of the GATS, in the event that the GATS

applies between the United States and Ukraine, a dispute concerning whether a measure is within

the scope of the Taxation Convention shall be considered only pursuant to Article 26 (Mutual

Agreement Procedure) of the Taxation Convention by the competent authorities of the United

States and Ukraine as defined in subparagraph 1(j) of Article 3 (General Definitions); and

(2) unless the competent authorities determine that a taxation measure is not within the scope

of the Taxation Convention, national treatment or most-favored-nation obligations under any

other agreement (including GATS in the event that it applies between the United States and

Ukraine) shall not apply a taxation measure, except for such national treatment or most-favored-

nation obligations as may apply to trade in goods under the Agreement on Trade Relations

between the United States and Ukraine, signed on May 6, 1992, and the General Agreement on

Tariffs and Trade if it applies between the United States and Ukraine.

If this proposal is acceptable to the Government of Ukraine, I have the further honor to

propose that this note, and your Government's note in reply, shall constitute an agreement which

shall enter into force on the date the Taxation Convention enters into force.

Accept, Excellency, the renewed assurances of my highest consideration.

For the Secretary of State:

ALAN LARSON.

EMBASSY OF UKRAINE

# 430 June 6, 1995

His Excellency

Warren CHRISTOPHER,

Secretary of State

Excellency:

I have the honor to refer to your note of May 26, 1995, concerning the Convention between

the Government of the United States of America and the Government of Ukraine for the

Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on

Income and Capital, together with a related Protocol, signed at Washington on March 4, 1994

("Taxation Convention") and the General Agreement on Trade in Services ("GATS")

The proposal as contained in your aforementioned note reads as follows:

"(1) Notwithstanding article XXII and footnote 11 of the GATS, in the event that the GATS

applies between the United States and Ukraine, a dispute concerning whether a measure is

within the scope of the Taxation Convention shall be considered only pursuant to Article 26

(Mutual Agreement Procedure) of the Taxation Convention by the competent authorities of the

United States and Ukraine as defined in Subparagraph 1(J) of Article 3 (General Definitions);

and

(2) Unless the competent authorities determine that a taxation measure is not within the

scope of the Taxation Convention, national treatment or most-favored-nation obligations under

any other Agreement (including GATS in the event that it applies between the United States and

Ukraine) shall not apply to' a taxation measure, except for such national treatment or most-

favored-nation obligations as may apply to trade in goods under the Agreement on Trade

Relations between the United States and Ukraine, signed on May 6, 1992, and the General

Agreement on Tariffs and Trade if it applies between the United States and Ukraine".

I am pleased to confirm that this proposal is acceptable to the Government of Ukraine and

that your note and this note in reply shall constitute an Agreement which shall enter into force

on the date the Taxation Convention enters into force.

Accept; Excellency, the renewed assurances of my highest consideration.

(s) For the Ambassador of Ukraine

Valeri Kuchinsky