Internal Revenue Bulletin:  2005-44 

October 31, 2005 

Announcement 2005-77

Cape Verde Reciprocal Exemption Agreement


Table of Contents

The Governments of the United States and the Republic of Cape Verde have exchanged diplomatic notes evidencing a reciprocal exemption agreement concerning income from the international operation of a ship or ships or aircraft. The diplomatic notes reproduced herein contain the terms of the reciprocal exemptions available for taxable years beginning on or after January 1, 2005. The text of the agreement is as follows:

AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND
THE GOVERNMENT OF THE REPUBLIC OF CAPE VERDE FOR RECIPROCAL EXEMPTION OF TAXES
ON INCOME FROM THE INTERNATIONAL OPERATION OF A SHIP OR SHIPS OR  AIRCRAFTThe Government of the United States of America and the Government of
the Republic of Cape Verde (hereinafter the “Contracting Parties”),
desiring to conclude an Agreement for reciprocal exemption with respect to
taxes levied on income from the international operation of a ship on ships
or aircraft derived by shipping and air transport enterprises of the two countries,
have agreed as follows:Article I TAXES COVEREDThis Agreement shall apply to all taxes on income derived from the international
operation of a ship or ships or aircraft imposed by each Contracting Party
irrespective of the manner in which taxes are levied.There shall be regarded as taxes on income derived from the international
operation of a ship or ships or aircraft all taxes imposed on the total of
such income, or on elements of such income, including taxes on gains from
the alienation of movable property. The taxes that are the subject of the Agreement are:In the case of the Republic of Cape Verde, any tax, as described in
paragraphs 1 and 2 (hereinafter referred to as “Cape Verde tax”);
and In the case of the United States, Federal income taxes, as described
in paragraphs 1 and 2, imposed by the Internal Revenue Code, including the
taxes imposed by sections 884 and 887 (hereinafter referred to as “United
States tax.”)

Article IIDEFINITIONS1. In this Agreement, unless the context otherwise requires:a) The term “tax” means “Cape Verde tax” or
“United States tax”, as the context requires;b) The term “enterprise of a Contracting Party” means an
enterprise carried on by the government of that State,  a political subdivision
or local authority thereof, or by individuals who are residents of that Contracting
Party or corporations created under the laws of that Contracting Party;c) The term “operation of a ship or ships or aircraft” means
the transportation by sea or air, as the context requires, of persons, baggage,
livestock, goods, merchandise or mail, including the sale of tickets and similar
documents used for the purpose of such transport, and other directly related
activities, carried on by the owner, lessor, or charterer of a ship or aircraft;d) The term “international operation” or “international
transport” means operation as defined in paragraph (c), except where
the ship or aircraft is operated solely between places in the territory of
a Contracting Party;e) The term “income derived from the international operation of
a ship or ships or aircraft” includes:1) Income from the rental on a full (time or voyage) basis of a ship
or ships or aircraft used in international transport;2) Income from the rental on a bareboat basis of a ship or ships or
aircraft used in international transport;3) Income from the rental of containers and related equipment used in
international transport that is incidental to income from the international
operation of a ship or ships or aircraft;

4) Gains from the sale or other alienation of a ship or ships or aircraft
used in international transport by an enterprise of a Contracting Party primarily
engaged in the international operation of a ship or ships or aircraft;5) Income derived by an enterprise of a Contracting Party that is engaged
in the international operation of a ship or ships or aircraft from its participation
in a pool, an alliance, joint businesses, international operating agency,
or other venture that is itself engaged in the international operation of
a ship or ships or aircraft;(f) The terms “competent authority” means:i) In the case of Cape Verde, the Ministry of Finance; andii) In the case of the United States, the Secretary of the Secretary
of the Treasury or his delegate.2) In application of the provisions of this Agreement by a Contracting
Party, any term not otherwise defined shall, unless the context otherwise
requires, have the meaning which it has at that time under the laws of that
Contracting Party relating to the taxes which are the subject of this Agreement.Article IIISHIPPING AND AIR TRANSPORT1. Income derived by an enterprise of a Contracting Party from the international
operation of a ship or ships or aircraft shall be exempt from tax by the other
Contracting Party.2. For a corporation to claim the benefits of this Agreement as an enterprise
of a Contracting Party, it must satisfy any ownership or public trading requirements,
as well as any filing requirements, of the other Contracting Party.

3. An enterprise of a Contracting Party engaged in the international
operation of aircraft includes, but is not limited to, those airlines designated
under any effective Air Transport Agreement between the Government of the
United States of America and the Government of the Republic of Cape Verde.Article IVCONSULATIONS AND AMENDMENT 1. Consultation may be requested in writing at any time by either Contracting
Party regarding the implementation of this Agreement. Such consultations shall
commence within sixty (60) days of such written request.2. The competent authorities of the Contracting Parties shall endeavor
to resolve by mutual agreement any questions that may arise regarding the
interpretation or application of this Agreement.3. This Agreement may be amended by written agreement of the Contracting
Parties.Article VENTRY INTO FORCE1. The Contracting Parties shall notify each other in Writing through
diplomatic channels when their respective legal procedures for entry into
force have been met with respect to this Agreement.2. The Agreement shall enter into force as of the date of the letter
of the notifications required under paragraph 1 of this article, and the provisions
of this Agreement shall have effect with respect to all taxable years beginning
on or after January 1, 2005.

Article VITERMINATIONThis Agreement may be terminated by either Contracting Party giving
written notice of termination through diplomatic channels. In the case of
termination by notice through diplomatic channels, the Agreement shall cease
to have effect for taxable periods beginning on or after 1 January of the
calendar year next following the date on which notice of termination was given.
If this Agreement is terminated as a consequence of any legislative act, the
Contracting Party concerned will give as much notice of termination as feasible
and such termination shall take effect as determined by legislative act.DONE at PRAIA, in duplicate, this 16th day of March, 2005, in the Portuguese
and English languages, each text being equally authentic. In case of divergence
between the texts, the English language text shall prevail.IN WITNESS WHEREOF, the undersigned being duly authorized by their representative
governments, have signed the present Agreement.FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICAFOR THE GOVERNMENT OF THE REPUBLIC OF CAPE VERDE:[Signature][Signature]

EMBASSY OF THE UNITED STATES OF AMERICANote° 032The Embassy of the United States of America presents its compliments
to the Ministry of Foreign Affairs of the Republic of Cape Verde and has the
honor to refer to the Agreement between the Government of the United States
of America and the Government of the Republic of Cape Verde for Reciprocal
Exemption of Taxes on Income from the International Operation of a Ship or
Ships or Aircraft signed on March 16, 2005.The Embassy wishes to inform the Ministry that the Government of the
United States of America has completed its necessary domestic legal requirements
for entry into force of the Agreement. The Embassy would appreciate receiving
a Note from the Ministry confirming that the Government of the Republic of
Cape Verde has also completed its necessary legal requirements for entry into
force of the Agreement.The Embassy of the United States of America avails itself of this opportunity
to renew to the Ministry of Foreign Affairs of the Republic of Cape Verde
the assurances of it highest consideration.Embassy of the United States of AmericaPraia, March 17, 2005 [SEAL]

[SEAL]MINISTÉRIO DOS NEGÓCIOS ESTRANGEIROS, COOPERAÇÃO
E COMUNIDADES Gabinete de Estudos, Documentação e AssessoriaTelefone: 607800 - Fax: 61 57 28 Ref. n° 108 /GEDA/8/2005Ministry of Foreign Affairs of the Government of Cape Verde presents
its Compliments to the Embassy of the United States of America and has the
honor to transmit, for the purpose of deposit the Ratification Letter of the
Agreement between the Government of the Republic of Cape Verde and the Government
of the Unites States of America for reciprocal Exemption of Taxes on Income
from the International Operation of a Ship or Ship or Aircraft, thus completing
its necessary domestic legal requirements to bring into force of the Agreement
as feet forth in article V.Ministry of Foreign Affairs further has the honor to inform that in
conformity with article V, 2. The Agreement enters into force on the date
of the last notifications, i.e., on 21 June 2005.The Ministry of Foreign Affairs avails itself of this opportunity to
renew to the Embassy of the United States of America the assurances of its
highest consideration.Praia, June 21, 2005 [SEAL]Embassy of the Unites States of America2005 - Ano do Trigésimo Aniversário da Independência
Nacional

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