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Office of the Press Secretary

For Immediate Release March 4, 1994



This treaty is designed to avoid double taxation of income and prevent evasion and avoidance of taxes. It also reduces excessive levels of tax on cross border flow of income. Thus this treaty facilitate cross-border flows of capital, trade, technology and personal services.

International income flows are generally subject to tax in two jurisdictions -- the country of the source of the income and the country of residence of the income recipient. Tax treaties generally grant the source country the primary right to tax income. Treaties then obligate the residence country to grant a credit against the source country income tax paid or by exempting the income which is taxed by the source country.

Treaties also provide for cooperation between the tax administrations of the two countries. The tax authorities exchange information as may be necessary for the proper enforcement and administration of the countries' tax laws. The tax authorities may resolve disputes which arise under a treaty. Treaties also assure non-discriminatory taxation of residents or nationals of one country under the tax rules of the other.

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