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Agreement on Tax Deductions Signed

June 2, 1980
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Americans and Israelis under a new tax agreement signed last week will be able, subject to certain limitations, to deduct contributions they make to charitable organizations in each other’s country. Other provisions of the protocol will affect the taxation of income from U.S. investments in Israel.

Israeli Ambassador Ephraim Evron and Assistant Secretary of State for Middle East Affairs Harold Sounders signed the document at the State Department Friday. It makes a number of technical changes in the income Tax Agreement of Nov. 20, 1975, between the United States and Israel. That agreement was held up in the Senate, to which the State Department had submitted it as a treaty, and was not put into force pending rectifications of certain provisions. Negotiations were reopened in 1978 and consummated Friday with the signing of the protocol.

A State Department official told the Jewish Telegraphic, Agency that the “whole package–the original convention and the protocol–will be resubmitted to the Senate. We expect no problem for the treaty to be ratified, “he said.

The U.S. Treasury Department issued the text of the agreement, which shows that one of the amendments “provides, subject to certain limitations, for the deductibility of contributions by residents of the United States or Israel to a qualifying charitable organization of the other country.”

Another amendment, a Treasury official told the JTA, provides that when a dividend is paid to a parent corporation in the U.S. by a subsidiary in Israel out of income which has benefitted from Israeli tax holiday provisions, the Israeli with-holding rate would be 15 percent instead of the 12-1/2 percent rate otherwise applicable to subsidiary dividends.

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