The Senate Foreign Relations Committee on July 26, 2011 approved the new US-Hungary tax treaty and protocols to the Luxembourg and Switzerland treaties, with the recommendation that all three pacts be approved. Assuming ratifi cation by the Senate later this year, the three accords will enter into effect upon the exchange of instruments of ratifi cation between the treaty partners.
The proposed Hungary treaty contains a comprehensive limitation on benefi ts (LOB) article that may affect the eligibility of inverted companies resident in a country that does not have a comprehensive income tax treaty with the United State to the extent they rely on the US-Hungary income tax treaty to obtain treaty benefi ts. The new LOB article also may affect inverted companies resident in treaty countries if their Hungarian subsidiary cannot qualify under an “equivalent benefi ciaries” test under the new LOB article.
The proposed protocols to the Swiss income tax treaty and Luxembourg income tax treaty do not change the LOB articles of either treaty, but include a mandatory binding arbitration provision that will be used to address any double taxation disputes that cannot be resolved by the Competent Authorities in the two countries.
A new US-Chile tax treaty was signed on February 4, 2010, but has not yet been the subject of hearing by the Senate Foreign Relations Committee. It is understood that the US and Polish offi cials are close to completing negotiations on a new US-Poland tax treaty. Tax treaty talks are expected to continue with various other countries, including Spain, the UK, Brazil, Colombia, Venezuela, Vietnam and Malaysia, as well as possible further changes to the treaty with Switzerland.