Copyright 1996 InterAm Database National Law Center for Inter-American Free Trade October 16, 1987 Entry into Force: 16 October 1987 Effective as from 1 January 1987 Agreement Between Colombia and the United States of America for the Avoidance of Double Taxation of Income from Shipping and Air Transport LIST-OF-ARTICLES: Exchange of Notes I Exchange of Notes II ARTICLES: Exchange of Notes I His Excellency Coronel Julio Londono, Minister of Foreign Relations, Bogota, D.E., October 16, 1987 Excellency: I have the honor to propose to your Excellency that our two Governments conclude an Agreement to exempt from income tax, on a reciprocal basis, income derived by residents of the other country from the international operation of ships and aircraft. The terms of the Agreement are as follows: The Government of the United States of America, in accordance with Sections 872(B) and 883(A) of the Internal Revenue Code, agrees to exempt from tax gross income derived from the international operations of ships or aircraft by individuals who are residents of Colombia (other than U.S. citizens) and corporations organized in Colombia. This exemption is granted on the basis of equivalent exemptions granted by Colombia to citizens of the United States (who are not residents of Colombia) and to corporations organized in the United States (which are not subject to tax by Colombia on the basis of residence). In the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions: (1) more than 50% of the value of the corporation's stock is owned, directly or indirectly, by individuals who are residents of Colombia or of another country which grants a reciprocal exemption to U.S. citizens and corporations; or (2) the corporation's stock is primarily and regularly traded on an established securities market in Colombia, or is wholly owned by a corporation whose stock is so traded and which is also organized in Colombia. For purposes of sub-paragraph (1), the Government of Colombia will be treated as an individual resident of Colombia. For purposes of the exemption from U.S. tax, sub-paragraph (1) will be considered to be satisfied if the corporation is a "controlled foreign corporation" under the Internal Revenue Code. Gross income includes all income derived from the international operation of ships or aircraft, including income from the rental of ships or aircraft on a full (time or voyage) basis and income from the rental of containers and related equipment which is incidental to the international operation of ships or aircraft. It also includes income from the rental on a bareboat basis of ships and aircraft used for international transport. Either Government may terminate this Agreement by giving written notice of termination through diplomatic channels. The Government of the United States of America considers that this note, together with the Ministry's reply note confirming that the Government of Colombia agrees to these terms, constitutes an Agreement amending the Agreement of August 1, 1961. This Agreement shall enter into force on the date on which the Government of Colombia notifies the Government of the United States that this exchange of notes has been approved by the Congress of Colombia and shall have effect with respect to taxable years beginning on or after January 1, 1987. Accept, Excellency, the renewed assurances of my highest consideration. Charles A. Gillespie, Jr., Ambassador. Exchange of Notes II Excellency Charles A. Gillespie, Ambassador of the United States of America, Bogota, October 16, 1987 Excellency: I have the honor to acknowledge receipt of your note of today's date proposing the terms of a reciprocal exemption from income tax of income derived from the international operation of ships and aircraft. The Government of Colombia agrees to exempt from tax gross income derived from the international operation of ships and aircraft by U.S. citizens (who are not residents of Colombia) and corporations organized in the United States (other than corporations which are subject to tax by Colombia) on the basis of residence. (in the case of a corporation, the exemption shall apply only if the corporation meets either of the following conditions: (1) more than 50% of the value of the corporation's stock is owned, directly or indirectly, by individuals who are citizens of the United States or of another country which grants a reciprocal exemption to Colombia, residents and corporations; or (2) the corporation's stock is primarily and regularly traded on an established securities market in the United States, or is wholly owned by a corporation whose stock is so traded and which is also organized in the United States.) Gross income includes all income derived from the international operation of ships and aircraft, including income from the rental of ships and aircraft on a full (time or voyage) basis and income from the rental of containers and related equipment which is incidental to the international operation of ships and aircraft. It also includes income from the rental on a bareboat basis of ships and aircraft used for international transport. Either Government may terminate this Agreement by giving written notice of termination through diplomatic channels. I am pleased to confirm that the Embassy's Note 803 and this reply constitute an Agreement amending the Agreement of August 1, 1961, which shall enter into force on today's date and shall have effect with respect to taxable years beginning on or after January 1, 1987. Please accept, Excellency, the assurances of my highest consideration. Excellency Charles A. Gillespie, Ambassador of the United States of America. Bogotá Julio Londono Paredes, Minister of Foreign Affairs of Colombia