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Re: RE: [tips_and_tricks] Re: Puerto Rico, how it fits in United States

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  • eyemail@bellsouth.net
    Perhaps the Jay Treaty defines who is a citizen of the United States. *** Draft Statutory Instrument 2002 No. The Double Taxation Relief (Taxes on Income) (The
    Message 1 of 4 , Nov 1, 2006
      Perhaps the Jay Treaty defines who is a citizen of the United States.
      ***
      Draft Statutory Instrument 2002 No.
      The Double Taxation Relief (Taxes on Income) (The United States of America) Order 2002

      © Crown Copyright 2002
      Article 1

      General scope
      4. Notwithstanding any provision of this Convention except paragraph 5 of this Article, a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by reason of citizenship may tax its citizens, as if this Convention had not come into effect.

      Article 2

      Taxes covered
      3. The existing taxes to which this Convention shall apply are:
      (a) in the case of the United States:
      (i) the Federal income taxes imposed by the Internal Revenue Code (but excluding social security taxes); and

      Article 3

      General definitions
      (h) the term "United States" means the United States of America, and includes the states thereof and the District of Columbia; such term also includes the territorial sea thereof and the sea bed and sub-soil of the submarine areas adjacent to that territorial sea, over which the United States exercises sovereign rights in accordance with international law; the term, however, does not include Puerto Rico, the Virgin Islands, Guam or any other United States possession or territory;

      (j) the term "national" of a Contracting State, means:
      (i) in relation to the United States,
      (A) any individual possessing the citizenship of the United States; and

      (B) any legal person, partnership, association or other entity deriving its status as such from the laws in force in the United States;

      ***
      43–229 l

      1997

      UNITED STATES-PUERTO RICO POLITICAL STATUS ACT

      FIELD HEARING

      before the

      COMMITTEE ON RESOURCES

      HOUSE OF REPRESENTATIVES

      ONE HUNDRED FIFTH CONGRESS

      FIRST SESSION

      on

      H.R. 856—United States-Puerto Rico's Political Status Act

      MAYAGUEZ, PUERTO RICO, APRIL 21, 1997

      Serial No. 105–27

      Printed for the use of the Committee on Resources

      One thing is what you might want to see, and the other thing is what can be reasonable or what others are going to be willing to accept. Each Congressman and each Senator responds to their citizens in their State.

      So when you claim, for instance, that you want to have equal benefits in Federal programs and yet you are not willing to pay Federal income tax, well, you have to be aware, whether it is constitutional or not, how does that sit with the citizens of the 50 States who do have to pay Federal income taxes? That is part of the things that each Congressman and each Senator is going to weigh…
      Mr. YOUNG. I want to thank the panel.

      Carlos, do you have questions?

      Mr. ROMERO-BARCELÓ. Yes, I have a couple of questions.

      I want to ask Mr. Velasco, if the Congress today would pass a banking law, can they make it applicable for Puerto Rico without Puerto Rico's previous consent?

      Mr. VELASCO. A banking law, yes.

      Mr. ROMERO-BARCELÓ. And fair trade laws?

      Mr. VELASCO. And fair trade laws, yes.

      Just to answer your whole question, the only laws that are not applicable to Puerto Rico made by the U.S. Congress are those that are locally inapplicable because of geographic or that kind of laws and also those that do not address the compact.

      Now, what is the compact? The compact is Public Law 600, the Federal Relations Act, the Constitution of Puerto Rico. Those are the laws—and 447, of course.

      Mr. ROMERO-BARCELÓ. Can Congress pass income tax laws taxing income produced in Puerto Rico?

      Mr. VELASCO. Income tax laws?

      Mr. ROMERO-BARCELÓ. Taxing income produced in Puerto Rico. Can they not pass laws?

      Mr. VELASCO. No, they cannot.

      Mr. ROMERO-BARCELÓ. Why are they taxing the companies that are here in Puerto Rico for their income produced in Puerto Rico now, what used to be section 936? Why are those taxing the income produced here if you say they cannot?

      Mr. VELASCO. Mr. Romero, those companies that were under 936 are U.S. companies.

      Mr. ROMERO-BARCELÓ. No, they are subsidiaries.

      Mr. VELASCO. Excuse me, the subsidiaries are U.S. subsidiaries that are doing business in Puerto Rico; so, therefore, those subsidiaries, because they are citizens of the States where they were incorporated, are under the Internal Revenue Code; and that is why you can do it.

      Mr. ROMERO-BARCELÓ. But they are taxed here for the income produced in Puerto Rico.

      Mr. VELASCO. But they are taxed because they are citizens of other States, not because they are citizens of Puerto Rico.

      Mr. ROMERO-BARCELÓ. And when a Puerto Rican earns income outside of Puerto Rico, they are also taxed by the United States, right?

      Mr. VELASCO. Because that income is derived outside of Puerto Rico. But the income derived inside of Puerto Rico is not taxable under the Internal Revenue Code. And it is not taxable, first, because they are not in the Internal Revenue code; and, second, because it is part of the compact.

      Mr. ROMERO-BARCELÓ. An excise tax, they cannot impose excise taxes on Puerto Rico?

      Mr. VELASCO. Excise taxes? Puerto Rico imposes excise taxes, not the United States. The United States imposes custom duties.
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