United States Income Tax Treaties That Meet the Requirements of Section 1(h)(11)(C)(i)(II)

IRS released Notice 2024-11 on December 28, 2023, updating the list of countries with tax treaties meeting Section 1(h)(11)(C)(i)(II) criteria.  Under section 1(h)(11) (qualified dividends), a dividend paid to an individual shareholder from either a domestic corporation or a "qualified foreign corporation" generally is subject to tax at the reduced rates applicable to certain capital gains.

A qualified foreign corporation includes certain foreign corporations that are eligible for benefits of a comprehensive income tax treaty with the United States that the Secretary determines is satisfactory for purposes of this provision and that includes an exchange of information program.  

U.S. Income Tax Treaties Satisfying the Requirements of Section 1(H)(11)(C)(I)(Ii) 

Updates to Section 1(h)(11)(C)(i)(II)

Notice 2024-11 updates the list of treaties that meet the requirements of section 1(h)(11)(C)(i)(II). It adds the treaty with Chile, which entered into force on December 19, 2023. The list no longer includes the treaties with Russia and Hungary because both have ceased to meet the requirements of section 1(h)(11) after the publication of Notice 2011-64.  

The treaty between Hungary and the United States (the Hungary treaty) terminated on January 8, 2023. Consequently, the Hungary treaty has ceased to meet the requirements of section 1(h)(11)(C)(i)(II). 

On April 5, 2022, a Department of the Treasury (Treasury) spokesperson announced that the IRS paused assistance to Russian tax authorities through exchange of information under the treaty between Russia and the United States (the Russia treaty). Therefore, the Russia treaty does not have an exchange of information program as required by section 1(h)(11)(C)(i)(II). 

Three other U.S. income tax treaties still in effect do not meet the requirements of section 1(h)(11)(C)(i)(II). They are the U.S.-U.S.S.R. income tax treaty (which was signed on June 20, 1973, and currently applies to certain former Soviet Republics), and the tax treaties with Bermuda and the Netherlands Antilles. 

Treasury and the IRS intend to continue to update this list, as appropriate. Situations that may result in changes to the list include the entry into force of new income tax treaties and the amendment or renegotiation of existing tax treaties.

Further, Treasury and the IRS continue to study the operation of each U.S. income tax treaty, including the implications of any change in the domestic laws of the treaty partner, to ensure that the treaty accomplishes its intended objectives and continues to be satisfactory for purposes of this provision. 

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