811.512362 Shipping/10 The Chargé in Germany (Robbins) to the Secretary of State No. 734 BERLIN, September 12, 1924. SIR: With reference to the Department's instruction No. 3354, dated March 20, 1924, concerning the taxing by Germany of earnings derived from the operation of ships documented under the laws of the United States, I have the honor to report that a communication was addressed to the Foreign Office on May 5, 1924, in the sense outlined in the Department's instruction, and that the Embassy now has Foreign Office note verbale No. V Steu 1489/B.34881, dated September 3, 1924, in reply, a copy and translation of which are enclosed herewith. With reference to the last paragraph of the Department's instruction under reference, there are also enclosed herewith a copy of the German Ordinance of January 5, 1924, and a translated copy of Section 108, subdivisional, of the Federal Tax Law of Germany. These documents were furnished the Embassy by the Foreign Office. There is also transmitted herewith a translation of the former document made by the Embassy. The Foreign Office has the honor to inform the Embassy of the United States of America, in response to the latter's Note No. 686 of May 16 last, relative to exemption from income tax of both German and American shipowners, as follows: The Federal Minister of Finance is now ready in principle to amend his order of August 10, 1923, in accordance with the wishes of the Government of the United States of America as conveyed in the Embassy's Note Verbale No. 675 of May 5, 1924, and to cause instructions to be issued to the subordinate financial authorities that the order of August 10, 1923, is to be applied to all companies which have their seat in the United States of America regardless of the location of their management. 94 As concerns the conditions for abstention from collection of taxes from January 1, 1921, referred to in the last-mentioned note verbale, the Foreign Office can only repeat the statement based on the official findings of the Federal Minister of Finance and contained in its Note No. V Steu 30 of January 19, 1924, the statement that since January 1, 1921, the income from the operation of ships of American shipping companies and citizens who have no residence in Germany has not been subjected to the German income tax or corporation tax. Furthermore, the German Government will abstain from a supplementary collection of taxes for the period since January 1, 1921, if the American Government grants reciprocity. The statement previously made by the Foreign Office through the usual diplomatic channels is a binding official declaration of the German Government. The Foreign Office requests the Embassy of the United States of America to inform its Government of the above and to acquaint the Foreign Office with the American Government's attitude as soon as possible so that, if an agreement is reached between the German and American Governments, the Federal Minister of Finance may issue suitable instructions to the financial authorities. BERLIN, September 3, 1924. [Enclosure 2-Translation 95] The German Minister of Finance to the State Finance Offices, Section for Property and Traffic Taxes, Königsberg, Mecklenburg-Lübeck in Schwerin, Oldenburg, Schleswig-Holstein in Kiel, Stettin, Unterelbe in Hamburg, Unterweser in Bremen III C 14722 BERLIN, January 5, 1924. Through a decree dated August 10, 1923 (III C 7412) I have ordered, on condition of complete reciprocity and with the reservation of cancellation at any time on the basis of section 108, paragraph 1, of the Federal Tax Law, that the income derived exclusively from the operation of ships of companies (juridical persons) whose seat and place of management is in the United States of America shall not be subjected to the corporation tax. On the same condition, I declare myself in agreement that the income derived exclusively from the operation of ships by citizens of the United States (natural persons) who have no residence in Germany shall be exempt from the income tax. I request that the financial offices charged with the assessment of taxes be informed thereof. "Ante, p. 190. 95 File translation revised. In case doubt should arise in individual cases, I request that a report be made thereon. By direction: POPITZ [Enclosure 3-Translation] Section 108 of the Federal Tax Law of Germany of December 13, 19199 96 In particular cases the Reichsfinanzminister may, wholly or in part, abate any taxes the collection of which would, with a view to the circumstances of the case, be unfair, or he may in such cases decree the taxes already paid to be refunded or credited to account. As regards specific types of cases, the above authority may be transferred to the Landesfinanzaemter or to the Finanzaemter. As regards cases of a specific type, the Reichsfinanzminister may, for reasons of fairness and with consent of the Reichsrat, generally provide for exemption from, or reduction of taxes as well as for taxes already paid to be refunded or credited to account. 811.512362 Shipping/12 The Secretary of State to the Chargé in Germany (Robbins) No. 3581 WASHINGTON, November 8, 1924. SIR: The Department refers to your despatch No. 734 of September 12, 1924, in regard to the taxation by Germany of the earnings derived from the operation of ships documented under the laws of the United States, with which you enclosed a copy and translation of a note dated September 3, 1924, from the Foreign Office, together with a copy of the German Ordinance of January 5, 1924, and a translated copy of Section 108, subdivisional, of the Federal Tax Law of Germany. Under date of October 3, 1924, copies of your despatch and its enclosures were transmitted to the Treasury Department for its consideration and the Department is now in receipt of the Treasury Department's reply of October 31, 1924, the substance of which is as follows: After careful consideration, this Department is of the opinion that in view of the categorical statement of the German Government and the proposed amendment by the Commonwealth Minister of Finance to his order of August 10, 1923, Germany will meet the equivalent exemption provision of Section 213 (b) (8) of the Revenue Act of 1924, upon the issuance of the necessary orders referred to in the Note under consideration. The same opinion is herein *Reichsgesetzblatt, S. 1993. 126127-40—vol. II—18 expressed with respect to the years 1921, 1922 and 1923, under the provision of Section 213 (b) (8) of the Revenue Act of 1921. Accordingly, it is requested that the German Government be apprised that upon completion of the action proposed in the Note of the Foreign Office of September 3, 1924, the equivalent exemption provision of Section 213 (b) (8) of both the Revenue Acts of 1921 and 1924 will be satisfied and that the income of a nonresident alien or foreign corporation from sources within the United States which consists exclusively of earnings of a ship or ships documented under the laws of Germany will be exempt from Federal Income tax and that such exemption will be applicable for the year 1921 and subsequent years. In this connection it should be pointed out that certain German shipping concerns have been granted until December 15th to complete their 1923 tax returns and it is desirable that this information be communicated to the German Government as expeditiously as possible. This Department would appreciate prompt advice of the action of the competent German authorities. You will observe from the foregoing that the Treasury Department refers to the categorical statement of the German Foreign Office "that the German Government will abstain from a supplementary collection of taxes for the period since January 1, 1921, if the American Government grants reciprocity" and that this statement is a "binding official declaration of the German Government". You will also observe that the Treasury Department states that in view of this categorical statement and a proposed amendment by the Commonwealth Minister of Finance to his Order of August 10, 1923, it considers that Germany will meet the equivalent exemption provision of Section 213 (b) (8) of the Revenue Act of 1924 upon the issuance of the necessary orders referred to in the note of the Foreign Office of September 3, 1924. The Treasury Department expresses the same opinion with respect to the years 1921, 1922 and 1923 under the provision of Section 213 (b) (8) of the Revenue Act of 1921. In compliance with the suggestion of the Treasury Department it is desired that you advise the Foreign Office that upon the completion of the action proposed in its note of September 3, 1924, the equivalent exemption provision of Section 213 (b) (8) of both of the Revenue Acts of 1921 and 1924 will be satisfied and that the income of a nonresident alien or foreign corporation from sources within the United States which consists exclusively of earnings of a ship or ships documented under the laws of Germany will be exempt from Federal income tax and that such exemption will be applicable for the year 1921 and subsequent years. You will observe that the Treasury Department states that as certain German shipping concerns have been granted until December 15 to complete their 1923 tax returns, it is desirable that this information be conveyed to the German authorities as expeditiously as possible. It is desired that you advise the Department as soon as possible with respect to the action taken by the German authorities in the matter of the proposed amendment by the Minister of Finance of his Order of August 10, 1923, so that the Treasury Department may, in turn, be definitely advised in the premises. I am [etc.] For the Secretary of State: 811.512362 Shipping/15 The Ambassador in Germany (Houghton) to the Secretary of State No. 843 BERLIN, December 12, 1924. 97 SIR: With reference to the Department's instruction No. 3581, of November 8 last, in regard to taxation by Germany of the earnings derived from the operation of ships documented under the laws of the United States, I have the honor to report that representations were made to the Foreign Office as directed therein, and to enclose herewith a copy and translation of Foreign Office Note Verbale, the substance of which was transmitted to the Department in the Embassy's telegram No. 256, 12 noon, of December 12, 1924.98 I have [etc.] Referring to note verbale No. 935, dated November 29, concerning the taxation of shipping companies of both countries, the Foreign Office has the honor to inform the Embassy of the United States of America that, in accordance with the proposal transmitted in the Foreign Office's note verbale of September 3, 1924 (V Steu 1489), the Federal Minister of Finance has now, by an order dated December 9, 1924, instructed the subordinate financial authorities to apply the "By note verbale No. 935, Nov. 29, 1924. For text of note verbale, see Department of State, Executive Agreement Series No. 17, p. 9. Telegram not printed. File translation revised. 'Department of State, Executive Agreement Series No. 17, p. 17. |