Article 2 of the Israel U.S. Tax Treaty - General Definitions

1. In this Convention, unless the context otherwise requires:

(a) (i) The term "United States" means the United States of America; and

(ii) When used in a geographical sense, the term "United States" means the states thereof and the District of Columbia.

Such terms also includes:

(A) The territorial sea thereof, and

(B) The seabed and subsoil of the submarine areas adjacent to the coast thereof, but beyond the territorial sea, over which the United States exercises sovereign rights, in accordance with international law, for the purpose of exploration for and exploitation of the natural resources of such areas, but only to the extent that the person, property, or activity to which the Convention is being applied is connected with such exploration or exploitation.

(b) (i) The term "Israel" means the State of Israel; and

(ii) When used in a geographical sense the term "Israel" includes:

(A) The territorial sea thereof, and

(B) The seabed and subsoil of the submarine areas adjacent to the coast thereof, but beyond the territorial sea, over which Israel exercises sovereign rights, in accordance with international law, for the purpose of exploration for and exploitation of the natural resources of such area, but only to the extent that the person, property, or activity to which this Convention is being applied is connected with such exploration or exploitation.

(c) The term "Contracting State" means the United States or Israel, as the context requires.

(d) The term "State" means any national State, whether or not one of the Contracting States.

(e) The term "person" includes an individual, a partnership, a corporation, an estate, or a trust.

(f) (i) The term "United States corporation" means a corporation (or any unincorporated entity treated as a corporation for United States tax purposes) which is created or organized under the laws of the United States or any state thereof or the District of Columbia; and

(ii) The term "Israeli corporation" means any body of persons taxed as a body of persons resident in Israel under the income tax ordinance.

(g) The term "competent authority” means:

(i) In the case of the United States, the Secretary of the Treasury or his delegate, and

(ii) In the case of Israel, the Minister of Finance or his delegate.

(h) The term "tax" means tax imposed by the United States or Israel, whichever is applicable, to which this Convention applies by virtue of Article 1 (Taxes Covered).

(i) The term "international traffic" means any voyage of a ship or aircraft operated by a resident of one of the Contracting States except where such voyage is confined solely to places within a Contracting State.

2. Any other term used in this Convention and not defined in this Convention shall, unless the context otherwise requires, have the meaning which it has under the laws of the Contracting State whose tax is being determined. Notwithstanding the preceding sentence, if the meaning of such a term under the laws of one of the Contracting States is different from the meaning of the term under the laws of the other Contracting State, or if the meaning of such a term is not readily determinable under the laws of one of the Contracting States; the competent authorities of the Contracting States may, in order to prevent double taxation or to further any other purpose of this Convention, establish a common meaning of the term for the purposes of this Convention.

Commentary to Article 2 of the Israel - U.S. Tax Treaty


Paragraph (1) sets out definitions of certain basic terms used in the Israel - U.S. Tax Treaty. Unless the context otherwise requires, the terms defined in this paragraph have a uniform meaning throughout the Israel - U.S. Tax Treaty. A number of important terms, however, are defined elsewhere in the Israel - U.S. Tax Treaty.

The term “United States” means the United States of America. When used in a geographical sense, the term means the states of the United States and the District of Columbia. Thus, the Israel - U.S. Tax Treaty does not apply to the possessions of the United States or the Commonwealth of Puerto Rico.

The term “Israel” means the State of Israel.

When used in a geographical sense, the terms “United States” and “Israel” also include their respective territorial seas, and in general accord with the principles of section 638 of the Code, their respective continental shelves.

The term “Contracting State” is defined to mean the United States or Israel as the context requires. The term “State” means the United States, Israel, or any other national State.

The term “person” is defined as including an individual, a partnership, a corporation, an estate or a trust.

The term “United States corporation” is defined as a corporation, or any unincorporated entity which is treated as a corporation for United States tax purposes, which is created or organized under the laws of the United States, any state thereof, or the District of Columbia.

An Israeli corporation is defined as any body of persons taxed as a body of persons resident in Israel under its income tax ordinance. Thus, for example, a corporation incorporated in a State other than a Contracting State which is taxed by Israel as a body of persons resident in Israel will be an Israeli corporation for purposes of the Israel - U.S. Tax Treaty. See, however, the discussion of paragraph (3) of Article 3 (Fiscal Residence) for the treatment of a corporation which is both resident of the

United States and a resident of Israel.

With respect to the United States, the term “competent authority” means the Secretary of the Treasury or his delegate. With respect to Israel, it means the Minister of Finance or his delegate. The term “tax” means those taxes imposed by the United States or Israel to which the Israel - U.S. Tax Treaty applies by virtue of Article 1 (Taxes Covered).

The term “international traffic” is defined as any voyage of a ship or aircraft operated by a resident of one of the Contracting States except where such voyage is confined solely to places within a Contracting State. Thus, for example, coastal shipping along the Atlantic coast of the United States is not a voyage in international traffic. However, if a ship operated by a resident of Israel transports goods from Canada to the United States, leaving some of the goods in New York and the remainder in Norfolk, the portion of the voyage between New York and Norfolk is international traffic.

Paragraph (2) provides that any term used in the Israel - U.S. Tax Treaty which is not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of the Contracting State whose tax is being determined. However, where a term has a different meaning under the laws of Israel and the United States or where the meaning under the laws of one of the Contracting States is not readily determinable, the competent authorities may for purposes of the Israel - U.S. Tax Treaty establish a common meaning, which may differ from the meaning under the laws of either or both Contracting States, in order to prevent double taxation or to further any other purpose of the Israel - U.S. Tax Treaty.



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Dr. Avi Nov Law Offices, Israeli & international tax law 

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The above is intended for informative purposes only and is in no way to be construed as tax advice or a legal opinion. It is important to consult with an Israeli tax lawyer on the practical application of the Israel US tax treaty.


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