German–US treaty cliff-hanger now over

Professor Dieter Endres and Andrew Miles

1 June 2006 saw the first signature ceremony on a protocol amending the 1989 German–US double-tax treaty. Parts of the political establishment found, though, the text to be wanting and directed the negotiating teams back to the negotiating table. Two and a half months later – on 17 August – agreement was reached on a revised wording, and the draft was republished. Because the protocol effectively amends the treaty, it requires the same ratification as a new treaty, that is, a formal exchange of ratification instruments on the authority of resolutions by the US Senate and the German Bundesrat . The Bundesrat lived up to expectations with its resolution of 24 November 2006; the Senate’s timetable fell foul of the US mid-term elections, thus thwarting hopes of ratification the same year. In 2007 ratification was bogged by another question – two senators put the debate on hold because of their reservations against the arbitration provisions inserted into the protocol, ironically at the insistence of the US Treasury. Finally, even this hurdle was overcome and the instruments of ratification were formally exchanged in Washington on 28 December. The protocol entered into force on the same day and took effect for withholding taxes retrospectively to 1 January 2007 and for other taxes prospectively from 1 January 2008.