The Treasury Department said a new protocol amending the income tax treaty with France has entered into force.

The protocol was approved by the U.S. Senate on Dec. 3, and it officially became active Dec. 23 after the appropriate documents were submitted to the French Embassy in Washington, D.C. The amendments to the treaty will affect the tax treatment of U.S. businesses and individuals operating in France.

Provisions include elimination of source-country withholding tax on certain direct dividends, elimination of source-country withholding tax on all royalty payments, mandatory binding arbitration of certain cases that cannot be resolved by the competent authorities within a specific period, and a comprehensive limitation on benefits provision.

With respect to taxes withheld at the source, the protocol will be in effect for amounts paid or credited on or after Jan. 1, 2009. For all other taxes, the new treaty will generally have effect for taxable years starting on or after Jan. 1, 2010.

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