I transmit herewith, for Senate advice and consent to ratification, the Convention between the Government of the United States of America and the Government of the Republic of Italy for the Avoidance of Double Taxation with Respect to Taxes on Income and the Prevention of Fraud or Fiscal Evasion (``the Convention''), together with a supplementary Protocol and exchange of notes, signed at Rome on April 17, 1984. I also transmit the report of the Department of State on the Convention.

Important changes in United States and Italian tax laws and the development of a model tax treaty by the United States made it necessary to replace the existing income tax convention with Italy, which has been in force since 1956.

Among the principal features of the new Convention are the inclusion of the Italian local income tax among the taxes covered by the Convention and a reduction in the tax at source on most dividends. The Convention also introduces a limitation on the taxation at source of interest paid to residents of the other country. It provides a maximum rate of tax at source of 10 percent on royalties.

The protocol provides that the benefits of the Convention are limited to residents of the two countries, and otherwise clarifies and supplements the Convention. The exchange of notes sets out certain understandings between the two governments.

I recommend that the Senate give early and favorable consideration to the Convention, together with the supplementary Protocol and exchange of notes, and give advice and consent to ratification.

Ronald Reagan

The White House,

July 3, 1984.