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72. U.S. diplomatic note sent from the U.S. Department of State to Sweden concerning exemption from real property taxes.


TELEGRAM July 18, 2001


Origin: MOFM


* * * * _________________________________________________________________

1. The Department offices involved with the property tax
issue (L,OFM,EUR) have determined that the following
note to the Swedish MFA should be sent in response to
the MFA note in reftel B. The text of the note was
prepared by L/DL. The purpose is to lay out the
Department's legal position once again and to make
clear that reciprocal measures may be taken.

2. Text of note: (complimentary opening) and refers to the
matter of tax exemption of Government-owned residential
property below the Chief of Mission level. The Embassy
referred the aide-memoir of the Ministry of Foreign
Affairs to the Department of State in Washington D.C.
for review. The Department has advised that it
restates and reaffirms its earlier position that
customary international law imposes an obligation on
the host State to provide tax exemption to government-
owned residences housing members of the diplomatic

The Department disagrees with the Ministry that "customary
international law has [not] developed in this field."
Rather, after two exhaustive studies of international
practice conducted by the Department, its Office of Legal
Adviser, and United States embassies world-wide in 1980
and again in 1986, the United States Government published
its position on international law exemption for diplomatic
residences in the United States Federal Register dated
July 30, 1986. That publication read as follows:

"In the opinion [of the Office of the Legal Adviser], the
Department stated that its conclusion that 'international
law imposes a binding obligation to exempt such property
from taxation' was reached on the basis of its study of
the sources of international law listed in Article 38(1)
of the Statute of the International Court of Justice, 'and
in particular... the current virtually uniform practice of
states in implementation of the Vienna Convention. ...[T]Be
survey reflected a general acknowledgment of a legal
obligation to exempt such property on the part of states
that are party to the Convention'...subject to reciprocal
treatment of comparable property owned by the United
States abroad."
After publication of the Federal Register notice, and as
noted in the Embassy's earlier diplomatic note, the
Department circulated a note to all missions on August 13,
1986, implementing its international legal determination.
The Department also requested confirmation of reciprocal
treatment of United States property abroad. As noted, the
Government of Sweden confirmed exemption of United States
diplomatic residential property in Sweden. On the basis
of this representation, the Government of Sweden enjoyed
exemption from costly annually recurring property taxes,
as well as exemption for one-time transfer taxes
associated with purchase or sale, on all of its real
estate holdings of diplomatic residences in Washington,
D.C., Maryland, and Virginia for over thirteen years.

As recently as 1997, the Department again surveyed all
United States embassies regarding host State practice with
respect to exemption form real estate related taxes
imposed on properties abroad. Of the 160 embassy
responses received by the Department, ninety-one percent
(91%) of States exempt the United States Government from
annual property taxes on diplomatic residences.
Additionally, the vast majority of States, over 75% and

perhaps as high as 91% (the data is not more precise],
exempt the United States from one-time property taxes
associated with the purchase or sale of embassy
Therefore, the Embassy reconfirms the position of the
United States Government and restates that the nearly
uniform custom and practice of States have ripened into a
customary law obligation to provide tax exemption to
Government owned residences housing members of the
diplomatic mission, subject to reciprocity.

The Embassy asks for reconsideration of the position of
the ministry of Foreign Affairs and the Ministry of
Finance, for recognition of the international law
obligation to grant tax exemption for 11 diplomatic
residences purchased by the United States Government in
1997 and for the immediate removal and cure of all adverse
actions taken by the Government of Sweden stemming from
The Department wishes this issue to be resolved to the
benefit of both countries and not to become a subject for
reciprocal action by the Department. However, the
Department is required under the Foreign Missions Act to
take reciprocity into account when considering the
benefits provided foreign missions in the United States.

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