(1) This Convention shall apply only to persons who are residents of one or both of the Contracting States, except as otherwise provided in this Convention.

(2) This Convention shall not restrict in any manner any benefit now or hereafter accorded:

• (a) by the laws of either Contracting State; or
• (b) by any other agreement to which both Contracting States are parties.

(3)

• (a) Notwithstanding the provisions of sub-paragraph (b) of paragraph (2) of this Article:
  • (i) for purposes of paragraph (3) of Article XXII (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that any question arising as to the interpretation or application of this Convention and, in particular, whether a taxation measure is within the scope of this Convention, shall be determined exclusively in accordance with the provisions of Article 25 (Mutual Agreement Procedure) of this Convention; and
  • (ii) the provisions of Article XVII (National Treatment) of the General Agreement on Trade in Services shall not apply to a taxation measure unless the competent authorities agree that the measure is not within the scope of Article 24 (Non-Discrimination) of this Convention.
• (b) For the purposes of this paragraph, a "measure" is a law, regulation, rule, procedure, decision, administrative action or any similar provision or action.

(4) Except to the extent provided in paragraph (5) of this Article, this Convention shall not affect the taxation by a Contracting State of its residents (as determined under Article 4 (Resident)) and its citizens. Notwithstanding the other provisions of this Convention, a former citizen or former long-term resident of a Contracting State may be taxed in accordance with the laws of that Contracting State.

(5) The provisions of paragraph (4) of this Article shall not affect:

• (a) the benefits conferred by a Contracting State under paragraph (3) of Article 7 (Business Profits), paragraph (2) of Article 9 (Associated Enterprises), paragraph (7) of Article 13 (Gains), sub-paragraph (b) of paragraph (1), paragraphs (2), (3) and (6) of Article 17 (Pensions, Social Security, Annuities, Alimony and Child Support), paragraph (3) of Article 18 (Contributions to Pension Funds), and Articles 23 (Relief From Double Taxation), 24 (Non-Discrimination) and 25 (Mutual Agreement Procedure); and
• (b) the benefits conferred by a Contracting State under paragraph (1) of Article 18 (Contributions to Pension Funds), and Articles 19 (Government Service), 20 (Students and Trainees) and 27 (Members of Diplomatic Missions and Consular Posts), upon individuals who are neither citizens of, nor have been admitted for permanent residence in, that Contracting State.

(6) For the purposes of this Convention, an item of income, profit or gain derived by or through an entity that is treated as wholly or partly fiscally transparent under the taxation laws of either Contracting State shall be considered to be derived by a resident of a Contracting State, but only to the extent that the item is treated for purposes of the taxation laws of such Contracting State as the income, profit or gain of a resident.

(7) Where an item of income, profit or gain arising in one of the Contracting States otherwise would be entitled to the benefits of this Convention in that Contracting State and, under the law of the other Contracting State, a person's tax in respect of such item is determined by reference to the amount thereof that is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned Contracting State shall apply only to so much of the amount as is taxed in the other Contracting State.

(8) Where an enterprise of a Contracting State derives income from the other Contracting State, and the first-mentioned Contracting State treats that income as profits attributable to a permanent establishment situated outside of that Contracting State, the benefits of this Convention shall not apply to that income if:

• (a) the income that is treated as profits attributable to the permanent establishment is subject to a combined aggregate effective rate of tax in the first-mentioned Contracting State and the state in which the permanent establishment is situated that is less than the lesser of (i) 15 percent or (ii) 60 percent of the highest general statutory rate of company tax applicable in the first-mentioned Contracting State; or
• (b) the permanent establishment is situated in a third state that does not have a comprehensive convention for the avoidance of double taxation in force with the Contracting State from which the benefits of this Convention are being claimed, unless the first-mentioned Contracting State includes the income treated as profits attributable to the permanent establishment in its tax base.

However, if a resident of a Contracting State is denied the benefits of this Convention pursuant to sub-paragraph (a) of this paragraph, the competent authority of the other Contracting State may, nevertheless, grant the benefits of this Convention with respect to a specific item of income if such competent authority determines that such grant of benefits is justified in light of the reasons such resident did not satisfy the requirements of sub-paragraph (a) of this paragraph (such as the existence of losses). The competent authority of the Contracting State to which a request has been made shall consult with the competent authority of the other Contracting State before either granting or denying the request made under this paragraph by a resident of that other Contracting State.

(9) Nothing in this Convention shall be construed as preventing the United States from imposing a tax under section 59A, entitled the “Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts,” of the Internal Revenue Code (as it may be amended from time to time) on a company that is a resident of the United States or on the profits of a company that is a resident of Croatia that are attributable to a permanent establishment in the United States.