This is a technical explanation of the Convention and the Protocol between the United States and the Italian Republic signed on August 25, 1999 (the "Convention" and the "Protocol"). References are made to the Convention between the United States and Italy for the Avoidance of Double Taxation with Respect to Taxes on Income and the Prevention of Fraud or Fiscal Evasion, signed on April 17, 1984 (the "prior Convention"). The Convention replaces the prior Convention. Negotiations took into account the U.S. Treasury Department's current tax treaty policy, as reflected in the U.S. Treasury Department's Model Income Tax Convention of September 20, 1996 (the "U.S. Model") and its recently negotiated tax treaties, the Model Income Tax Convention on Income and on Capital, published by the OECD in 1992 and amended in 1994, 1995 and 1997 (the "OECD Model"), and recent tax treaties concluded by Italy. In connection with the negotiation of the Convention and the Protocol, the negotiators developed and agreed upon a Memorandum of Understanding. The Memorandum of Understanding is a statement of intent setting forth a common understanding and interpretation of certain provisions of the Convention and Protocol reached by the delegations of the United States and Italy acting on behalf of their respective governments. These understandings and interpretations are intended to give guidance both to the taxpayers and the tax authorities of both Contracting States in interpreting the relevant provisions of the Convention and Protocol. The Technical Explanation is an official guide to the Convention and Protocol. It reflects the policies behind particular Convention and Protocol provisions, as well as understandings reached with respect to the application and interpretation of the Convention and Protocol. References in the Technical Explanation to "he" or "his" should be read to mean "he or she" and "his or her."