[Code of Federal Regulations]
[Title 26, Volume 18, Parts 500 to 599]
[Revised as of April 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR509.104]
[Page 39-41]
TITLE 26--INTERNAL REVENUE
CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
(Continued)
PART 509--SWITZERLAND--Table of Contents
Subpart--General Income Tax
Sec. 509.104 Definitions.
(a) General. Any term defined in the convention or Secs. 509.101 to
509.122 shall have the meaning so assigned to it; any term not so
defined shall, unless the context otherwise requires, have the meaning
which such term has under the internal revenue laws of the United
States.
(b) Specific terms. As used in Secs. 509.101 to 509.122--
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(1) United States tax. The term ``United States tax'' means the
Federal income taxes, including surtaxes and excess profits taxes, and
any other income or profits tax of a substantially similar character
imposed by the United States after May 24, 1951.
(2) Swiss tax. The term ``Swiss tax'' means the federal, cantonal,
and communal taxes on income--that is, on total income, earned income,
income from property, industrial and commercial profits, etc.--and any
other income or profits tax of a substantially similar character imposed
by Switzerland after May 24, 1951.
(3) United States. The term ``United States'' means the United
States of America; and, when used in a geographical sense, means the
States, the Territories of Alaska and Hawaii, and the District of
Columbia.
(4) Switzerland. The term ``Switzerland'' means the Swiss
Confederation.
(5) Permanent establishment--(i) Fixed place of business. The term
``permanent establishment'' means an office, factory, workshop,
warehouse, branch, or other fixed place of business, but does not
include the casual and temporary use of merely storage facilities. It
implies the active conduct of a business enterprise. The mere ownership,
for example, of timberlands or a warehouse in the United States by a
Swiss enterprise does not mean that such enterprise, in the absence of
any business activity therein, has a permanent establishment in the
United States. Moreover, the maintenance within the United States by a
Swiss enterprise of a warehouse for convenience of delivery, and not for
purposes of display, does not of itself constitute a permanent
establishment in the United States, even though offers of purchase have
been obtained by an agent therein of the Swiss enterprise and
transmitted by him to the Swiss enterprise for acceptance. The fact that
a Swiss enterprise maintains in the United States an office or other
fixed place of business used exclusively for the purchase for such
enterprise of goods or merchandise shall not of itself constitute such
fixed place of business a permanent establishment of such enterprise.
(ii) Subsidiary corporation. The fact that a Swiss corporation has a
domestic subsidiary corporation, or a foreign subsidiary corporation
which is engaged in trade or business in the United States through a
permanent establishment situated therein, does not of itself constitute
either subsidiary corporation the United States permanent establishment
of the Swiss parent corporation.
(iii) Agency. A Swiss enterprise which has an agency in the United
States does not thereby have a permanent establishment in the United
States, unless the agent has, and habitually exercises, a general
authority to negotiate and conclude contracts on behalf of such
enterprise or unless he has a stock of merchandise from which he
regularly fills orders on its behalf. If the enterprise has an agent in
the United States who has power to contract on its behalf, but only at
fixed prices and under conditions determined by such principal, it does
not thereby necessarily have a permanent establishment in the United
States. The mere fact that an agent of a Swiss enterprise--assuming he
has no general authority to negotiate and conclude contracts on behalf
of his principal--maintains samples, or occasionally fills orders from
incidental stocks of goods maintained, in the United States does not of
itself mean that such enterprise has a permanent establishment in the
United States. The mere fact that salesmen, employees of a Swiss
enterprise, promote the sale of their employer's products in the United
States or that a Swiss enterprise transacts business in the United
States by means of mail order activities does not mean that such
enterprise has a permanent establishment in the United States. A Swiss
enterprise shall not be deemed to have a permanent establishment in the
United States merely because it carries on business dealings in the
United States through a commission agent, broker, custodian, or other
independent agent, acting in the ordinary course of his business as
such.
(6) Enterprise. The term ``enterprise'' means any commercial or
industrial enterprise or undertaking carried on by any person, for
example, by an individual partnership, or corporation. It
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includes such activites as manufacturing, merchandising, mining,
processing, banking, and insuring. It does not include the rendition of
personal services. Hence, a nonresident alien individual who is resident
of Switzerland and who performs personal services is not, merely by
reason of such services, engaged in a Swiss enterprise within the
meaning of the convention; consequently, his liability to United States
tax is not determined under Article III of the convention, if he has not
otherwise carried on a Swiss enterprise.
(7) Swiss enterprise. The term ``Swiss enterprise'' means an
enterprise carried on in Switzerland by a nonresident alien individual
who is a resident of Switzerland, or by a Swiss corporation or other
entity. Thus, an enterprise carried on wholly outside Switzerland by a
Swiss corporation is not a Swiss enterprise within the meaning of the
convention.
(8) Swiss corporation or other entity. The term ``Swiss corporation
or other entity'' means a corporation or institution or foundation
having juridical personality, or a partnership (association ``en nom
collectif'' or ``en commandite''), or other association without
juridical personality, created or organized under Swiss laws.
(9) United States enterprise. The term ``United States enterprise''
means an enterprise carried on in the United States by a resident of the
United States (including an individual, fiduciary, and partnership) or
by a United States corporation or other entity.
(10) United States corporation or other entity. The term ``United
States corporation or other entity'' means a corporation or other entity
created or organized under the law of the United States or of any State
or Territory of the United States.
(11) Industrial and commercial profits. The term ``industrial and
commercial profits'' means profits arising from industrial, commercial,
mercantile, manufacturing, and like activities of an enterprise,
including mining, financial and insurance profits. It does not include
income in the form of dividends, interests, rents, royalties, or
remuneration for personal services. In determining the industrial and
commercial profits from sources within the United States of a Swiss
enterprise, no profits shall be deemed to arise from the mere purchase
of goods or merchandise within the United States by such enterprise.
Moreover, in determining such profits of the United States permanent
establishment of such enterprise, there shall be allowed as deductions
all expenses which are reasonably applicable to the permanent
establishment, including executive and general administrative expenses
so applicable. See sections 861 through 864, Internal Revenue Code of
1954, and the regulations thereunder.
(12) Commissioner. The term ``Commissioner'' means the Commissioner
of Internal Revenue or his authorized representative.
(13) Director of the Federal Tax Administration. The term ``Director
of the Federal Tax Administration'' means the Director of the Federal
Tax Administration (Direktor der eidgenoessischen Steuerverwaltung) of
Switzerland.