[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: 26CFR503.4]

[Page 21]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 503--GERMANY--Table of Contents
 
                       Subpart--Withholding of Tax
 
Sec. 503.4  Patent and copyright royalties and film rentals.

    (a) General. (1) Royalties and other amounts derived in taxable 
years beginning on or after January 1, 1954, by a natural person (other 
than a citizen or resident of the United States) resident in the Federal 
Republic of Germany, or by a German company (other than a United States 
corporation), as bona fide consideration for the right to use 
copyrights, artistic and scientific works, patents, designs, plans, 
secret processes and formulae, trade-marks, and other like property and 
rights, are exempt from United States tax under the provisions of 
Article VIII of the convention if such person or company at no time 
during the taxable year in which such income is derived has a permanent 
establishment in the United States. Such items of income, are, 
therefore, not subject to the withholding of United States tax at 
source.
    (2) The provisions of this section shall apply to rentals and like 
payments in respect to motion picture films or for the use of 
industrial, commercial, or scientific equipment.
    (b) Application of exemption from withholding. (1) To avoid 
withholding of United States tax at source in the case of the income to 
which this section is applicable, the resident of the Federal Republic 
of Germany or the German company shall notify the withholding agent by 
letter in duplicate that such income is exempt from United States tax 
under the provisions of Article VIII of the convention. The provisions 
of Sec. 503.3(b) relating to the execution, filing, and effective period 
of the letter of notification prescribed therein with respect to 
interest, including its use for the release of excess tax withheld, are 
equally applicable with respect to the income falling within the scope 
of this section.
    (2) Each letter of notification, or the duplicate thereof, shall be 
immediately forwarded by the withholding agent to the District Director 
of Internal Revenue, Audit Division, Alien Returns Section, Baltimore 2, 
Maryland.