[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: 26CFR509.103]

[Page 38-39]
 
                       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. 509.103  Scope of the convention.

    (a) Purposes of convention. The primary purposes of the convention, 
to be accomplished on a reciprocal basis, are to avoid double taxation 
upon certain items of income derived from sources in one country by 
residents or corporations or other entities of the other country and to 
provide for administrative cooperation between the competent tax 
authorities of the two countries looking to the avoidance of double 
taxation and the prevention of fiscal evasion.
    (b) Exemption from United States tax. The following items of income 
from sources within the United States are exempt from United States tax 
for taxable years beginning on or after January 1, 1951, subject to the 
respective articles of the convention:
    (1) Industrial and commercial profits of a Swiss enterprise having 
no permanent establishment in the United States (Article III);
    (2) Income derived by a Swiss enterprise from the operation of ships 
or aircraft registered in Switzerland (Article V);
    (3) Patent and copyright royalties, and other like amounts, 
including motion picture film rentals, derived by a nonresident alien 
who is a resident of

[[Page 39]]

Switzerland, or by a Swiss corporation or other entity, if such alien, 
corporation, or other entity has no permanent establishment in the 
United States (Article VIII);
    (4) Compensation, subject to certain limitations, for personal 
services performed in the United States by a nonresident alien 
individual who is a resident of Switzerland (Article X);
    (5) Compensation and pensions paid by Switzerland to an alien 
individual, and to a citizen of Switzerland who is also a citizen of the 
United States, including such items as are from sources without the 
United States (Article XI);
    (6) Private pensions and life annuities paid to a nonresident alien 
individual who is a resident of Switzerland (Article XI);
    (7) Remuneration derived from certain teaching in the United States 
by a professor or teacher who is a nonresident alien residing in 
Switzerland (Article XII); and
    (8) Dividends and interest paid by a foreign corporation to a 
nonresident alien who is a resident of Switzerland, or to a Swiss 
corporation, if such alien or corporation has no permanent establishment 
in the United States (Article XIV).
    (c) Students or apprentices. Remittances received from abroad for 
the purpose of maintenance or studies by a student or apprentice, a 
nonresident alien residing in Switzerland, who is temporarily present in 
the United States under specified circumstances are also exempt from 
United States tax (Article XIII).
    (d) Reduced rates of United States tax. Dividends and interest 
derived from sources within the United States by a nonresident alien who 
is a resident of Switzerland, or by a Swiss corporation or other entity, 
are subject to United States tax at reduced rates, if such alien, 
corporation, or other entity has no permanent establishment in the 
United States (Articles VI and VII).
    (e) Withholding regulations. For regulations pertaining to the 
release of excess tax withheld, and to exemption from, or reduction in 
the rate of, withholding of United States tax at source, in the case of 
dividends, interest, patent and copyright royalties, film rentals, 
private pensions, and life annuities, received from sources within the 
United States by a nonresident alien who is a resident of Switzerland, 
or by a Swiss corporation or other entity, see Treasury Decision 5867, 
approved November 21, 1951 (Secs. 509.1 to 509.10).
    (f) United States citizens, residents, and corporations. (1) Any 
citizen of Switzerland who is a resident of the United States is liable 
to United States tax as though the convention had not come into effect; 
however, such alien resident of the United States is entitled to the 
foreign tax credit in accordance with Article XV and is also entitled to 
the benefits of Article XI (1) and Article XVIII.
    (2) A citizen of the United States, even though resident in 
Switzerland, or a domestic corporation, even though engaged in trade or 
business in Switzerland through a permanent establishment situated 
therein, is also liable to United States tax as though the convention 
had not come into effect but is entitled to the foreign tax credit and, 
to the extent, applicable, to the benefits of Article XI (1).
    (g) Other provisions applicable to Swiss residents and corporations. 
Except as otherwise expressly provided by the convention, the United 
States tax liability of a nonresident alien who is a resident of 
Switzerland, or of a Swiss corporation or other entity, is determined in 
accordance with the provisions of the Internal Revenue Code of 1954 
relating to nonresident alien individuals and foreign corporations.

    Effective Date Note:  By T.D. 8734, 62 FR 53497, Oct. 14, 1997, 
Sec. 509.103 was amended by removing and reserving paragraph (e), 
effective Jan. 1, 1999. By T.D. 8804, 63 FR 72183, Dec. 31, 1998, the 
effective date was delayed until Jan. 1, 2000. By T.D. 8856, 64 FR 
73408, Dec. 30, 1999, the effective date was delayed until Jan. 1, 2001.