[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: 26CFR516.2]
[Page 103-104]
TITLE 26--INTERNAL REVENUE
CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
(Continued)
PART 516--AUSTRIA--Table of Contents
Subpart--Withholding of Tax
Sec. 516.2 Dividends; general rules.
(a) Paid by an Austrian corporation. Dividends paid on or after
January 1, 1957, by an Austrian corporation which is not a United States
corporation are exempt from United States tax under the provisions of
Article XIV (1) of the convention if the recipient is a nonresident
alien or a foreign corporation.
(b) 50 percent of statutory rate--(1) In general. Article VI of the
convention provides that the rate of United States tax imposed upon
dividends received from sources within the United States on or after
January 1, 1957, by a nonresident alien individual who is a resident of
Austria, or by an Austrian corporation or other entity, shall not exceed
50 percent of the statutory rate of tax imposed on such dividends by the
United States if such alien, corporation, or other entity has not had a
permanent establishment in the United States at any time during the
taxable year in which such dividends are received. This subparagraph
does not apply to dividends falling within the scope of paragraph (a) or
(c) of this section.
(2) Personal services. If a nonresident alien individual who is a
resident of Austria performs personal services within the United States
during the taxable year, but has at no time during such year a permanent
establishment within the United States, he is entitled to the reduced
rate of tax on dividends prescribed by subparagraph (1) of this
paragraph, even though under the provisions of section 871(c) of the
Internal Revenue Code of 1954 he has engaged in trade or business within
the United States during such year by reason of his having performed
personal services therein.
(c) Dividends paid by a related corporation--(1) Rate of 5 percent.
Under the provisions of Article VI of the convention, dividends received
from sources within the United States on or after January 1, 1957, by an
Austrian corporation which controls, directly or indirectly, at the time
the dividend is paid, 95 percent or more of the entire voting power in
the corporation paying the dividend are subject to United States tax at
a rate not in excess of 5 percent if (i) not more than 25 percent of the
gross income of the paying corporation for the 3-year period immediately
preceding the taxable year in which the dividend is paid consists of
dividends and interest (other than dividends and interest received by
such paying corporation from its own subsidiary corporations, if any),
(ii) the relationship between the paying corporation and the Austrian
corporation has not been arranged or maintained primarily with the
intention of securing the reduced rate of 5 percent, and (iii) the
Austrian corporation at no time during the taxable year in which such
dividends are received has had a permanent establishment within the
United States. This subparagraph does not apply to dividends falling
within the scope of paragraph (a) of this section.
(2) Information to be filed with Commissioner. Any corporation
(hereinafter referred to as the claimant) which claims or contemplates
claiming that dividends paid or to be paid by it are subject to a rate
of United States tax not in excess of 5 percent shall file the following
information with the Commissioner of Internal Revenue as soon as
practicable: (i) the date and place of its organization; (ii) the number
of outstanding shares of stock of the claimant having voting power and
the voting power thereof; (iii) the person or persons beneficially
owning such stock of the claimant and their relationship to the Austrian
corporation; (iv) the amounts by years (for the 3-year period
immediately preceding the taxable year in which the dividend is paid) of
the gross income of the claimant, of the interest and dividends included
in such gross income, and of the interest and dividends received by the
claimant from its own subsidiary corporations, if any; and (v) the
relationship between the claimant and the Austrian corporation receiving
the dividend.
(3) Notification by Commissioner. As soon as practicable after such
information is filed, the Commissioner will determine whether the
dividends concerned qualify under Article VI of the convention for a
rate of tax not in excess of 5 percent and will notify the claimant of
his determination. If the dividends do qualify for such reduced rate,
this notification may also authorize the release, pursuant to
Sec. 516.9(a)(3),
[[Page 104]]
of excess tax withheld from the dividends concerned.
(d) Withholding of United States tax from dividends--(1) Exempt from
withholding. No withholding of United States tax is required in the case
of dividends paid by an Austrian corporation which, in accordance with
paragraph (a) of this section, are exempt from United States tax.
(2) 50 percent of statutory rate--(i) In general. Withholding of tax
at source on or after January 1, 1958, in the case of dividends (other
than dividends falling within the scope of subparagraph (1) or (3) of
this paragraph) received from sources within the United States by a
nonresident alien or by a foreign corporation or other entity, whose
address is in Austria, shall, to the extent withholding of United States
tax is required, be at the rate of 50 percent of the statutory rate in
every case except that in which, prior to the date of payment of such
dividends, the Commissioner of Internal Revenue has notified the
withholding agent that the reduced rate of withholding shall not apply.
(ii) Effect of address in Austria. For the purposes of this
subparagraph, every nonresident alien whose address is in Austria shall
be deemed by United States withholding agents to be a nonresident alien
individual who is a resident of Austria not having a permanent
establishment within the United States; and every foreign corporation or
other entity whose address is in Austria shall be deemed by such
withholding agents to be an Austrian corporation or other entity not
having a permanent establishment within the United States.
(iii) Reduced rate applicable to owner only. This subparagraph is
based on the assumption that the payee of the dividend is the actual
owner of the capital stock from which the dividend is derived. As to
action by a recipient who is not the owner, see Sec. 516.3.
(iv) Statutory rate. As used in this subparagraph, the term
``statutory rate'' means the rate (30 percent as of the date of approval
of this Treasury decision) prescribed with respect to dividends by
chapter 3 of the Internal Revenue Code of 1954 as though the convention
had not come into effect.
(v) Nonresident alien. The term ``nonresident alien'', as used in
this subparagraph, includes nonresident alien individuals, fiduciaries,
and partnerships.
(3) Rate of 5 percent. If, in accordance with paragraph (c)(3) of
this section, the Commissioner of Internal Revenue has notified the
claimant corporation that the dividends qualify under Article VI of the
convention for a rate of tax not in excess of 5 percent, the reduced
withholding rate of 5 percent, to the extent withholding of United
States tax is required, shall apply on or after January 1, 1958, to any
dividends subsequently paid by such corporation and received by the
Austrian corporation, unless (i) the stock ownership of the claimant
corporation materially changes, (ii) the character of the income of the
claimant corporation materially changes, or (iii) the Commissioner
determines that the relationship between the two corporations concerned
is being maintained primarily with the intention of securing the reduced
rate of United States tax. In such instance, if such change in stock
ownership or character of income occurs, the claimant corporation shall
promptly notify the Commissioner of the then existing facts with respect
thereto. The continued application of the rate not in excess of 5
percent is also dependent upon the continued fulfillment of paragraph
(c)(1)(iii) of this section.
(4) Evidence of tax withheld. The rate at which United States tax
has been withheld from any dividend paid at any time after the
expiration of the thirtieth day after the date on which Secs. 516.1 to
516.12 are published in the Federal Register to any person whose address
is in Austria at the time the dividend is paid shall be shown either in
writing or by appropriate stamp on the check, draft, or other evidence
of payment, or on an accompanying statement.