[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: 26CFR509.117]
[Page 46-47]
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. 509.117 Dividends and interest paid by a foreign corporation.
(a) General--(1) Dividends. A dividend paid by a foreign corporation
constitutes, in whole or in part, income from sources within the United
States and is subject to tax by the United States when received by a
nonresident alien individual or other foreign corporation, if 50 percent
or more of the gross income of the paying corporation for the statutory
period was derived from sources within the United States. See section
861(a)(2)(B), section 872(a), and section 882(b), Internal Revenue Code
of 1954; and the regulations thereunder.
(2) Interest. Interest on bonds, notes, and other interest-bearing
obligations of resident foreign corporations constitutes, in its
entirety, income from sources within the United States and is
[[Page 47]]
subject to tax by the United States when received by a nonresident alien
individual or other foreign corporation, if 20 percent or more of the
gross income of the paying corporation for the statutory period was
derived from sources within the United States. See section 861(a)(1)(B),
section 872(a), and section 882(b), Internal Revenue Code of 1954; and
the regulations thereunder.
(b) Exemption from United States tax. Notwithstanding the provisions
of paragraph (a) of this section, Article XIV(1) of the convention
provides that dividends and interest paid by any foreign corporation and
derived by a nonresident alien who is a resident of Switzerland, or by a
Swiss corporation, shall not be included in gross income and shall be
exempt from United States tax if such alien or corporation at no time
during the taxable year in which such items of income are derived has a
permanent establishment in the United States. The exemption so provided
shall apply even though the corporation paying the dividends or interest
is a resident foreign corporation at the time of payment and without
regard to the percentage of its gross income from sources within the
United States.
Effective Date Note: By T.D. 8734, 62 FR 53497, Oct. 14, 1997,
Sec. 509.117 was amended by removing and reserving paragaph (a),
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.