[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: 26CFR516.4]
[Page 105-107]
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. 516.4 Interest.
(a) Paid by Austrian corporation. Interest paid on or after January
1, 1957, by an Austrian corporation which is not a United States
corporation is 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. Such exempt interest is not subject to the
withholding of United States tax at source.
(b) Other interest. Interest on bonds, notes, debentures,
securities, or on any other form of indebtedness, including interest on
obligations of the United States and its instrumentalities but not
including interest on debts secured by mortgages, which is 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, is exempt, in an amount not
exceeding a fair and reasonable consideration on the indebtedness, from
United States tax under the provisions of Article VII of the convention
if such alien, corporation, or other entity at no time during the
taxable year in which such interest is received has a permanent
establishment in the United States. This paragraph does not apply to the
interest which is exempt from United States tax in accordance with
paragraph (a) of this section.
(c) 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
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in the United States, he is entitled to the interest exemption
prescribed by paragraph (b) of this section 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.
(d) Exemption from withholding of United States tax--(1) Coupon bond
interest--(i) Form to use. To avoid withholding of United States tax at
source on or after January 1, 1958, in the case of coupon bond interest
to which paragraph (b) of this section applies, the nonresident alien
individual who is a resident of Austria, or the Austrian corporation or
other entity, shall, for each issue of bonds, file Form 1001-A in
duplicate when presenting the interest coupons for payment. This form
shall be signed by the owner of the interest, or by his trustee or
agent, and shall show the information required by Sec. 1.1461-1(d) of
this chapter. It shall contain a statement that the owner (a) is a
resident of Austria, or is an Austrian corporation or other entity, and
(b) has no permanent establishment in the United States.
(ii) Exemption applicable only to owner. The exemption from United
States tax contemplated by Article VII of the convention, insofar as it
concerns coupon bond interest, is applicable only to the owner of the
interest. The person presenting the coupon, or on whose behalf it is
presented, shall, for the purpose of the exemption from United States
tax, be deemed to be the owner of the interest only if he is, at the
time the coupon is presented for payment, the owner of the bond from
which the coupon has been detached. If the person presenting the coupon,
or on whose behalf it is presented, is not the owner of the bond, Form
1001, and not Form 1001-A, shall be executed.
(iii) Disposition of form. The original and duplicate of Form 1001-A
shall be forwarded by the withholding agent to the Director of
International Operations, Internal Revenue Service, Washington 25, D.C.,
in accordance with Sec. 1.1461-2(b)(2) of this chapter.
(2) Interest on noncoupon bonds--(i) Notification by letter. To
avoid withholding of United States tax at source on or after January 1,
1958, in the case of interest (other than coupon bond interest) to which
paragraph (b) of this section applies, the nonresident alien individual
who is a resident of Austria, or the Austrian corporation or other
entity, shall notify the withholding agent by letter in duplicate that
the interest is exempt from United States tax under the provisions of
Article VII of the convention. The letter of notification shall be
signed by the owner of the interest, or by his trustee or agent, and
shall show the name and address of the obligor and the name and address
of the owner of the interest. It shall contain a statement (a) that the
owner is neither a citizen nor a resident of the United States but is a
resident of Austria, or, in the case of a corporation or other entity,
that the owner is an Austrian corporation or other entity, and (b) that
the owner has at no time during the current taxable year had a permanent
establishment in the United States.
(ii) Use of letter for release of excess tax. If the letter is also
to be used as authorization for the release, pursuant to
Sec. 516.9(a)(5), of excess tax withheld from such interest, it shall
also contain a statement (a) that, at the time when the interest was
received from which the excess tax was withheld, the owner was neither a
citizen nor a resident of the United States but was a resident of
Austria, or, in the case of a corporation or other entity, the owner was
an Austrian corporation or other entity, and (b) that the owner at no
time during the taxable year in which such interest was received had a
permanent establishment in the United States.
(iii) Manner of filing letter. The letter of notification, which
shall constitute authorization for the payment of the interest without
withholding of United States tax at source, shall be filed with the
withholding agent for each successive 3-calendar-year period during
which the interest is paid. For this purpose, the first such period
shall commence with the beginning of the calendar year in which the
interest is first paid on or after January 1, 1958. Each letter filed
with any withholding agent shall be filed not later than 20 days
preceding the date of the first payment
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within each successive period, or, if that is not possible because of
special circumstances, as soon as possible after such first payment.
Once a letter has been filed in respect of any 3-calendar-year period,
no additional letter need be filed in respect thereto unless the
Commissioner of Internal Revenue notifies the withholding agent that an
additional letter shall be filed by the taxpayer. If, after filing a
letter of notification, the taxpayer ceases to be eligible for the
exemption from United States tax granted by Article VII of the
convention, he shall promptly notify the withholding agent by letter in
duplicate. When any change occurs in the ownership of the interest as
recorded on the books of the payer, the exemption from withholding of
United States tax shall no longer apply unless the new owner of record
is entitled to and does properly file a letter of notification with the
withholding agent.
(iv) Disposition of letter. Each letter of notification, or the
duplicate thereof, shall be immediately forwarded by the withholding
agent to the Director of International Operations, Internal Revenue
Service, Washington 25, D.C.
(3) Reasonableness of consideration. For purposes of this paragraph,
the withholding agent may, unless he has information to the contrary,
presume that the interest represents a fair and reasonable consideration
on the indebtedness involved.