[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: 26CFR514.2]

[Page 66]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 514--FRANCE--Table of Contents
 
                       Subpart--Withholding of Tax
 
Sec. 514.2  Dividends.

    (a) General. (1) The rate of United States tax imposed by the 
Internal Revenue Code upon dividends derived from sources within the 
United States on or after January 1, 1952, by a nonresident alien 
(including a nonresident alien individual, fiduciary, and partnership) 
who is a resident of France when such dividend is so paid, or by a 
French corporation, shall not exceed 15 percent if such alien or 
corporation at no time during the taxable year in which such dividends 
are so received has no permanent establishment within the United States. 
Article I(a) of the convention, signed June 22, 1956. As to what 
constitutes a ``permanent establishment'' see Protocol III(a), in 
Sec. 514.1.
    (2) Thus, if a nonresident alien individual who is a resident of 
France 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 with respect to dividends derived from United States 
sources, as provided in Article I(d) of the convention 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 rendered personal services therein.
    (b) Effect of address in France on withholding in the case of 
dividends. For the purpose of withholding of United States tax in the 
case of dividends, every nonresident alien (including a nonresident 
alien individual, fiduciary, and partnership) whose address is in France 
shall be deemed by United States withholding agents to be a nonresident 
alien who is a resident of France not having a permanent establishment 
in the United States; and every foreign corporation whose address is in 
France shall be deemed by such withholding agents to be a French 
corporation not having a permanent establishment in the United States.
    (c) Rate of withholding. (1) Withholding at source in the case of 
dividends derived from sources within the United States and paid on or 
after January 1, 1957, to nonresident aliens (including a nonresident 
alien individual, fiduciary, and partnership) and to foreign 
corporations, whose addresses are in France, shall be at the rate of 15 
percent 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.
    (2) The preceding provisions respecting the application of the 
reduced withholding rate in the case of dividends paid to nonresident 
aliens and foreign corporations with addresses in France are based upon 
the assumption that the payee of the dividend is the actual owner of the 
capital stock from which the dividend is derived and consequently is the 
person liable to the United States upon such dividend. As to action by 
the recipient who is not the owner of the dividend, see Sec. 514.3.
    (3) The rate at which the 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. 514.1 to 514.10 are published in the 
Federal Register to any person whose address is in France 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.