[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: 26CFR513.3]
[Page 56-58]
TITLE 26--INTERNAL REVENUE
CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
(Continued)
PART 513--IRELAND--Table of Contents
Subpart--Withholding of Tax
Sec. 513.3 Interest.
(a) General. (1) Interest (other than interest falling within the
scope of paragraph (c) of this section) on bonds, securities, notes,
debentures, or any other form of indebtedness, including interest on
obligations of the United States, obligations of instrumentalities of
the United States, and mortgages and bonds secured by real property,
derived from sources within the United States and received in taxable
years beginning on or after January 1, 1951, by a nonresident alien
(including a nonresident alien individual, fiduciary, and partnership)
who is resident in Ireland for the purposes of Irish tax, or by a
foreign corporation (whether or not created or organized in or under the
laws of Ireland) whose business is managed and controlled in Ireland, is
exempt from United States tax under the provisions of Article VII(1) of
the convention if such alien or corporation is subject to Irish tax on
such interest and at no time during the taxable year had a permanent
establishment within the United States. Such interest is, therefore, not
subject to the withholding provisions of the Internal Revenue Code. As
to what constitutes a permanent establishment, see Article II(1) of the
convention.
(2) The provisions of Sec. 513.2(a) relating to the degree of
liability to Irish tax in the case of dividends are equally applicable
with respect to the income falling within the scope of this section.
(b) Application of exemption from withholding. (1) To obviate
withholding at the source in the case of coupon bond interest the
nonresident alien resident in Ireland for the purpose of Irish tax, or
the foreign corporation whose business is managed and controlled in
Ireland, shall for each issue of bonds submit Form 1001-IR in duplicate
to the paying agent with each presentation of interest coupons. Such
form shall be signed by the owner of the interest, trustee, or agent and
shall show the name and address of the obligor, the name and address of
the owner of such interest, and the amount of such interest. Such form
shall contain a statement that the owner (i) is resident in Ireland for
the purposes of Irish tax, or is a foreign corporation whose business is
managed and controlled in Ireland, (ii) has no permanent establishment
in the United States, and (iii) is subject to Irish tax on such
interest.
(2) The exemption from United States tax contemplated by Article
VII(1) of the convention, insofar as it concerns coupon bond interest,
is applicable only to the owner of such interest. The person presenting
such coupon, or on whose behalf it is presented, shall for the purpose
of the exemption from 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 is not the owner of the bond, Form 1001, and not
Form 1001-IR, shall be executed.
(3) The original and duplicate ownership certificates, Form 1001-IR,
must be forwarded to the Commissioner of Internal Revenue by the
withholding agent with the quarterly return on Form 1012, as provided in
existing regulations with respect to Form 1001. See Sec. 29.143-7 of
Regulations 111 (26 CFR 1949 ed. Supps. 29.143-7 [and Sec. 39.143-7 of
Regulations 118 (26 CFR, Rev. 1953, Parts 1-79, and Supps.)] Form 1001-
IR need not be listed on Form 1012.
(4) For general provisions pertaining to the use, without reference
to the provisions of the convention, of ownership certificate, Form
1001, by nonresident aliens and nonresident foreign corporations, see
Secs. 29.143-4 and 29.143-6 of Regulations 111 (26 CFR 1949 ed. Supps.
29.143-4 and 29.143-6) [and Secs. 39.143-4 and 39.143-6 of Regulations
118 (26 CFR, Rev. 1953, Parts 1-79, and Supps.)]
(5) To obviate withholding at the source in the case of interest,
other than interest payable by means of coupons, the nonresident alien
resident in Ireland for the purposes of Irish tax, or the foreign
corporation whose business is managed and controlled in Ireland,
[[Page 57]]
shall notify the withholding agent by letter in duplicate that such
income is exempt from United States tax under the provisions of Article
VII(1) of the convention. The letter of notification shall be signed by
the owner of the interest, trustee, or agent and shall show the name and
address of the obligor and the name and address of the owner of such
interest. It shall also contain a statement that the owner (i) is
resident in Ireland for the purposes of Irish tax, or is a foreign
corporation whose business is managed and controlled in Ireland, (ii)
has no permanent establishment in the United States, and (iii) is
subject to Irish tax on such interest. This letter shall constitute
authorization for the payment of such interest without deduction of the
tax at source.
(6) The letter of notification in the case of interest, other than
interest payable by means of coupons, must be filed for each three-
calendar-year period, and the first such letter filed by the taxpayer
with any withholding agent shall be filed not later than 20 days
preceding the date of the first payment of interest in such period. If
the taxpayer files such letter with the withholding agent in the
calendar year 1952, or in any subsequent calendar year, no additional
letter need be filed prior to the end of the two calendar years
immediately following the calendar year in which such letter is so filed
unless the Commissioner of Internal Revenue notifies the withholding
agent that an additional letter must be filed by the taxpayer at any
earlier date. If, after filing a letter of notification, the taxpayer
ceases to be eligible for the benefit of the convention, he must
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 United States tax will no longer apply
unless a letter of notification is duly executed and filed with the
withholding agent by the new owner of record of such interest.
(7) Each letter of notification, or the duplicate thereof, must be
immediately forwarded by the withholding agent to the Commissioner of
Internal Revenue, Clearing Branch, Washington 25, D.C.
(8) In the case of interest paid on or after January 1, 1951, by an
Irish corporation, as defined in Article II(1)(e) of the convention, no
withholding of United States tax is required. See Article XV(1) of the
convention.
(c) Exemption not applicable to interest paid by subsidiary
corporation to its parent corporation. (1) Under the exception contained
in Article VII(1) of the convention any interest derived from sources
within the United States and paid by a domestic corporation to a foreign
corporation whose business is managed and controlled in Ireland is not
exempt from United States tax if such foreign corporation controls,
directly or indirectly, at the time the interest is paid more than 50
percent of the entire voting power of all classes of stock of such
domestic corporation. The exemption from United States tax provided by
Article VII(1) of the convention does not, therefore, apply to such
interest paid by such domestic corporation.
(2) In any case in which a foreign corporation whose business is
managed and controlled in Ireland anticipates the receipt of interest
from a domestic corporation and the relationship existing between the
foreign corporation and the domestic corporation is such as to render
uncertain whether, by reason of the exception contained in Article
VII(1) of the convention, the exemption will apply to such interest, the
foreign corporation shall not undertake to file any Form 1001-IR or
letter of notification prescribed by paragraph (b) of this section
unless it has, prior to such filing, applied for and received from the
Commissioner of Internal Revenue, Washington 25, D.C., a determination
that such foreign corporation does not control, directly or indirectly,
more than 50 percent of the entire voting power in the paying
corporation. The application to the Commissioner shall contain a full
statement of all the facts pertinent to a determination of the question.
(3) As soon as practicable after the application has been filed, the
Commissioner of Internal Revenue will determine whether the foreign
corporation has such control of the domestic corporation as to render
the exemption
[[Page 58]]
provided by Article VII(1) of the convention inapplicable to interest
paid by such domestic corporation to such foreign corporation and shall
notify the foreign corporation of his determination. The foreign
corporation shall forthwith file with the domestic corporation a copy of
the Commissioner's letter of notification.
(4) If the Commissioner's determination is that the foreign
corporation does not control, directly or indirectly, more than 50
percent of the entire voting power of all classes of stock of the
domestic corporation, the foreign corporation may thereafter obviate
withholding at the source with respect to subsequent payments of such
interest by complying with the provisions of paragraph (b) of this
section, that is, by submitting Form 1001-IR in the case of coupon bond
interest, or the letter of notification for each three-calendar-year
period in the case of interest other than interest payable by means of
coupons.
(5) A determination of the Commissioner that the foreign corporation
does not have such control of the domestic corporation as to render the
exemption provided by Article VII(1) of the convention inapplicable will
apply until such time as the stock ownership of the domestic corporation
has changed to the extent that interest to be received from the domestic
corporation by the foreign corporation is no longer exempt from United
States tax under Article VII(1) of the convention. If such change in
stock ownership occurs, the foreign corporation shall promptly notify
both the Commissioner of Internal Revenue and the domestic corporation
of the then existing facts with respect to such stock ownership.
(6) In any case in which a foreign corporation whose business is
managed and controlled in Ireland has received on or after January 1,
1952, interest from a domestic corporation and the relationship existing
between the foreign corporation and the domestic corporation was at the
time the interest was paid such as to render uncertain whether, by
reason of the exception contained in Article VII(1) of the convention,
such interest was exempt from United States tax, the foreign corporation
shall apply to the Commissioner of Internal Revenue for a similar
determination as to the degree of control at the time the interest was
paid. If the Commissioner's determination is that at such time the
degree of control was such as to permit the application of the exemption
provided by Article VII(1) of the convention, his letter of notification
may, subject to the provisions of Sec. 513.7(e), authorize the release
of excess tax withheld with respect to such exempt interest.
Effective Date Note: By T.D. 8734, 62 FR 53497, Oct. 14, 1997,
Sec. 513.3 was revised, 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. For the convenience of the user, the revised text is
set forth as follows:
Sec. 513.3 Interest.
The provisions of Sec. 513.2 relating to the degree of liability to
Irish tax in the case of dividends are equally applicable with respect
to the income falling within the scope of this section.
[62 FR 53497, Oct. 14, 1997]