[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: 26CFR514.104]

[Page 94-95]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 514--FRANCE--Table of Contents
 
                       Subpart--General Income Tax
 
Sec. 514.104  Definitions.

    (a) Any word or term used in this subpart which is defined in the 
convention shall be given the definition assigned to such word or term 
in such convention. Any word or term used in this subpart which is not 
defined in the convention but is defined in the Internal Revenue Code 
shall be given the definition contained therein.
    (b) As used in this subpart:
    (1) The term ``permanent establishment'' includes branches, mines 
and oil wells, plantations, factories, workshops, stores, purchasing and 
selling and other offices, agencies, warehouses and other fixed places 
of business. A French parent corporation having a domestic or foreign 
subsidiary corporation in the United States shall not be deemed by 
reason of such fact to have a permanent establishment in the United 
States. The mere fact that a foreign subsidiary corporation of a French 
parent corporation has a permanent establishment in the United States 
does not mean that such French parent corporation has a permanent 
establishment in the United States. The fact that a French enterprise 
carries on business dealings in the United States through a bona fide 
commission agent or broker shall not be held to mean that such 
enterprise has a permanent establishment in the United States. If, 
however, a French enterprise carries on business in the United States 
through an employee or agent established there who has general authority 
to negotiate and conclude contracts or has a stock of merchandise from 
which he regularly fills orders, such enterprise shall be deemed to have 
a permanent establishment in the United States. Thus, if a French 
enterprise has a full time employee or full time agent who for such 
enterprise maintains in the United States a stock of merchandise from 
which orders are filled, such enterprise has a permanent establishment 
in the United States even though such employee or agent has no general 
authority to negotiate and conclude contracts on behalf of such 
enterprise. However, the mere fact that a commission agent or broker 
through whom a French enterprise carries on business in the United 
States maintains a small stock of goods in the United States from which 
occasional orders are filled shall not be construed as meaning that such 
enterprise has a permanent establishment in the United States. The mere

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fact that salesmen, employees of a French enterprise, promote the sale 
of its products in the United States does not mean that such enterprise 
has a permanent establishment therein. However, a French insurance 
enterprise which insures risks within the United States or receives 
premiums from sources within the United States is deemed to have a 
permanent establishment within the United States.
    (2) The term ``enterprise'' means any commercial or industrial 
undertaking, whether conducted by an individual, partnership, 
corporation, or other entity. It includes such activities as 
manufacturing, merchandising, mining, banking, and insurance. It does 
not include the operation of, or the trading in, real property located 
in the United States. It does not include the rendition of personal 
services. Hence, a nonresident alien individual who is a resident of 
France, rendering personal services within the United States is not, 
merely by reason of such services, engaged in an enterprise within the 
meaning of the convention, and his liability to United States income tax 
is unaffected by Article 3 of the Convention.
    (3) The term ``French enterprise'' means an enterprise carried on in 
France by a nonresident alien individual resident of France or by a 
French corporation or other French entity. The term ``corporation or 
other entity'' means a partnership, corporation, or other entity created 
or organized in France or under the laws of France. For example, an 
enterprise carried on wholly outside France by a French corporation is 
not a French enterprise within the meaning of the convention. Whether a 
French entity is a corporation, a partnership, or a trust is to be 
determined in accordance with the principles of existing law relating to 
the taxation of nonresident aliens and foreign corporations.
    (4) The term ``industrial and commercial profits'' means the profits 
arising from the industrial, mercantile, manufacturing, or like 
activities of a French enterprise as defined in this section. Such term 
does not include income from real property, interest, dividends, rentals 
and royalties, gains from the sale or exchange of capital assets, or 
compensation for labor or personal service. Such enumerated items of 
income are not governed by the provisions of Article 3 but, to the 
extent covered by the convention, are subject to the rules elsewhere set 
forth therein and in this subpart.
    (5) The term ``Secretary'' means the Secretary of the Treasury and 
the term ``Minister'' means the Minister of Finance of France.