[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: 26CFR516.5]

[Page 107-108]
 
                       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. 516.5  Patent and copyright royalties and film rentals.

    (a) Items exempt from tax--(1) In general. Royalties and other 
amounts 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, as consideration 
for the right to use literary, musical or other copyrights, artistic and 
scientific works, patents, designs, plans, secret processes and 
formulae, trademarks, and other like property and rights (including 
rentals and like payments for the use of industrial, commercial, or 
scientific equipment but not including motion picture film rentals) are, 
in an amount not exceeding a fair and reasonable consideration for such 
right, exempt from United States tax under the provisions of Article 
VIII(1) of the convention if such alien, corporation, or other entity 
has not had a permanent establishment in the United States at any time 
during the taxable year in which such items are received.
    (2) Exemption from withholding of United States tax--(i) 
Notification by letter. To avoid withholding of United States tax at 
source on or after January 1, 1958, in the case of the items of income 
to which this paragraph 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 
income is exempt from United States tax under the provisions of Article 
VIII(1) of the convention.
    (ii) Manner of filing letter. The provisions of Sec. 516.4(d)(2) 
relating to the execution, filing, effective period, and disposition of 
the letter of notification prescribed therein, including its use for the 
release of excess tax withheld, are equally applicable with respect to 
the income falling within the scope of this paragraph.
    (iii) Reasonableness of consideration. For purposes of this 
subparagraph, the withholding agent may, unless he has information to 
the contrary, presume that the royalty or other like amount represents a 
fair and reasonable consideration for the right involved.
    (b) Motion picture film rentals--(1) Reduced rate. Under Article 
VIII(2) of the convention, the rate of United States tax imposed upon 
motion picture film rentals 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, shall not exceed the lesser of (i) 50 percent of the statutory 
rate of tax imposed on such rentals by the United States or (ii) 10 
percent of the gross amount of such rentals, if such alien, corporation, 
or other entity at no time during the taxable year in which such rentals 
are received has a permanent establishment in the United States.
    (2) Reduction in rate of withholding of United States tax--(i) 
Notification by letter. To secure withholding of United

[[Page 108]]

States tax at source on or after January 1, 1958, at the reduced rate 
(10 percent, as of the date of approval of Secs. 516.1 to 516.12, of the 
gross amount of the rentals) in the case of the motion picture film 
rentals to which this paragraph 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 rentals are subject to United States tax at the reduced rate 
under the provisions of Article VIII(2) of the convention.
    (ii) Manner of filing letter. The provisions of Sec. 516.4(d)(2) 
relating to the execution, filing, effective period, and disposition of 
the letter of notification prescribed therein, including its use for the 
release of excess tax withheld, are equally applicable with respect to 
the rentals falling within the scope of this paragraph except that the 
release of excess tax withheld from such rentals shall be made in 
accordance with Sec. 516.9(a)(6).