[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: 26CFR521.104]
[Page 147-148]
TITLE 26--INTERNAL REVENUE
CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
(Continued)
PART 521--DENMARK--Table of Contents
Subpart--General Income Tax
Sec. 521.104 Definitions.
(a) As used in Secs. 521.101 to 521.117, unless the context
otherwise requires, the terms defined in the convention shall have the
meanings so assigned to them. Any term used in Secs. 521.101 to 521.117,
which is not defined in the convention but which is defined in the
Internal Revenue Code shall be given the definition contained therein
unless the context otherwise requires.
(b) As used in Secs. 521.101 to 521.117.
(1) The term ``permanent establishment'' means a branch office,
factory, warehouse or other fixed place of business, but does not
include the casual and temporary use of merely storage facilities. The
fact that a Danish corporation has a domestic subsidiary corporation or
a foreign subsidiary corporation having a branch in the United States,
does not of itself constitute either subsidiary corporation a permanent
establishment of the parent Danish enterprise. The fact that a Danish
enterprise has business dealings in the United States through a bona
fide commission agent, broker, or custodian, acting in the ordinary
course of his business as such, or maintains in the United States an
office or other fixed place of business used exclusively for the
purchase of goods or merchandise, does not mean that such Danish
enterprise has a permanent establishment in the United States. If,
however, a Danish enterprise carries on business in the United States
through an agent who has, and habitually exercises, a general authority
to negotiate and conclude contracts on behalf of such enterprise or if
it has an agent who maintains within the United States a stock of
merchandise from which he regularly fills orders on behalf of his
principal, then such enterprise shall be deemed to have a permanent
establishment in the United States. However, an agent having power to
contract on behalf of his principal but only at fixed prices and under
conditions determined by the principal does not necessarily constitute a
permanent establishment of such principal. The mere fact that an agent
(assuming he has no general authority to contract on behalf of his
employer or principal) maintains samples or occasionally fills orders
from incidental stocks of goods maintained in the United States will not
constitute a permanent establishment within the United States. The mere
fact that salesmen, employees of a Danish enterprise, promote the sale
of their employer's products in the United States or that such
enterprise transacts business in the United States by means of mail
order activities, does not mean such enterprise has a permanent
establishment therein. The term ``permanent establishment'' as used in
the convention implies the active conduct therein of a business
enterprise. The mere ownership, for example, of timberlands or a
warehouse in the United States by a Danish enterprise does not mean that
such enterprise has a permanent establishment therein. As to the effect
of the maintenance of a permanent establishment within the United States
upon exemption from United States tax in the case of interest and
royalties and reduction in the
[[Page 148]]
rate of United States tax in the case of dividends, see Sec. 521.108.
(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, processing, and banking. It does
not include the rendition of personal services. Hence, a non resident
alien who is a resident of Denmark and who renders personal services is
not, merely by reason of such services, engaged in an enterprise within
the meaning of the convention and his liability to United States tax is
not affected by Article III of the convention.
(3) The term ``Danish enterprise'' means an enterprise carried on in
Denmark by a resident of Denmark or by a Danish corporation or other
entity. The term ``Danish corporation or other entity'' means a
partnership, corporation or other entity created or organized in Denmark
or under the laws of Denmark.
(4) The term ``industrial or commercial profits'' means profits
arising from industrial, commercial, mercantile, manufacturing, and like
activities of a Danish enterprise as defined in this section. Such term
does not include rentals, royalties, interest, dividends, fees,
compensation for personal services, nor gains derived from the sale or
exchange of capital assets. Such enumerated items of income are not
governed by the provisions of Article III of the convention.