[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: 26CFR509.108]

[Page 43]
 
                       TITLE 26--INTERNAL REVENUE
 
     CHAPTER 1--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY 
                               (Continued)
 
PART 509--SWITZERLAND--Table of Contents
 
                       Subpart--General Income Tax
 
Sec. 509.108  Dividends.

    (a) General. (1) The rate of United States tax imposed by the 
Internal Revenue Code of 1954 upon dividends derived from sources within 
the United States by a nonresident alien individual who is a resident of 
Switzerland, or by a Swiss corporation or other entity, shall not exceed 
15 percent under the provisions of Article VI of the convention, if such 
alien, corporation, or other entity at no time during the taxable year 
in which such dividends are derived has a permanent establishment in the 
United States.
    (2) If, for example, a nonresident alien individual who is a 
resident of Switzerland 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 in that year from 
United States sources, as provided in Article VI 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 performed personal 
services therein.
    (b) Dividends paid by related corporation. The rate of United States 
tax imposed by the Internal Revenue Code of 1954 upon dividends derived 
from sources within the United States by a Swiss corporation shall not 
exceed 5 percent under the provisions of Article VI (2) of the 
convention if:
    (1) The Swiss corporation is a shareholder which controls, directly 
or indirectly, at the time the dividend is paid 95 percent or more of 
the entire voting power in the corporation paying the dividend;
    (2) Not more than 25 percent of the gross income of the paying 
corporation for the three-year period immediately preceding the taxable 
year in which the dividend is paid consists of dividends and interest 
(other than dividends and interest received by such paying corporation 
from its own subsidiary corporations, if any);
    (3) The relationship between the paying corporation and the Swiss 
corporation has not been arranged or maintained primarily with the 
intention of securing the reduced rate of 5 percent; and
    (4) The Swiss corporation at no time during the taxable year in 
which such dividends are derived has a permanent establishment in the 
United States.