§ 509.4 - Patent and copyright royalties and film rentals.

Royalties and other amounts received in taxable years beginning on or after January 1, 1951, from sources within the United States by a nonresident alien (including a nonresident alien individual, fiduciary, and partnership) who is a resident of Switzerland or by a Swiss corporation, as consideration for the right to use copyrights, artistic and scientific works, patents, designs, plans, secret processes and formulae, trade-marks, and other like property and rights (including rentals and like payments in respect to motion picture films or for the use of industrial, commercial, or scientific equipment), are exempt from United States tax under the provisions of Article VIII of the convention if such alien or corporation at no time during the taxable year in which such royalties or other amounts are received has had a permanent establishment within the United States. Such items are therefore not subject to the withholding provisions of the Internal Revenue Code. As to what constitutes a permanent establishment, see Article II(1)(c) of the convention.

To obviate withholding at the source in the case of such items, the nonresident alien who is a resident of Switzerland or the Swiss corporation shall file Form 1001A-S, in duplicate, with the withholding agent in the United States. The provisions of § 509.3(b) relating to the execution and effective period of such form with respect to interest are equally applicable with respect to the income falling within the scope of this section.

The duplicate of Form 1001A-S must be immediately forwarded by the withholding agent to the Commissioner of Internal Revenue, Records Division, Washington, D.C.