§ 514.2 - Dividends.

§ 514.2 Dividends.

(a) General.

(1) The rate of United States tax imposed by the Internal Revenue Code upon dividends derived from sources within the United States on or after January 1, 1952, by a nonresident alien (including a nonresident alien individual, fiduciary, and partnership) who is a resident of France when such dividend is so paid, or by a French corporation, shall not exceed 15 percent if such alien or corporation at no time during the taxable year in which such dividends are so received has no permanent establishment within the United States. Article I(a) of the convention, signed June 22, 1956. As to what constitutes a “permanent establishment” see Protocol III(a), in § 514.1.

(2) Thus, if a nonresident alien individual who is a resident of France 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 from United States sources, as provided in Article I(d) 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 rendered personal services therein.

(b) Effect of address in France on withholding in the case of dividends. For the purpose of withholding of United States tax in the case of dividends, every nonresident alien (including a nonresident alien individual, fiduciary, and partnership) whose address is in France shall be deemed by United States withholding agents to be a nonresident alien who is a resident of France not having a permanent establishment in the United States; and every foreign corporation whose address is in France shall be deemed by such withholding agents to be a French corporation not having a permanent establishment in the United States.

(c) Rate of withholding.

(1) Withholding at source in the case of dividends derived from sources within the United States and paid on or after January 1, 1957, to nonresident aliens (including a nonresident alien individual, fiduciary, and partnership) and to foreign corporations, whose addresses are in France, shall be at the rate of 15 percent in every case except that in which, prior to the date of payment of such dividends, the Commissioner of Internal Revenue has notified the withholding agent that the reduced rate of withholding shall not apply.

(2) The preceding provisions respecting the application of the reduced withholding rate in the case of dividends paid to nonresident aliens and foreign corporations with addresses in France are based upon the assumption that the payee of the dividend is the actual owner of the capital stock from which the dividend is derived and consequently is the person liable to the United States upon such dividend. As to action by the recipient who is not the owner of the dividend, see § 514.3.

(3) The rate at which the United States tax has been withheld from any dividend paid at any time after the expiration of the thirtieth day after the date on which §§ 514.1 to 514.10 are published in the Federal Register to any person whose address is in France at the time the dividend is paid shall be shown either in writing or by appropriate stamp on the check, draft, or other evidence of payment or on an accompanying statement.