PART 514—FRANCE Authority: 26 U.S.C. 7805. Subpart—Withholding of Tax Source: T.D. 6273, 22 FR 9530, Nov. 28, 1957; 25 FR 14022, Dec. 31, 1960, unless otherwise noted. § 514.1 Introductory. (a) Applicable provisions of convention. Article I(a) of the Supplemental Convention of 1956, on June 13, 1957. Article I(d) of the Supplemental Convention of 1956, on January 1, 1952. Article 7 and the Protocol of the Convention of 1939, on January 1, 1945. The supplemental convention signed June 22, 1956, provides in part as follows: Article I The provisions of the Convention and Protocol between the United States and the French Republic signed at Paris on July 25, 1939 are hereby modified and supplemented as follows: (a) By striking out Article 1(a) and inserting in lieu thereof the following: “(a) In the case of the United States: The Federal income taxes (including surtaxes and excess profits taxes) and the documentary taxes on sales or transfers of shares or certificates of stock or bonds.” (d) By adding immediately after Article 6 the following new articles: “Article 6A Dividends and interest derived, on or after January 1, 1952, from sources within one of the contracting States by a resident or corporation or other entity of the other State, not having a permanent establishment in the former State shall be subject to tax by such former State at a rate not in excess of 15 percent of the gross amount of such dividends or interest. Such reduced rate of tax shall not apply to dividends or interest paid prior to the calendar year in which are exchanged the instruments of ratification of the present Convention if, for the taxable year in which such dividends or interest is received, penalty for fraud with respect to the taxes which are the subject of the present Convention has been imposed against the recipient of such dividends or interest.” Article III (a) The present Convention shall be ratified and the instruments of ratification shall be exchanged at Paris as soon as possible. (b) Its provisions shall come into force and shall become effective as of the date of the exchange of the instruments of ratification subject both to the provisions of Article I (d) and (e) and to the provisions set forth herein below. (c) If refund of any overpayment resulting from the application of Article I(d) of the present Convention is prevented on the date of exchange of instruments of ratification or within two years from such date by the operation of any law, refund of such overpayment (without interest) shall nevertheless be made provided that claim for refund is filed within two years after the date of the exchange of instruments of ratification of the present Convention with the contracting State to which such overpayment was made. (d) The present Convention shall remain effective so long as the Conventions signed July 25, 1939 and October 18, 1946, remain effective. The convention of July 25, 1939, provides, in part, as follows: Article 7 Royalties derived from within one of the contracting States by a resident, or by a corporation or other entity of the other contracting State as consideration for the right to use copyrights, patents, secret processes and formulae, trademarks and other analogous rights shall be exempt from taxation in the former State, provided such resident, corporation or other entity does not have a permanent establishment there. Article 8 Private pensions and life annuities derived from within one of the contracting States and paid to individuals residing in the other contracting State shall be exempt from taxation in the former State. Protocol: III. As used in this Convention: (a) The term “permanent establishment” includes branches, mines and oil wells, plantations, factories, workshops, stores, purchasing and selling and other offices, agencies, warehouses, and other fixed places of business but does not include a subsidiary corporation. When an enterprise of one of the contracting States carries on business in the other State through an employee or agent, established there, who has general authority to negotiate and conclude contracts or has a stock of merchandise from which he regularly fills orders which he receives, this enterprise shall be deemed to have a permanent establishment in the latter State. But the fact that an enterprise of one of the contracting States has business dealings in the other State through a bona fide commission agent or broker shall not be held to mean that such enterprise has a permanent establishment in the latter State. Insurance enterprises shall be considered as having a permanent establishment in one of the States as soon as they receive premiums from or insure risks in the territory of that State. IV. The term “life annuities” referred to in Article 8 of this Convention means a stated sum payable periodically at stated times during life, or during a specified number of years to the person who has paid the premium or a gross sum for such an obligation. The convention of October 18, 1946, provides, in part, as follows: Title III Administrative Assistance Article 13 (1) The competent authorities of the two Contracting States may prescribe regulations necessary to interpret and carry out the provisions of the present Convention and the Convention of July 25, 1939. (b) Definitions In general. (2) France. § 514.2 Dividends. (a) General. (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. (c) Rate of withholding. (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 § 514.3 Dividends received by addressee not actual owner. (a) Additional tax to be withheld Nominee or representative. (2) Fiduciary or partnership. (3) Released amounts of tax. (b) Returns filed by French withholding agents. § 514.4 Interest. (a) General. (b) Application of reduced rate at source. (2) The reduction in the rate of United States tax contemplated by Article 6A of the convention, insofar as it concerns coupon bond interest, is applicable only to the owner of the interest. The person presenting the coupon or on whose behalf it is presented shall, for the purpose of the reduction in tax, be deemed to be the owner of the interest only if he is, at the time the coupon is presented for payment, the owner of the bond from which the coupon has been detached. If the person presenting the coupon, or on whose behalf it is presented, is not the owner of the bond, Form 1001, and not Form 1001-F, shall be executed. (3) The original and duplicate of Form 1001-F shall be forwarded by the withholding agent to the Director, International Operations Division, Internal Revenue Service, Washington 25, D. C., with the annual return on Form 1042. Form 1001-F shall be listed on Form 1042. (4) To secure the reduced rate of United States tax at source in the case of interest other than coupon bond interest, the nonresident alien individual who is a resident of France, or the French corporation or other entity, shall file Form 1001A-F in duplicate with the withholding agent in the United States. This form shall be signed by the owner of the interest, or by his trustee or agent, and shall show the name and address of the obligor and the name and address of the owner of the interest. It shall contain a statement that the owner (i) is a resident of France, or is a French corporation or other entity, and (ii) has no permanent establishment in the United States. (5) Form 1001A-F shall be filed with the withholding agent for each successive three-calendar-year period during which such interest is paid. For this purpose, the first such period shall commence with the beginning of the calendar year in which such income is first paid on or after January 1, 1957. Each such form filed with any withholding agent shall be filed not later than 20 days preceding the date of the first payment within each successive period, or, if that is not possible because of special circumstances, as soon as possible after such first payment. Once such a form has been filed in respect of any three-calendar-year period, no additional Form 1001A-F need be filed in respect thereto unless the Commissioner of Internal Revenue notifies the withholding agent that another such form shall be filed by the taxpayer. If, after filing such form, the taxpayer ceases to be eligible for the reduced rate of United States tax granted by Article 6A of the convention in respect to such interest, he shall promptly notify the withholding agent by letter in duplicate. When any change occurs in the ownership of the interest as recorded on the books of the payer, the reduction in rate of withholding of United States tax shall no longer apply unless the new owner of record is entitled to and does properly file a Form 1001A-F with the withholding agent. (6) The duplicate of each Form 1001A-F shall be immediately forwarded by the withholding agent to the Director, International Operations Division, Internal Revenue Service, Washington 25, D. C. § 514.5 Patent and copyright royalties and film rentals. (a) Exemption from tax. (b) Exemption from withholding of United States tax. (c) Manner of filing. (d) Revocation of 26 CFR 1939 7.418 Treasury Decision 5499 § 514.6 Private pensions and life annuities. (a) Exemption from tax. (b) Exemption from withholding of United States tax—Form to use. (c) Manner of filing. (d) Definition. § 514.7 Beneficiaries of a domestic estate or trust. (a) Entitled to benefits of convention. (b) Withholding of United States tax. (c) Amounts otherwise includible in gross income of beneficiary. § 514.8 Release of excess tax withheld at source. (a) Amounts to be released Dividends derived from domestic corporation. (2) Coupon bond interest Substitute form. ( a ( b ( c ( d One such substitute form shall be filed, in duplicate, with respect to each issue of bonds and will serve with respect to that issue to replace all Forms 1001 previously filed by the taxpayer in the calendar year in which the excess tax was withheld and with respect to which such excess is released. If the person presenting the coupon, or on whose behalf it is presented, is not the owner of the bond, Form 1001, and not Form 1001-F, shall be executed. (ii) Disposition of form. (3) Noncoupon interest, royalties, private pensions, and life annuities. (ii) If a taxpayer furnishes to the withholding agent a Form 1001A-F, properly executed as prescribed by § 514.4(b)(4), and United States tax has been withheld at the statutory rate on or after January 1, 1957, from royalties, private pensions, and life annuities in respect of which the form is filed, the withholding agent shall release and pay over to the person from whom the tax was withheld an amount which is equal to the total tax so withheld. (b) Amounts not to be released. (c) Statutory rate. § 514.9 Refund of excess tax withheld. (a) Years 1952, 1953, 1954, 1955, 1956. (1) That the taxpayer was a nonresident alien (including a nonresident alien individual, fiduciary, or partnership) resident in France or was a French corporation, during the year or years for which the return is filed; (2) That the taxpayer had no permanent establishment in the United States during the respective years in which the income was received; (3) That no penalty for fraud has been imposed by the United States against the taxpayer claimant with respect to income tax for the year or years for which the return is filed. In addition to the above statements, all information requested on the return must be furnished. Any tax paid in excess of that due from the owner of the income will be refunded by the United States Government as required by law. For the purpose of refund of excess tax withheld resulting from the tax convention, a properly executed return on Form 1040NB France or Form 1120NB France shall constitute a claim for refund or credit for the amount of the overpayment disclosed by such return. (b) Date of payment of tax. § 514.10 Effective date. The provisions of §§ 514.1 through 517.9 shall be effective with respect to taxable years beginning after December 31, 1956, and before January 1, 1967, or with respect to dividends, interest, and royalties paid before August 11, 1968. [T.D. 6986, 34 FR 136, Jan. 4, 1969] Taxable Years Beginning After December 31, 1966, or Dividends, Interest, And Royalties Paid on or After August 11, 1968 Source: T.D. 6986, 34 FR 136, Jan. 4, 1969, unless otherwise noted. § 514.22 Dividends received by persons not entitled to reduced rate of tax. (a) General. (b) Additional French tax to be withheld in the United States By a nominee or representative. (2) By a fiduciary or partnership. (3) Withholding additional French tax from amounts released or refunded. (4) Return of French tax by U.S. withholding agents. [T.D. 6986, 34 FR 136, Jan. 4, 1969, as amended by T.D. 8734, 62 FR 53498, Oct. 14, 1997]