26 C.F.R. §§ 514.1–514.10

Applicable provisions of convention. The income tax convention between the United States and France, signed on July 25, 1939, and October 18, 1946, as modified by the supplemental convention, signed June 22, 1956 (the instruments of ratification of which were exchanged on June 13, 1957), referred to in this part as the convention, provides in part as follows, the quoted articles being effective as indicated:

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.

Returns filed by French withholding agents. The amounts withheld pursuant to paragraph (a) of this section by any withholding agent in France shall be deposited, without converting the amounts into United States dollars, with the Directeur General des Impots of France on or before the 15th day after the close of the quarter of the calendar year in which the withholding in France occurs. The withholding agent making the deposit shall render therewith such appropriate French form as may be prescribed by the Directeur General des Impots. The amounts so deposited should be remitted by the Directeur General des Impots by draft in the United States dollars to the Director, International Operations Division, Internal Revenue Service, Washington 25, D. C., U. S. A., on or before the end of the calendar month in which the deposit is made, and should be accompanied by such French form as may be required to be rendered by the withholding agent in France in connection with the deposit.

General. The rate of United States tax imposed by the Internal Revenue Code upon interest on bonds, securities, notes, debentures, or on any other form of indebtedness, including interest on obligations of the United States, obligations of instrumentalities of the United States, and mortgages and bonds secured by real property, which is derived from sources within the United States in taxable years beginning on or after January 1, 1952, by a nonresident alien (including a nonresident alien individual, fiduciary, and partnership) who is a resident of France, or by a French corporation or other entity, shall not exceed 15 percent under the provisions of Article I(d) of the convention if such alien, corporation, or other French entity at no time during the taxable year in which such interest is received has a permanent establishment in the United States. As to what constitutes a permanent establishment see Article III(a) of the convention.

Exemption from tax. Royalties for the right to use copyrights, patents, designs, secret processes and formulae, trademarks, and other analogous property, and royalties and rentals in respect of motion picture films or for the use of industrial, commercial, or scientific equipment, which are derived from sources within the United States on or after January 1, 1945, by a nonresident alien individual who is a resident of France, or by a French corporation, are exempt from United States tax under the provisions of Article 7 of the convention signed July 25, 1939, as modified by Article 7(b) of the convention signed October 18, 1946, if such alien or corporation at no time during the taxable year in which such income is derived has engaged in trade or business within the United States through a permanent establishment situated therein.

Exemption from withholding of United States tax. To avoid withholding of United States tax at source in the case of items of income to which this section applies, the nonresident alien who is a resident of France, or the French corporation, shall file Form 1001A-F, in duplicate, with the withholding agent in the United States.

Manner of filing. The provisions of § 514.4 relating to the execution, filing, effective period, and disposition of Form 1001A-F, are equally applicable with respect to the income falling within the scope of this section.

Revocation of 26 CFR— (1939) 7.418 (Treasury Decision 5499). Effective January 1, 1957, the provisions of 26 CFR 7.418 (Rev. 1953, Parts 1-79, and Supps.) (Treasury Decision 5499, 11 F.R. 2158), approved February 27, 1946, are hereby made inapplicable, and the provisions of this section are hereby substituted therefor with respect to payments of royalties and film rentals made on or after January 1, 1957.

Exemption from tax. Private pensions and life annuities as defined in paragraph (d) of this section, derived from sources within the United States on or after January 1, 1945, and paid to a nonresident alien who is a resident of France are exempt from United States tax under the provisions of Article 8 of the convention of July 25, 1939.

Exemption from withholding of United States tax—Form to use. To secure exemption from withholding of United States tax at the source in the case of private pensions and life annuities, the nonresident alien who is a resident of France shall file Form 1001A-F, in duplicate, with the withholding agent in the United States.

Manner of filing. The provisions of § 514.4 relating to the execution, filing, effective period, and disposal of Form 1001A-F are equally applicable with respect to the income falling within the scope of this section.

Definition. As used in this section, the term “pensions” means periodic payments made in consideration for services rendered or by way of compensation for injuries received, and the term “life annuities” means a stated sum payable periodically at stated times during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration in money or money's worth. Neither term includes retired pay or pensions paid by the United States or by any State or Territory of the United States.

Entitled to benefits of convention. If he otherwise satisfies the requirements of the respective articles concerned, a nonresident alien individual who is a resident of France and who is a beneficiary of a domestic estate or trust shall be entitled to the reduction in the rate of, or exemption from, United States tax granted by Articles 6A and 7 of the convention with respect to dividends, interest, and patent royalties and other like amounts to the extent that (1) any amount paid, credited, or required to be distributed by such estate or trust to such beneficiary is deemed to consist of such items, and (2) such items would, without regard to the convention, be includible in his gross income.

Withholding of United States tax. In order to be entitled, because of the application of paragraph (a) of this section, to the reduction in rate of, or exemption from, withholding of United States tax the beneficiary must otherwise satisfy the requirements of the respective articles concerned, and shall, where applicable, execute and submit to the fiduciary of the estate or trust in the United States the appropriate form or forms prescribed in §§ 514.4(b) and 514.6(b).

Amounts otherwise includible in gross income of beneficiary. For the determination of amounts which, without regard to the convention, are includible in the gross income of the beneficiary, see subchapter J of chapter 1 of the Internal Revenue Code of 1954, and the regulations thereunder.

Amounts not to be released. The provisions of this section do not apply to excess tax withheld at source which has been paid by the withholding agent to the internal revenue officer entitled to receive payment of the tax withheld under chapter 3 of the Internal Revenue Code of 1954.

Statutory rate. As used in this section, the term “statutory rate” means the rate prescribed by chapter 3 of the Internal Revenue Code of 1954 and the regulations thereunder, as though the convention had not come into effect.

Years 1952, 1953, 1954, 1955, 1956. Where the tax withheld at the source upon dividends and interest paid in any one or more of the calendar years 1952, 1953, 1954, 1955, and 1956 is in excess of the tax due from the taxpayer under the convention, supplemented as set forth above, it will be necessary for the taxpayer to file an income tax return (Form 1040NB France for individuals and Form 1120NB France for corporations) with respect to such taxable year or years. The return shall cover all years for which a refund is claimed. The return must be filed on or before June 13, 1959. One return shall cover all years for which a refund is claimed. The taxpayer's total fixed or determinable, annual or periodical income (other than royalties) from sources within the United States should be reported on the return, and the income for each taxable year should be shown separately. There shall also be shown on such returns the amounts, if any, received in any of such years of capital gains (other than gains from the sale or exchange of stocks, securities or commodities) from sources within the United States. For this purpose, beginning with the calendar year 1954, certain distributions from employees' trusts, and amounts received incident to disposal of timber or coal or patent rights shall be included in such capital gains. See section 871(a)(1) of the Internal Revenue Code of 1954 for provisions pertaining to individual taxpayers and section 881(a) for provisions pertinent to corporate taxpayers. There shall be included with the return the following statements:

Date of payment of tax. The United States tax withheld from dividends and interest derived from sources within the United States by nonresident aliens, or by a foreign corporation not engaged in trade or business in the United States, is deemed to have been paid on March 15 of the calendar year immediately succeeding that in which such income has been so derived. Section 1461, Internal Revenue Code of 1954. Hence, the United States tax withheld from dividends and interest derived by such aliens resident in France and such French corporations for the years 1952, 1953, 1954, 1955, and 1956 is deemed to have been paid, respectively, on March 15, 1953, March 15, 1954, March 15, 1955, March 15, 1956, and March 15, 1957.