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Rev. Rul. 54-475

Rev. Rul. 54-475; 1954-2 C.B. 11

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Citations: Rev. Rul. 54-475; 1954-2 C.B. 11

Superseded by Rev. Rul. 57-391 Modified by Rev. Rul. 55-482

Rev. Rul. 54-475

The several Treasury Decisions cited in the tabulation set forth below deal with withholding of tax at the source, in the case of nonresident aliens and nonresident foreign corporations, incident to the administration of the several income tax conventions to which the United States is a party. The exemptions from, or reduced rates of, United States tax, varying as between countries and as to specific items of income, require withholding agents to consult, before disbursement of such income, the provisions of the Treasury Decision applicable to the country of the resident to which the payment is being made.

To provide a more convenient source of information to withholding agents within the United States as an aid in the withholding of income tax under sections 1441 and 1442 of the Internal Revenue Code of 1954, the following table has been prepared. This table is based on applicable tax conventions and Treasury Decisions which constitute the authority for application at the source of the exemption from tax or the reduced rate of tax in the case of each item of income. The table has been confined to dividends, interest, royalties, and real estate rentals, which, with few exceptions, includes practically all income subject to withholding under sections 1441 and 1442 of the Internal Revenue Code of 1954.

Rates of United States tax to be withheld at the source in the case

of nonresident aliens and nonresident foreign corporations pursuant

to existing income tax conventions

Divi- Royal-

Country dends Interest ties

Australia----------- ⁴ 15% NE ² /3/ E

Belgium------------- ³ 15% ³ 15% ³ E

Canada-------------- ³ /5/ 15% ³ 15% ² /3/ 15%

Denmark------------- ³ /5/ 15% ³ E ³ E

Finland------------- ³ /5/ 15% ³ E ³ E

France-------------- NE NE ³ E

Greece-------------- NE ³ /6/ E ³ /11/ E

Ireland------------- ⁴ /5/ 15% ⁴ /6/ E ⁴ E

Netherlands--------- ³ /5/ 15% ³ /7/ E ³ E

New Zealand--------- ³ /5/ 15% NE ¹⁰ NE

Norway-------------- NE ³ E ³ E

South Africa-------- NE NE NE

Sweden-------------- ¹ 10% NE ¹ E

Switzerland--------- ³ /8/ 15% ³ 5% ⁸ E

United Kingdom------ ⁴ /8/ 15% ³ /6/ E ⁴ E

Rental estate

rentals and Applicable Treasury

Country natural resource Decisions

royalties

Australia----------- ⁸ NE 6108, p.614, this Bulletin.

Belgium------------- ⁹ NE 6056, C.B. 1954-1, 64.

Canada-------------- ³ /9/ 15% 6047, C.B. 1953-2, 59.

Denmark------------- ⁸ NE 5692, C.B. 1949-1, 104.

Finland------------- ⁸ NE 6030, C.B. 1953-2, 185.

France-------------- ⁸ NE 5499, C.B. 1946-1, 134.

Greece-------------- ⁸ NE 6109, p.638, this Bulletin.

Ireland------------- ⁴ /9/ 15% 5897, C.B. 1952-1, 89.

Netherlands--------- ⁸ NE 5690, C.B. 1949-1, 92.

New Zealand--------- ¹⁰ NE 5957, C.B. 1953-1, 238.

Norway-------------- ⁸ NE 5956, C.B. 1953-1, 228.

South Africa-------- ⁸ NE None issued. ¹²

Sweden-------------- NE 4975, C.B. 1940-2, 43.

Switzerland--------- ⁹ NE 5867, C.B. 1951-2, 75.

United Kingdom------ ⁴ /8/ 15% 5532, C.B. 1946-2, 73.

Definitions:

E = Exempt.

NE = Not exempt. -- Tax to be withheld at the statutory rate

prescribed by sections 1441 and 1442 of the Internal Revenue Code of

1954.

References:

¹ Applicable whether or not engaged in trade or business in

United States.

² Copyright royalties only.

³ Applicable if no permanent establishment in United States.

⁴ Applicable if no permanent establishment in United States

and subject to United Kingdom (or Irish or Australian) tax.

⁵ The rate is 5 percent on dividends paid by domestic

subsidiary corporation subject to prescribed conditions.

⁶ Does not apply to interest paid by controlled corporation.

⁷ Does not apply to interest paid by controlled nor to

interest on mortgages secured on real estate.

⁸ Recipient may elect to be subject to tax on a net basis by

filing Form 1040B.

⁹ Recipient may elect to be subject to tax on a net basis but

only on real property by filing Form 1040B.

¹⁰ No exemption except motion picture film rentals; net basis

tax elective (on filing Form 1040B) on real property rentals, natural

resource royalties, and industrial royalties (other than film

rentals).

¹¹ Does not apply to motion picture film rentals.

¹² See the Income Tax Convention between the United States and

the Union of South Africa effective July 1, 1946, appearing on page

651 of this Bulletin.

The exemptions from, or reductions in rate of, United States tax set forth above with respect to interest, royalties, and real property rentals and natural resource royalties are applied at the source upon the filing, by the payee of the income, with the withholding agent in the United States, of the appropriate certificate (or letter, as the case may be) as prescribed by regulations (Treasury Decisions cited above).

The reduced rates in the case of dividends (other than those with respect to which the rate of 5 percent is claimed) is applicable at the source in every case in which the address of the stockholder on the records of the disbursing entity paying the dividend (or on those of the domestic agent receiving such dividend on behalf of the nonresident alien or nonresident foreign corporation) is in the foreign country concerned. The reduced rate of 5 percent is applicable only where the Commissioner determines, and so notifies the paying corporation, that such reduced rate applies.

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