Rev. Proc. 67-24

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to provide interim procedures which will supplement the withholding regulations set forth in Treasury Decision 6122, C.B. 1955-1, 641, governing the withholding of United States income tax at source from dividends paid by United States corporations to residents or companies of the Federal Republic of Germany. This interim procedure will apply until withholding regulations under the income tax convention, as modified by a protocol which was brought into force December 27, 1965, are published.

SEC. 2. BACKGROUND.

The United States-Federal Republic of Germany income tax convention of July 22, 1954, C.B. 1955-1, 635, provides for a 15-percent rate of United States tax (the statutory rate is 30 percent) for dividends paid by a United States corporation to a German company owning 10 percent or more of the stock of such corporation. The modifying protocol, C.B. 1966-1, 360, among other things, extends the 15-percent rate of United States tax to all dividends paid by a United States corporation to a resident or company of Germany, effective with respect to dividends paid on or after January 1, 1965. The reduction in rate does not apply if the German recipient has a permanent establishment in the United States and the holding of stock giving rise to the dividend is effectively connected with the permanent establishment.

SEC. 3. PROCEDURES.

.01 In order to give effect to the reduced rate of tax with respect to dividends paid on or after January 1, 1965, United States withholding agents who have withheld United States tax at the statutory 30-percent rate from dividends paid during those years by United States corporations to recipients having addresses in the Federal Republic of Germany at the time of payment may, except as provided in .03 of this section, release and pay over to the recipient from whom such tax was withheld an amount which is equal to the difference between the tax so withheld and the 15-percent tax required to be withheld pursuant to the United States-German income tax convention, as modified by the protocol. This procedure will not apply if, prior to the date of release of tax, the withholding agent is notified by the Commissioner or the recipient that the recipient is not entitled to the reduced rate.

.02 Withholding agents filing information returns on Form 1942, U.S. Annual Return of Income Tax to be Paid at Source, which include payments of dividends made to recipients having addresses in the Federal Republic of Germany, where withheld taxes are released in accordance with this interim procedure, should adjust the amount reported on such returns as tax withheld so as to reflect only the net amount withheld. The accompanying Forms 1042S, U.S. Annual Information Statement of Income Paid to Nonresident Aliens, Etc., reporting dividends paid to, and United States tax withheld from, recipients having addresses in the Federal Republic of Germany should also indicate the amount of tax withheld, the amount of tax released, and the net amount withheld after such release of tax has been made.

.03 Where United States withholding agents have already paid over the amounts withheld as tax at the statutory 30-percent rate to the Director, Office of International Operations, a claim by the German recipient for refund of any resulting overpayment of tax may be made under section 6402 of the Internal Revenue Code of 1954 and the regulations thereunder.

.04 If the claimant has previously filed an income tax return with the Internal Revenue Service for the taxable year in which an overpayment has resulted because of the application of the convention, he should make a claim for refund of the overpayment by filing Form 843, or an amended return. If the claimant has not previously filed an income tax return with the Service for the taxable year in which an overpayment has resulted because of the application of the convention, he should make a claim for refund of the overpayment by filing, U.S. Nonresident Alien Income Tax Return, Form 1040NB, Form 1040NB-a, Form 1040B, or Form 1120-F, U.S. Income Tax Return of Foreign Corporations, whichever is applicable, showing the overpayment. Such a return will serve as a claim for refund, and it will not be necessary for the claimant to file Form 843. Amended returns or claims for refund should be filed with the Director, Office of International Operations, Washington, D.C. 20225.

.05 Pending issuance of withholding regulations under the Convention, as modified by the protocol, United States withholding agents paying dividends on or after January 1, 1965, to recipients having addresses in the Federal Republic of Germany may withhold at the reduced rate of 15 percent in every case except that in which, prior to the date of payment of the dividends, the withholding agent is notified by the Commissioner or the recipient that the reduced rate does not apply.

¹ Based on Technical Information Release 801, dated Feb. 23, 1966.