| a | No U.S. tax is imposed on a percentage of any dividend paid
by a U.S. corporation that received at least 80% of its gross income from an
active foreign business for the 3-year period before the dividend is declared.
(see sections 871(i)(2)(B) and 881(d) of the Internal Revenue Code.
|
| b | The reduced rate applies to dividends paid by a subsidiary
to a foreign parent corporation that has the required percentage of stock
ownership. In some cases, the income of the subsidiary must meet certain
requirements (e.g., a certain percentage of its total income must consist of
income other than dividends and interest). For Japan, dividends received from a
more than 50% owned corporate subsidiary are exempt if certain conditions are
met.
|
| c | Generally, if the person was receiving pension distributions
before March 31, 2000, the distributions continue to be exempt from U.S. tax.
|
| d | Exemption does not apply to U.S. Government (federal, state,
or local) pensions and annuities; a 30% rate applies to these pensions and
annuities. For this purpose, railroad retirement tier 2, dual, and supplemental
benefits are not considered U.S. Government pensions or annuities. U.S.
Government pensions paid to an individual who is both a resident and national of
Bangladesh, Belgium, Bulgaria, China, Denmark, Estonia, Finland, Germany,
Hungary, Iceland, India, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta,
Mexico, the Netherlands, Portugal, Russia, Slovenia, South Africa, Spain,
Switzerland, Thailand, Turkey, the United Kingdom, or Venezuela are exempt from
U.S. tax. U.S. Government pensions paid to an individual who is both a resident
and citizen of Kazakhstan, New Zealand, or Sweden are exempt from U.S. tax.
|
| e | No withholding is required on capital gains other than those
listed earlier under
Capital Gains, even if the gain is subject to U.S. tax.
|
| f | Includes alimony. |
| g | The exemption or reduction in rate does not apply if the
recipient has a permanent establishment in the United States and the property
giving rise to the income is effectively connected with this permanent
establishment. Under certain treaties, exemption or reduction in rate also does
not apply if the property producing the income is effectively connected with a
fixed base in the United States from which the recipient performs independent
personal services. Even with the treaty, if the income is not effectively
connected with a trade or business in the United States by the recipient, the
recipient will be considered as not having a permanent establishment in the
United States under Internal Revenue Code section 894(b).
|
| h | The exemption or reduction in rate does not apply if the
recipient is engaged in a trade or business in the United States through a
permanent establishment that is in the United States. However, if the income is
not effectively connected with a trade or business in the United States by the
recipient, the recipient will be considered as not having a permanent
establishment in the United States to apply the reduced treaty rate to that item
of income.
|
| i | The rate is 5% for trademarks and any information for rentals
of industrial, commercial, or scientific equipment. |
| j | Exemption is not available when paid from a fund under an
employees' pension or annuity plan, if contributions to it are deductible under
U.S. tax laws in determining taxable income of the employer.
|
| k | The rate is 15% for interest determined with reference to
the profits of the issuer or one of its associated enterprises. |
| l | Annuities purchased while the annuitant was not a resident
of the United States are not taxable. The reduced rate applies if the
distribution is not subject to a penalty for early withdrawal.
|
| m | Contingent interest that does not qualify as portfolio interest
is treated as a dividend and is subject to the rate under column 6 or 7.
|
| n | The exemption applies only to interest on credits, loans,
and other indebtedness connected with the financing of trade between the United
States and the C.I.S. member. It does not include interest from the conduct of a
general banking business.
|
| o | The exemption applies only to gains from the sale or other
disposition of property acquired by gift or inheritance. |
| p | The exemption does not apply if the recipient was a resident
of the United States when the pension was earned or when the annuity was
purchased.
|
| q | Annuities paid in return for other than the recipient's services
are exempt. For Bangladesh, exemption does not apply to annuity received for
services rendered.
|
| r | Generally, if the property was owned by the Canadian resident
on September 26, 1980, not as part of the business property of a permanent
establishment or fixed base in the U.S., the taxable gain is limited to the
appreciation after 1984. Capital gains on personal property not belonging to a
permanent establishment or fixed base of the taxpayer in the U.S. are exempt.
|
| s | The rate for royalties with respect to tangible personal
property is 7%. |
| t | Does not apply to annuities. For Denmark, annuities are exempt. |
| u | Depending on the facts, the rate may be determined by either
the Business Profits article or the Other Income article. |
| v | Tax imposed on 70% of gross royalties for rentals of industrial,
commercial, or scientific equipment. |
| w | The rate in column 6 applies to dividends paid by a regulated
investment company (RIC) or a real estate investment trust (REIT). However, that
rate applies to dividends paid by a REIT only if the beneficial owner of the
dividends is an individual holding less than a 10% interest (25% in the case of
Portugal, Spain, and Tunisia) in the REIT.
|
| x | Royalties not taxed at the 5% or 8% rate are taxed at a 10%
rate, unless footnote (g) applies. |
| y | The exemption does not apply to contingent interest that
does not qualify as portfolio interest. Generally, this is interest based on
receipts, sales, income, or changes in the value of property.
|
| z | The rate is 10% if the interest is paid on a loan granted
by a bank or similar financial institution. For Thailand, the 10% rate also
applies to interest from an arm's length sale on credit of equipment,
merchandise, or services.
|
| aa | The rate is 8% for copyrights of scientific work. |
| bb | The rate is 5% for interest (a) beneficially owned by a bank
or other financial institution (including an insurance company) or (b) paid due
to a sale on credit of any industrial, commercial, or scientific equipment, or
of any merchandise to an enterprise.
|
| cc | The rate is 15% for copyrights of scientific work. |
| dd | Under some treaties, the reduced rates of withholding may
not apply to a foreign corporation unless a minimum percentage of its owners are
citizens or residents of the United States or the treaty country.
|
| ee | Exemption or reduced rate does not apply to an excess inclusion
for a residual interest in a real estate mortgage investment conduit (REMIC).
|
| ff | The rate in column 6 applies to dividends paid by a regulated
investment company (RIC). Dividends paid by a real estate investment trust
(REIT) are subject to a 30% rate.
|
| gg | The exemption or reduction in rate does not apply if the
recipient has a permanent establishment in the United States and the income is
effectively connected with this permanent establishment. Instead, tax is not
withheld at source and the provisions of Article 8 (Business profits) apply.
Additionally, even if the income is not effectively connected with a U.S.
permanent establishment, the recipient may choose to treat net interest income
as industrial or commercial profits subject to Article 8 of the treaty.
|
| hh | The rate is 4.9% for interest derived from (1) loans granted
by banks and insurance companies and (2) bonds or securities that are regularly
and substantially traded on a recognized securities market. The rate is 10% for
interest not described in the preceding sentence and paid (i) by banks or (ii)
by the buyer of machinery and equipment to the seller due to a sale on credit.
|
| ii | The exemption does not apply if (1) the recipient was a U.S.
resident during the 5-year period before the date of payment, (2) the amount was
paid for employment performed in the United States, and (3) the amount is not a
periodic payment, or is a lump-sum payment in lieu of a right to receive an
annuity.
|
| jj | The rate is 15% (10% for Bulgaria; 30% for Germany and Switzerland)
for contingent interest that does not qualify as portfolio interest. Generally,
this is interest based on receipts, sales, income, or changes in the value of
property.
|
| kk | The rate is 15% for interest determined with reference to
(a) receipts, sales, income, profits or other cash flow of the debtor or a
related person, (b) any change in the value of any property of the debtor or a
related person, or (c) any dividend, partnership distribution, or similar
payment made by the debtor or related person.
|
| ll | The rate is 4.95% if the interest is beneficially owned by
a financial institution (including an insurance company). |
| mm | The rate in column 6 applies to dividends paid by a regulated
investment company (RIC) or real estate investment trust (REIT). However, that
rate applies to dividends paid by a REIT only if the beneficial owner of the
dividends is (a) an individual (or pension fund, in the case of France) holding
not more than a 10% interest in the REIT, (b) a person holding not more than 5%
of any class of the REIT's stock and the dividends are paid on stock that is
publicly traded, or (c) a person holding not more than a 10% interest in the
REIT and the REIT is diversified.
|
| nn | Interest received by a financial institution is exempt. |
| oo | Dividends received from an 80%-owned corporate subsidiary
are exempt if certain conditions are met. |
| pp | Dividends received by a trust, company, or other organization
operated exclusively to administer or provide pension, retirement, or other
employee benefits generally are exempt if certain conditions are met.
|
| qq | Exemption does not apply to amount paid under, or as part
of, a conduit arrangement. |
| rr | Interest is exempt if (a) paid to certain financial institutions,
or (b) paid on indebtedness from the sale on credit of equipment or merchandise.
|
| ss | Amounts paid to a pension fund that are not derived from
the carrying on of a business, directly or indirectly, by the fund are exempt.
This includes amounts paid by a REIT only if the conditions in footnote tt are
met. For Sweden, to be entitled to the exemption, the pension fund must not sell
or make a contract to sell the holding from which the dividend is derived within
2 months of the date the pension fund acquired the holding.
|
| tt | The rate in column 6 applies to dividends paid by a regulated
investment company (RIC) or real estate investment trust (REIT). However, that
rate applies to dividends paid by a REIT only if the beneficial owner of the
dividends is (a) an individual or pension fund holding not more than a 10%
interest in the REIT, (b) a person holding not more than 5% of any class of the
REIT's stock and the dividends are paid on stock that is publicly traded, or (c)
a person holding not more than a 10% interest in the REIT and the REIT is
diversified. Dividends paid to a pension fund from a RIC, or a REIT that meets
the above conditions, are exempt. For Sweden, the pension fund must also satisfy
the requirements in footnote ss.
|
| uu | The exemption does not apply to a sale of a U.S. company's
stock representing ownership of 50% or more. |
| vv | The rate is 5% for the rental of tangible personal property. |
| ww | The rate applies to dividends paid by a real estate investment
trust (REIT) only if the beneficial owner of the dividends is (a) an individual
holding less than a 10% interest in the REIT, (b) a person holding not more than
5% of any class of the REIT's stock and the dividends are paid on stock that is
publicly traded, or (c) a person holding not more than a 10% interest in the
REIT and the REIT is diversified.
|
| xx | The rate in column 6 applies to dividends paid by a regulated
investment company (RIC) or real estate investment trust (REIT). However, that
rate applies to dividends paid by a REIT only if the beneficial owner of the
dividends is (a) an individual holding not more than a 25% interest in the REIT
(b) a person holding not more than 5% of any class of the REIT's stock and the
dividends are paid on stock that is publicly traded, or (c) a person holding not
more than a 10% interest in the REIT and the REIT is diversified, or (d) a Dutch
belegginginstelling.
|
| yy | Interest paid or accrued on the sale of goods, merchandise,
or services between enterprises is exempt. Interest paid or accrued on the sale
on credit of industrial, commercial, or scientific property is exempt.
|
| zz | Withholding at a special rate may be required on the disposition
of U.S. real property interests. See
U.S. Real Property Interest earlier in this publication.
|
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