§1442 — Withholding of tax on foreign corporations
46 cases·10 followed·2 distinguished·15 questioned·3 overruled·16 cited—22% support
Statute Text — 26 U.S.C. §1442
In the case of foreign corporations subject to taxation under this subtitle, there shall be deducted and withheld at the source in the same manner and on the same items of income as is provided in section 1441 a tax equal to 30 percent thereof. For purposes of the preceding sentence, the references in section 1441(b) to sections 871(a)(1)(C) and (D) shall be treated as referring to sections 881(a)(3) and (4), the reference in section 1441(c)(1) to section 871(b)(2) shall be treated as referring to section 842 or section 882(a)(2), as the case may be, the reference in section 1441(c)(5) to section 871(a)(1)(D) shall be treated as referring to section 881(a)(4), the reference in section 1441(c)(8) to section 871(a)(1)(C) shall be treated as referring to section 881(a)(3), the references in section 1441(c)(9) to sections 871(h) and 871(h)(3) or (4) shall be treated as referring to sections 881(c) and 881(c)(3) or (4), the reference in section 1441(c)(10) to section 871(i)(2) shall be treated as referring to section 881(d), and the references in section 1441(c)(12) to sections 871(a) and 871(k) shall be treated as referring to sections 881(a) and 881(e) (except that for purposes of applying subparagraph (A) of section 1441(c)(12), as so modified, clause (ii) of section 881(e)(1)(B) shall not apply to any dividend unless the regulated investment company knows that such dividend is a dividend referred to in such clause).
Subject to such terms and conditions as may be provided by regulations prescribed by the Secretary, subsection (a) shall not apply in the case of a foreign corporation engaged in trade or business within the United States if the Secretary determines that the requirements of subsection (a) impose an undue administrative burden and that the collection of the tax imposed by section 881 on such corporation will not be jeopardized by the exemption.
For purposes of this section, the term “foreign corporation” does not include a corporation created or organized in Guam, American Samoa, the Northern Mariana Islands, or the Virgin Islands or under the law of any such possession if the requirements of subparagraphs (A), (B), and (C) of section 881(b)(1) are met with respect to such corporation.
If dividends are received during a taxable year by a corporation—
created or organized in, or under the law of, the Commonwealth of Puerto Rico, and
with respect to which the requirements of subparagraphs (A), (B), and (C) of section 881(b)(1) are met for the taxable year,
subsection (a) shall be applied for such taxable year by substituting “10 percent” for “30 percent”.
If, on or after the date of the enactment of this paragraph, an increase in the rate of the Commonwealth of Puerto Rico’s withholding tax which is generally applicable to dividends paid to United States corporations not engaged in a trade or business in the Commonwealth to a rate greater than 10 percent takes effect, this paragraph shall not apply to dividends received on or after the effective date of the increase.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.1442-1 Withholding of tax on foreign corporations
- Treas. Reg. §Treas. Reg. §1.1442-2 Exemption under a tax treaty
- Treas. Reg. §Treas. Reg. §1.1442-3 Tax exempt income of a foreign tax-exempt corporation
46 Citing Cases
We hold that petitioner, having failed to make the proper withholding under section 1442, is liable for the tax under section 1461 in accordance with the Rule 155 computation ofearnings and profits.
We hold that it was not because Burndy-US did not own more than 50 percent of the voting power of Burndy-Japan stock or more than 50 percent of the value of Burndy-Japan stock in 1992.
Thus, there is no inconsistency in applying section 1442 rather than section 1441 herein since similar evidence is involved in providing a basis for determining whether or not a taxpayer is exempt from withholding under either section.
and Cox cases, respectively, that the effective date of section 6653(a)(2) did not preclude its application to underpayments of withholding tax for 1981 required by section 1442, or a 1981 deficiency resulting from the taxpayers' negligent failure to report income received during 1981.
We hold that petitioner, having failed to make the proper withholding under section 1442, is liable for the tax under section 1461 in accordance with the Rule 155 computation ofearnings and profits.
Connectors International (FCI), its French parent, assets worth more than the assets that B-US received from FCI. The parties dispute whether these transfers were constructive dividends paid by B-US in 1993 which are subject to withholding tax under sec. 1442, I.R.C. Held: Transfers by B-US to FCI of assets worth more than the assets B-US received from FCI were constructive dividends which were actually distributed for purposes of the U.S.-France Tax Treaty, Convention With Respect to Taxes on I
If we conclude that the amounts are not deductible, then we must decide (1) whether petitioner’s payments to its parent company constitute dividend payments, for which petitioner was required to withhold 30 percent pursuant to section 1442; (2) whether petitioner was required to file Federal withholding tax returns, Forms 1042, Annual Withholding Tax Return for U.S.
Burden of Proof Petitioner argues that the notices of deficiency refer only to section 1441, so that reliance by respondent on section 1442 constitutes a new matter on which respondent has the burden of proof under Rule 142(a).
In general, section 1442 imposes a withholding tax on dividends to foreign corporations, and section 1445(e)(3) imposes a withholding tax on distributions not out ofearnings and profits where the distributing corporation is a U.S.
In general, section 1442 imposes a withholding tax on dividends to foreign corporations, and section 1445(e)(3) imposes a withholding tax on distributions not out ofearnings and profits where the distributing corporation is a U.S.
entity to a foreign corporation is generally subject to 30% - 17 - [*17] tax under section 881 and withholding under section 1442, but portfolio interest is exempt from U.S.
entity to a foreign corporation is generally subject to 30% - 17 - [*17] tax under section 881 and withholding under section 1442, but portfolio interest is exempt from U.S.
0-percent withholding obligation under art. 13 of the U.S.-Japan Income Tax Treaty (the treaty). Convention for the Avoidance of Double Taxation, Mar. 8, 1971, U.S.-Japan, art. 13, 23 U.S.T. (Part I) 967, 990. Under the treaty, the withholding under sec. 1442 is reduced from 30 to 10 percent. - 18 - petitioner posed two additional alternative arguments in support of its allegation that respondent's excess interest tax determination is in error. Petitioner contends that the advances from related
- 2 - liable under section 1461 for his failure to withhold tax due under section 881, as required by section 1442, on payments made by such limited partnerships to A-Alphatronics Hong Kong Limited (A-Alpha), a Hong Kong corporation, for research and development services, to the extent that such payments were U.S.
10-percent withholding obligation under art. 13 of the U.S.Japan Income Tax Treaty (the treaty). Convention for the Avoidance of Double Taxation, Mar. 8, 1971, U.S.-Japan, art. 13, 23 U.S.T. (Part I) 967, 990. Under the treaty, the withholding under sec. 1442 is reduced from 30 to 10 percent. In support of its argument, petitioner cites J.A. Tobin Constr. Co. v. Commissioner, 85 T.C. 1005 (1985); Georgia-Pac. Corp. v. Commissioner, 63 T.C. 790 (1975); J.A. Maurer, Inc. v. Commissioner, 30 T.C. 1
Respondent asserts that the penalty applies to the extent that the Court concludes that the MDT payments to various foreign entities and individuals were subject to the 30-percent withholding under section 1442 and petitioners failed to withhold.
Respondent asserts that the penalty applies to the extent that the Court concludes that the MDT payments to various foreign entities and individuals were subject to the 30-percent withholding under section 1442 and petitioners failed to withhold.
Respondent asserts that the penalty applies to the extent that the Court concludes that the MDT payments to various foreign entities and individuals were subject to the 30-percent withholding under section 1442 and petitioners failed to withhold.
Respondent asserts that the penalty applies to the extent that the Court concludes that the MDT payments to various foreign entities and individuals were subject to the 30-percent withholding under section 1442 and petitioners failed to withhold.