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IRS REVISES PUBLICATIONS ON WITHHOLDING, TAX TREATIES.

NOV. 6, 2000

Announcement 2000-89; 2000-2 C.B. 467

DATED NOV. 6, 2000
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Citations: Announcement 2000-89; 2000-2 C.B. 467

Announcement 2000-89

[1] The United States recently exchanged instruments of ratification for a new income tax treaty with Ukraine. The provisions for taxes withheld on interest, dividends, and royalties are effective for amounts paid or credited on or after August 1, 2000. For other taxes, the provisions are effective for tax periods beginning on or after January 1, 2001.

[2] Previously, residents of Ukraine were covered under the treaty between the United States and the former Soviet Union. A person entitled to benefits under that treaty can elect to have that treaty apply in its entirety for the first tax year for which the new treaty would otherwise apply. A person claiming benefits under Article III(1)(d) of the treaty between the United States and the former Soviet Union can elect to have the treaty apply in its entirety for the duration of the period of benefits provided by that subparagraph.

[3] This announcement provides additions to Tables 1 and 2 in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations (For Withholding in 2000), and Publication 901, U.S. Tax Treaties, to reflect the provisions of the new treaty. The footnotes in Publication 515 that relate to the column headings in these tables generally apply to this new treaty.

     TABLE 1. WITHHOLDING TAX RATES ON INCOME OTHER THAN PERSONAL

 

        SERVICE INCOME UNDER CHAPTER 3, INTERNAL REVENUE CODE,

 

          AND INCOME TAX TREATIES -- FOR WITHHOLDING IN 2000

 

 

 ______________________________________________________________________

 

 Income code

 

 number              1         2          3           6         7

 

 ______________________________________________________________________

 

 Country of

 

 residence of

 

 payee                                               Dividends paid by

 

 _______________                                   ____________________

 

 

                                        Interest             U.S. sub-

 

                  Interest              paid to              sidiaries

 

                   paid by   Interest  controlling   U.S.    to foreign

 

                     U.S.     on real    foreign    Corpora-   parent

 

                  obligors   property    corpora-    tions    corpora-

 

 Name      Code    General   mortgages    tions     General    tions

 

 ______________________________________________________________________

 

 Ukraine    UP        0         0           0          15        5

 

                     /a/      /a/ /c/      /a/       /a/ /d/   /a/ /d/

 

 ______________________________________________________________________

 

                           [table continued]

 

 ______________________________________________________________________

 

 Income code

 

 number        9       10         11        12       13         14

 

 ______________________________________________________________________

 

 Country of

 

 residence                          Copyright

 

 of payee                           royalties

 

 __________                    _________________

 

                                                    Real

 

                                                  Property

 

                                                   Income

 

                                 Motion              and

 

                     Indus-     Pictures           Natural    Pensions

 

            Capital   trial       and             Resources     and

 

 Name        Gains  Royalties  Television  Other  Royalties  Annuities

 

 _____________________________________________________________________

 

 Ukraine      0        10          10        10       30         0

 

            /a/ /e/    /a/        /a/        /a/                /b/

 

 _____________________________________________________________________

 

FOOTNOTES TO TABLE 1

 

 

/a/ Under the treaty 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. 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.

/b/ Exemption does not apply to U.S. Government (federal, state or local) pensions and annuities; a 30% rate applies to these pensions and annuities.

/c/ Exemption or reduced rate does not apply to an excess inclusion for a residual interest in a real estate mortgage investment conduit (REMIC).

/d/ 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.

/e/ Gain on real or personal property attributable to a permanent establishment or a fixed base is subject to U.S. tax. See Publication 515 for when withholding is required.

 

END OF FOOTNOTES TO TABLE 1

 

 

       TABLE 2. COMPENSATION FOR PERSONAL SERVICES PERFORMED IN

 

       UNITED STATES EXEMPT FROM WITHHOLDING AND U.S. INCOME TAX

 

                       UNDER INCOME TAX TREATIES

 

 

 ____________________________________________________________________

 

                      Category of Personal Services        Maximum

 

                 _______________________________________   Presence

 

 Country   Code                 Purpose                    in U.S.

 

   1     2                    3                        4

 

 ______________________________________________________________________

 

 

 Ukraine    15   Scholarship or fellowship grant 1       5 years 2

 

            16   Independent personal services 4 /6/     No limit

 

            17   Dependent personal services 5 /6/ 8   183 days

 

            19   Studying and training:

 

                    Remittances or allowances 7          5 years 2

 

 ______________________________________________________________________

 

                           [table continued]

 

 ______________________________________________________________________

 

                                                    Maximum    Treaty

 

                                                   Amount of   Article

 

 Country  Code   Required Employer or Payer       Compensation Citation

 

   1    2                5                      6         7

 

 ______________________________________________________________________

 

 Ukraine   15   Any U.S. or foreign resident 3    No limit      20

 

           16   Any contractor                      No limit      14

 

           17   Any foreign resident                No limit      15

 

           19   Any foreign resident                No limit      20

 

 ______________________________________________________________________

 

FOOTNOTES TO TABLE 2

 

 

1 Applies to grants, allowances, and other similar payments received for studying or doing research.

2 The 5-year limit pertains only to training or research.

3 Grant must be from a nonprofit organization. The exemption also applies to amounts from either government.

4 Exemption does not apply to the extent income is attributable to the recipient's fixed U.S. base.

5 Fees paid to a resident of Ukraine for services as a director of a U.S. corporation are subject to U.S. tax, unless the services are rendered in Ukraine.

6 The exemption does not apply if the employee's compensation is borne by a permanent establishment (or a fixed base) that the employer has in the United States.

7 Does not apply to compensation for research work primarily for private benefit.

8 The exemption does not apply to income received for performing services in the United States as an entertainer or a sportsman. However, this income is exempt for U.S. income tax if the visit is (a) substantially supported by public funds of Ukraine, its political subdivisions, or local authorities, or (b) made under a specific arrangement agreed to by the governments of the treaty countries.

 

END OF FOOTNOTES TO TABLE 2
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