Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-9

1955-1 C.B. 675

Sec. 871

IRS Headnote

The Internal Revenue Service will raise no objection to a domestic corporation's furnishing data appearing on its Corporation Income Tax Return, Form 1120, for the use of a United Kingdom bank in behalf of the United Kingdom stockholders of the corporation in order to facilitate the recognition of the credit allowed under the United Kingdom's tax laws for United States tax withheld or paid by the domestic corporation.

Full Text

Rev. Rul. 55-9

Advice has been requested whether a domestic corporation, which has been withholding a tax of 15 percent on dividends paid to United Kingdom stockholders of such domestic corporation, may upon request by a United Kingdom bank, provide a statement of data appearing on the Corporation Income Tax Return, Form 1120, for use by such bank in order to facilitate the recognition of the credit allowed under the United Kingdom's tax laws for United States tax withheld or paid by the domestic corporation.

Pursuant to Article VI of the income tax convention between the United States and the United Kingdom of Great Britain and Northern Ireland, T.D. 5569, C.B. 1947-2, 100, a domestic corporation has been withholding a tax of 15 percent of the amount of dividends paid to United Kingdom stockholders of the corporation.

Article XIII of such convention provides, in part, as follows:

(2) Subject to such provisions (which shall not affect the general principle hereof) as may be enacted in the United Kingdom, United States tax payable in respect of income from sources within the United States shall be allowed as a credit against any United Kingdom tax payable in respect of that income. Where such income is an ordinary dividend paid by a United States corporation, such credit shall take into account (in addition to any United States income tax deducted from or imposed on such dividend) the United States income tax imposed on such corporation in respect of its profits, and where it is a dividend paid on participating preference shares and representing both a dividend at the fixed rate to which the shares are entitled and an additional participation in profits, such tax on profits shall likewise be taken into account in so far as the dividend exceeds such fixed rate.

Thus, in contrast to the United States system of taxation, the British tax law views the tax paid by the domestic corporation as, in effect, a tax paid proportionately by the United Kingdom stockholders thereof and a credit is allowed by the United Kingdom not only for the United States tax of 15 percent withheld from the dividends at the source but also for a portion of the tax paid by such domestic corporation.

In accordance with Article XX of the convention the contracting parties adopt the principle of exchange of such information as is necessary to the administration of the provisions of the convention but not including information which would disclose any trade secret or trade process. The practice has existed since the effective date of the convention whereby United Kingdom Inland Revenue authorities have been furnished data by the Internal Revenue Service taken from Forms 1120 of various named domestic corporations.

Accordingly, the Internal Revenue Service will raise no objection to a domestic corporation's furnishing data appearing on its Corporation Income Tax Return, Form 1120, for the use of a United Kingdom bank in behalf of the United Kingdom stockholders of the corporation in order to facilitate the recognition of the credit allowed under the United Kingdom's tax laws for United States tax withheld or paid by the domestic corporation