General rule
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).
Exemption
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.
Exception for certain possessions corporations
Guam, American Samoa, the Northern Mariana Islands, and the Virgin Islands
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.
Commonwealth of Puerto Rico
In general
Applicability
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.
Aug. 16, 1954, ch. 73668A Stat. 358Pub. L. 89–809, title I, § 104(c)80 Stat. 1557Pub. L. 92–178, title III, § 313(e)85 Stat. 528Pub. L. 92–606, § 1(e)(2)86 Stat. 1497Pub. L. 94–455, title XIX, § 1906(b)(13)(A)90 Stat. 1834Pub. L. 98–369, div. A, title I98 Stat. 652Pub. L. 99–514, title XII, § 1273(b)(2)(B)100 Stat. 2596Pub. L. 100–647, title I, § 1012(g)(7)102 Stat. 3501Pub. L. 103–66, title XIII, § 13237(c)(5)107 Stat. 508Pub. L. 108–357, title IV118 Stat. 1504(, ; , , ; , , ; , , ; , , ; , §§ 127(e)(2), 130(b), title IV, § 474(r)(29)(I), , , 661, 845; , title XVIII, § 1810(d)(3)(E), , , 2825; , , ; , , ; , §§ 411(a)(3)(B), 420(b), , , 1513.)
Editorial Notes
References in Text
Pub. L. 108–357The date of the enactment of this paragraph, referred to in subsec. (c)(2)(B), is the date of enactment of , which was approved .
Amendments
Pub. L. 108–357, § 411(a)(3)(B)2004—Subsec. (a). , substituted “the reference in section 1441(c)(10)” for “and the reference in section 1441(c)(10)” and inserted before period at end “, 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)”.
Pub. L. 108–357, § 420(b)Subsec. (c). , designated existing provisions as par. (1), inserted heading, and added par. (2).
Pub. L. 103–661993—Subsec. (a). substituted “871(h)(3) or (4)” for “871(h)(3)” and “881(c)(3) or (4)” for “881(c)(3)”.
Pub. L. 100–6471988—Subsec. (a). struck out “and” after “to section 881(a)(3),” and inserted before period at end “, and the reference in section 1441(c)(10) to section 871(i)(2) shall be treated as referring to section 881(d)”.
Pub. L. 99–514, § 1810(d)(3)(E)1986—Subsec. (a). , substituted “871(h)” for “871(h)(2)”, “881(c)” for “881(c)(2)”, and “1441(c)(9)” for “1449(c)(9)”.
Pub. L. 99–514, § 1273(b)(2)(B)Subsec. (c). , amended subsec. (c) generally, substituting reference to “certain possessions corporations” for reference to “certain Guam and Virgin Islands corporations” in heading, and in text extending “foreign corporation” exception so as to not include corporation created or organized in Guam, American Samoa, Northern Mariana Islands, or the Virgin Islands, and striking out par. (2) which declared that par. (1) not apply to tax imposed in Guam, and par. (3) which referred to sections 934 and 943a for tax imposed in Virgin Islands.
Pub. L. 98–369, § 474(r)(29)(I)1984—Subsec. (a). , struck out “or section 1451” after “provided in section 1441” and struck out “; except that, in the case of interest described in section 1451 (relating to tax-free covenant bonds), the deduction and withholding shall be at the rate specified therein” after “a tax equal to 30 percent thereof”.
Pub. L. 98–369, § 127(e)(2), struck out “and” after “section 881(a)(4),” and inserted “, and the references in section 1449(c)(9) to sections 871(h)(2) and 871(h)(3) shall be treated as referring to sections 881(c)(2) and 881(c)(3)”.
Pub. L. 98–369, § 130(b)Subsec. (c). , substituted provision relating to exception for certain Guam and Virgin Islands corporations for provision relating to exception for Guam corporations.
Pub. L. 94–4551976—Subsec. (b). struck out “or his delegate” after “Secretary” in two places.
Pub. L. 92–6061972—Subsec. (c). added subsec. (c).
Pub. L. 92–1781971—Subsec. (a). provided that reference in section 1441(c)(8) to section 871(a)(1)(C) shall be treated as referring to section 881(a)(3).
Pub. L. 89–8091966— limited the withholding of tax at the 30 percent rate to items of fixed or determinable United States source income not effectively connected with the conduct of a trade or business in the United States and authorized the granting of an exemption from the withholding requirement in the case of a foreign corporation engaged in trade or business within the United States if the Secretary or his delegate determines that the withholding imposes an undue administrative burden and that the collection of the tax will not be jeopardized by the exemption.
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
section 411(a)(3)(B) of Pub. L. 108–357section 411(d)(1) of Pub. L. 108–357section 871 of this titleAmendment by applicable to dividends with respect to taxable years of regulated investment companies beginning after , see , set out as a note under .
section 420(b) of Pub. L. 108–357section 420(d) of Pub. L. 108–357section 881 of this titleAmendment by applicable to dividends paid after , see , set out as a note under .
Effective Date of 1993 Amendment
Pub. L. 103–66section 13237(d) of Pub. L. 103–66section 871 of this titleAmendment by applicable to interest received after , see , set out as a note under .
Effective Date of 1988 Amendment
Pub. L. 100–647Pub. L. 99–514section 1019(a) of Pub. L. 100–647section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .
Effective Date of 1986 Amendment
section 1273(b)(2)(B) of Pub. L. 99–514section 1277 of Pub. L. 99–514section 931 of this titleAmendment by applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as a note under .
section 1810(d)(3)(E) of Pub. L. 99–514Pub. L. 98–369, div. Asection 1881 of Pub. L. 99–514section 48 of this titleAmendment by effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .
Effective Date of 1984 Amendment
section 127(e)(2) of Pub. L. 98–369section 127(g)(1) of Pub. L. 98–369section 871 of this titleAmendment by applicable to interest received after , with respect to obligations issued after such date, in taxable years after such date, see , set out as a note under .
section 130(b) of Pub. L. 98–369section 130(d) of Pub. L. 98–369section 881 of this titleAmendment by applicable to payments made after , in taxable years ending after such date, see , set out as a note under .
section 474(r)(29)(I) of Pub. L. 98–369section 475(b) of Pub. L. 98–369section 33 of this titleAmendment by not applicable with respect to obligations issued before , see , set out as a note under .
Effective Date of 1972 Amendment
Pub. L. 92–606, § 286 Stat. 1497
Effective Date of 1971 Amendment
Pub. L. 92–178section 313(f) of Pub. L. 92–178section 871 of this titleAmendment by applicable with respect to payments occurring on or after , see , set out as a note under .
Effective Date of 1966 Amendment
Pub. L. 89–809section 104(n) of Pub. L. 89–809section 11 of this titleAmendment by applicable with respect to taxable years beginning after , see , set out as a note under .
Plan Amendments Not Required Until January 1, 1989
Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .
Withholding of Tax on Nonresident Aliens and Foreign Corporations
Pub. L. 97–248, title III, § 34296 Stat. 635section 1441 of this titleFor provisions relating to withholding of tax on nonresident aliens and foreign corporations, see , , , set out as a note under .