Part II. Treaties — Internal Revenue Bulletin 2009-8

Subpart A.—Tax Conventions and Other Related Items

Supplemental Tables of Income Tax Rates Under New Income Tax Conventions

Announcement 2009–5

The United States recently exchanged instruments of ratification for new income tax treaties with Bulgaria and Iceland and a new protocol to the income tax treaty with Canada. The effective dates are as follows:

Bulgaria. The provisions for withholding tax at source are effective for amounts paid or credited on or after January 1, 2009. For other taxes, the treaty is effective for tax periods beginning on or after January 1, 2009.

Canada. The provisions for withholding tax at source are generally effective for

amounts paid or credited on or after February 1, 2009. For other taxes, the protocol is effective for tax periods beginning on or after January 1, 2009. Certain provisions, none of which are discussed in this announcement, have different effective dates.

Iceland. The provisions for withholding tax at source are effective for amounts derived on or after January 1, 2009. For other taxes, the new treaty is effective for tax years beginning on or after January 1, 2009. An individual who was otherwise entitled to benefits under Article 21 (Teachers) of the former treaty can continue to apply those provisions. A person entitled to benefits under the former treaty can elect to have that treaty apply in its entirety for

a twelve-month period following the date the new treaty would otherwise apply.

Tables 1 and 2. The following tables can be used to supplement Tables 1 and 2 in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities (For Withholding in 2008 ), and Publication 901 , U.S. Tax Treaties. The footnotes in those publications that relate to the column headings in these tables generally apply to these entries. These tables are intended only as a summary, and the full text of the relevant income tax treaty and protocol should be consulted.

The complete texts of the Bulgaria and Iceland treaties and the Canada protocol are available on the IRS website at www.irs.gov .

Table 1. Withholding Tax Rates on Income Other Than Personal Service Income

Income code number		1	2	3	6	7	9	10	11	12	13	14	21
Country/Code	Country/Code
Bulgaria Canada Iceland	BU CA IC	5 a,b,c 0 a,b,k 0 a,j	5 a,b,c,d 0 a,b,d,k 0 a,d,j	5 a,b,c 0 a,b,k 0 a,j	10 a,c,e 15 a,e, 15 a,c,e	5 a,c,e 5 a,e 5 a,c,e	0 a 0 i 0 a	5 a 0 a 0 a,h	5 a 10 a 5 a	5 a 0 a 0 a	30 30 30	0 f,g 15 0 g	30 0 30

Income Codes

1 Interest paid by U.S. obligors — General 10 Industrial royalties 2 Interest on real property mortgages 11 Copyright royalties — Motion pictures and Television 3 Interest paid to controlling foreign corporations 12 Copyright royalties — Other 6 Dividends paid by U.S. corporations — General 13 Real property income and Natural resources royalties 7 Dividends qualifying for direct dividend rate 14 Pensions and annuities 9 Capital gains 21 Social security payments

Footnotes

a The exemption or reduction in rate does not apply if the recipient has a permanent establishment in the United States and the income paid is attributable to this permanent establishment. b The rate is 10% (15% for Canada) 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. c Amounts paid to a pension fund that are not derived from the carrying on of a business by the pension fund are exempt. For Bulgaria, interest paid to a financial institution is exempt. d The exemption or reduced rate does not apply to an excess inclusion for a residual interest in a real estate mortgage investment conduit (REMIC).

February 23, 2009 569 2009–8 I.R.B.

e 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 (and for Bulgaria, a 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. For Bulgaria, dividends paid to pension fund from a RIC, or a REIT that meets the above conditions, are exempt. f Includes alimony. g A 30% rate applies to U.S. government pensions (federal, state, or local); however, pensions paid to an individual who is both a resident and national of the treaty country are exempt from U.S. tax. h The rate is 5% for trademarks and any information for rentals of industrial, commercial, or scientific equipment. i 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 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 of the taxpayer in the U.S. are exempt. j 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. k If the payor and the beneficial owner are related, the rate for interest paid or credited in 2009 is 4%.

Table 2. Compensation for Per Under Income Tax Treaties	rsonal Services Performed in	n United States E	Exempt from Withhold	ding and U.S. Inco	ome Tax
Country Code	Category of personal services	Maximum presence in U.S.	Required Employer or Payer	Maximum Amount of Compensation	Article No.
Country Code	Purpose	Purpose	Purpose	Purpose	Purpose
Bulgaria 16 17 20 18 19	Independent personal services 1 Dependent personal services 4,5 Public entertainment Teaching 2 Studying and training: 8 Remittances or allowances Compensation during study or training	No limit 183 days No limit 2 years No limit 3 No limit 3	Any contractor Any foreign resident Any U.S. or foreign resident U.S. educational or research institution Any foreign resident Any U.S. or foreign resident 9	No limit No limit $15,000 p.a. 6 No limit No limit $9,000 p.a.	7 14 16 19(2) 19(1)(a) 19(1)(b)

2009–8 I.R.B. 570 February 23, 2009

Country Code	Category of personal services	Maximum presence in U.S.	Required Employer or Payer	Maximum Amount of Compensation	Article No.
Country Code	Purpose	Purpose	Purpose	Purpose	Purpose
Canada 16 20 17 20 19	Independent personal services 1 Public entertainment Dependent personal services Public entertainment Studying and training: Remittances or allowances 8	No limit No limit No limit 183 days No limit No limit 3	Any contractor Any contractor Any U.S. or foreign resident Any foreign resident 5 Any U.S. or foreign resident Any foreign resident	No limit $15,000 p.a. 6 $10,000 No limit 7 $15,000 p.a. 6 No limit	VII XVI XV XV XVI XX
Iceland 15 16 17 20 19	Scholarship or fellowship grant Independent personal services 1 Dependent personal services 4,5 Public entertainment Studying and training: Remittances or allowances Compensation during study or training Compensation while gaining experience Compensation under U.S. Government program	5 years No limit 183 days No limit 5 years 5 years 12 consec. mo. 1 year	Any U.S. or foreign resident 10 Any contractor Any foreign resident Any U.S. or foreign resident Any foreign resident Any U.S. or foreign resident Any U.S. or foreign resident 9 U.S. Government or its contractor	No limit No limit No limit $20,000 p.a. 6 No limit $9,000 p.a. $9,000 $9,000	19(1) 7 14 16 19(1) 19(1) 19(2) 19(3)

Footnotes

1 The exemption does not apply to any amounts attributable to a permanent establishment in the United States. 2 Does not apply to income from research work primarily for private benefit. 3 Exemption applies to a business apprentice (trainee) only for a period not exceeding 2 years (1 year for Canada) from the date of arrival in the United States. 4 The exemption does not apply to fees paid to a director of a U.S. corporation. 5 The exemption does not apply if the employee’s compensation is borne by a permanent establishment that the employer has in the United States. 6 The exemption does not apply if gross receipts (including reimbursements) exceed this amount during the year. 7 Does not apply to compensation paid to public entertainers. 8 Applies only to full-time student or trainee. 9 Applies only if training or experience is received from a person other than the alien’s employer. 10 Grant must be from nonprofit organization.

February 23, 2009 571 2009–8 I.R.B.