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(3) A direct investor which, during 1968 or any succeeding year, allocates proceeds of long-term foreign borrowing and deducts the amount of such proceeds from positive direct investment in a scheduled area under § 1000.306(e), may, during 1969 or any succeeding year, reallocate all or part of such proceeds of long-term foreign borrowing to positive direct investment in another scheduled area. The direct investor which makes a reallocation under this paragraph (d) (3) of this section shall be deemed at the time of such reallocation to have made a transfer of capital equal to the amount so reallocated to the scheduled area in which the proceeds of long-term foreign borrowing were allocated immediately prior thereto. The direct investor may thereafter continue to reallocate to different scheduled areas, up to the amount of proceeds of long-term foreign borrowing previously allocated: Provided, That each time such reallocation occurs, the direct investor shall be deemed to have made a transfer of capital equal to the amount so reallocated to the scheduled area to which the proceeds of long-term foreign borrowing were allocated or reallocated immediately prior to such reallocation.
(e) [Revoked] $ 1000.204 Evasion.
Anything in this part to the contrary notwithstanding, any transaction for the purpose of, or which has the effect of, evading or avoiding any of the provisions set forth in this part may be disregarded in whole or in part for purposes of measuring compliance with the provisions of this part.
Subpart C-General Definitions § 1000.301 Foreign country.
The term “foreign country” includes, but not by way of limitation:
(a) The state and the government of any foreign country as well as any political subdivision, agency, or instrumentality thereof or any territory, dependency, colony, protectorate, mandate, dominion, possession or place subject to the jurisdiction thereof.
(b) Any other government (including any political subdivision, agency, or instrumentality thereof) to the extent and only to the extent that such government exercises or claims to exercise control, authority, jurisdiction or sovereignty over territory which constitutes such foreign country.
(d) Any territory which is controlled or occupied by the military, naval or police forces or other authority of a foreign country. § 1000.302 Foreign national.
(a) The term “foreign national” means a foreign country (as defined in § 1000.301) and any person which is not a person within the United States (as defined in $ 1000.322), including a corporation or partnership organized under the laws of a foreign country (as defined in § 1000.304(a) (1) (i)), a business venture conducted within a foreign country (as defined in $ 1000.304(a) (1) (ii) and (iii)), and a foreign bank (as defined in $ 1000.317(b)).
(b) Notwithstanding the provisions of paragraph (a) of this section, the Secretary retains full power to determine that any person is a foreign national. § 1000.303 Nationals of more than one
foreign country. (REVOKED) § 1000.304 Affiliated foreign national
(a) Except as provided in paragraphs (b) (4), (c), and (d) of this section, the term “affiliated foreign national” of a person within the United States includes each of the following in which such person owns, directly or indirectly, a 10percent interest:
(1) A corporation or partnership organized under the laws of a foreign country (including all business ventures conducted by employees or partners of such corporation or partnership on behalf of such corporation or partnership within any foreign countries assigned to the same scheduled area as the country of organization);
(2) A business venture conducted within a foreign country on behalf of such person within the United States by such person or by employees or partners of such person; and
(3) A business venture conducted on behalf of a corporation or partnership organized under the laws of a foreign country by employees or partners of such corporation or partnership if the business venture is conducted within a foreign country which is not assigned to the same scheduled area as the country of organization. For purposes of determining whether a business venture conducted on behalf of a foreign corporation or partnership is a separate affiliated foreign national,
Canada shall be deemed to be in a sched- the United States if the operations of uled area other than Schedule B.
such corporation, partnership, or busi(b) (1) A corporation or partnership ness venture consist solely of charitable, referred to in paragraph (a) (1) of this educational, religious, scientific, literary, section is an affiliated foreign national in or other similar activities not engaged the scheduled area in which the foreign in for profit. country under whose laws it is organized (d) Notwithstanding the provisions of is located. A business venture referred to paragraphs (a) and (b) of this section, a in paragraph (a) (2) or (3) of this business venture referred to in paragraph section is an affiliated foreign national in (a) (2) or (3) of this section shall not be the scheduled area in which the business considered an affiliated foreign national is conducted: Provided, That, if such a of a person within the United States durbusiness venture is conducted in more ing any year if (1) the business venture than one scheduled area during any year, does not have or involve, at any time durthe scheduled area in which the business ing such year, gross assets of more than venture is conducted for the greatest $50,000 (valued at the greatest of cost, period of time during such year shall, for book value, replacement value or market purposes of this section, be deemed the value); or (2) the business venture is only scheduled area in which the business commenced during such year and is not venture is conducted during such year. reasonably expected to be conducted
(2) The term “10 percent interest," within one or more foreign countries for when used with respect to any corpora- more than 12 consecutive months; or (3) tion, partnership or business venture the business venture is terminated during referred to in paragraph (a) of this sec- such year and was not in fact conducted tion, means (i) 10 percent or more of the within one or more foreign countries for total combined voting power of all out- more than 12 consecutive months. standing securities of such corporation
§ 1000.305 Direct investor. or (ii) 10 percent or more of the profit interest in such partnership or business
The term “direct investor" means any venture. Whether a person within the
person within the United States which United States directly or indirectly owns
directly or indirectly owns or acquires a 10 percent interest in a corporation,
a 10-percent interest in a corporation partnership or business venture referred or partnership organized under the laws to in paragraph (a) of this section shall
of a foreign country or in a business be determined in accordance with the
venture conducted within a foreign provisions of $ $ 1000.901 and 1000.902.
country as described in § 1000.304. (3) For purposes of this part, the term & 1000.306 Positive and negative direct "incorporated affiliated foreign national" investment. includes a corporation described in para
(a) Direct investment by a direct ingraph (a) (1) of this section and the
vestor in all affiliated foreign nationals term “unincorporated affiliated foreign
in any scheduled area during any period national” includes a partnership de
means: scribed in paragraph (a) (1) of this section and a business venture described in
(1) The net transfer of capital (as deparagraph (a) (2) or (3) of this section.
fined in $ 1000.313(c)) made during such (4) Notwithstanding the provisions of
period by the direct investor to all inparagraph (a) of this section and the
corporated and unincorporated affiliated
foreign nationals in such scheduled area; foregoing provisions of this paragraph
and (b), the Secretary retains full power, with
(2) The direct investor's share in the respect to any person within the United States, to determine that any person is
total reinvested earnings of all incorpoan affiliated foreign national of such per
rated affiliated foreign nationals in such son within the United States and to scheduled area during such period (comdetermine the scheduled area in which puted in accordance with paragraphs (b) such affiliated foreign national is located.
and (c) of this section). (c) Notwithstanding the provisions of (3) If the sum of paragraphs (a) (1) paragraphs (a) and (b) of this section, a and (2) of this section is in excess of corporation, partnership or business ven- zero, the direct investment during such ture referred to in paragraph (a) of this period shall be positive direct investsection shall not be considered an affili- ment; if a negative amount, it shall be ated foreign national of a person within negative direct investment.
(b) A direct investor's share in the direct investor in the same or other total reinvested earnings of all incor- scheduled areas and all earnings of uninporated affiliated foreign nationals in corporated affiliated foreign nationals of any scheduled area during any period the direct investor in other scheduled means the direct investor's share in the areas. Earnings and losses shall be comtotal earnings or losses during such pe- puted without regard to U.S. taxes and riod of such incorporated affiliated for- foreign withholding taxes on the payeign nationals (computed in accordance ment of dividends. Earnings shall not be with paragraph (c) of this section) less reduced by application or provision by an amount (which may be positive or the direct investor of reserves for denegative) obtained by subtracting (1) valuation or impairment of investment. the sum of (i) the direct investor's share Notwithstanding the foregoing, the Secof all dividends paid during such year retary shall have the right, generally or to such affiliated foreign nationals by specifically, in his discretion to disapincorporated affiliated foreign nationals prove any such accounting principles of the direct investor in other sched- determined by him to be inconsistent uled areas and (ii) the direct investor's with the purposes of this part and to share of all earnings remitted during prescribe such principies as he may deem such year to such affiliated foreign na- appropriate to carry out the purposes of tionals by unincorporated affiliated for
this part. eign nationals of the direct investor in (d) For purposes of this part: other scheduled areas from (2) the sum (1) Earnings of an unincorporated of (x) all dividends paid during such affiliated foreign national during any peyear by such affiliated foreign nationals riod shall be deemed to have been remitto the direct investor and (y) the direct ted to the extent that such earnings exinvestor's share of all dividends paid ceed the net increase in the net assets of during such year by such affiliated for- the unincorporatd affiliated foreign naeign nationals to affiliated foreign na- tional during the period. tionals of the direct investor in other (2) The term "dividends” means cash scheduled areas: Provided, That, in cal- dividends, whether paid out of current culating a direct investor's share in the or accumulated earnings (other than total reinvested earnings of incorporated liquidating dividends). The amount of a affiliated foreign nationals for any year dividend paid shall be calculated before (including the years 1965 and 1966), a deducting foreign withholding taxes. A direct investor may elect, in such man- dividend shall be deemed to have been ner as the Secretary may determine, to paid to a direct investor or an affiliated treat dividends paid within 60 days after foreign national, as the case may be, the end of the year as having been paid when entered on the books of account of during such year.
the recipient as actually having been (c) Computations of earnings or losses paid in cash or as being subject to payof offiliated foreign nationals under this ment upon demand, whichever first section or any other provision of this part (e) (1) There shall be deducted from shall (except as otherwise provided here- positive direct investment in a scheduled in) be made in accordance with account- area during any year, as calculated under ing principles generally accepted in the paragraph (a) of this section, an amount United States and consistently applied: equal to any available proceeds (as deto the extent such principles are re- fined in $ 1000.324(d)) allocated by the flected in reports to stockho.ders, the direct investor to such positive direct incomputation shall follow the principles vestment for such year. Available proused in preparing such reports. The earn- ceeds shall be allocated to such positive ings or loss of each incorporated affiliated direct investment for such year if (i) an foreign national in that scheduled area entry is made in the books and records shall be added to the earnings or maintaine, by the direct investor under loss of every other incorporated affiliated $ $ 1000.203(b) and 1000.601; (ii) the alforeign national in that scheduled area location and deduction is reported on the in order to determine the total earnings next annual report of the direct investor or losses of such affiliated foreign na- (Form FDI-102F) filed for the year for tionals as a group. In computing such which the deduction is made; and (iii) total earnings and losses, there shall be the proceeds, as of the end of the year excluded all dividends paid during such for which the deduction is made and year to such affiliated foreign nationals thereafter, are not held, directly or inby incorporated foreign nationals of the directly, in the form of foreign balances or in the form of securities (including manner reasonably reflecting the direct debt obligations, equity interests, and any investor's interests in each scheduled other type of investment contract) of area during such year. foreign nationals or in the form of any
$ 1000.307 Person; corporation. other foreign property: Provided, That proceds so allocated may at any time be (a) The term “person" means an indiexpended in making transfers of capital vidual, corporation, partnership, business to affiliated foreign nationals. In addi- venture, trust, or estate. tion, available proceeds of long-term (b) The term “corporation" means an foreign borrowing made on or before organization or entity incorporated unFebruary 28, 1974 (including ava:lable der the laws of the United States or a proceeds so treated under $ 1000.1403(a) foreign country and any other organiza(1) as the result of proceeds borrowing tion or entity not so incorporated but made on or before February 28, 1974), which is organized under the laws of the shall be allocated to such positive direct United States or a foreign country and investment for the year 1973 if bookkeep- has all or a substantial part of the legal ing entries and a report on Form FDI- characteristics commonly attributed to 102F for 1973 are made with respect to corporations under the laws of the United such allocation, as required under this States. section, and such proceeds, as of Febru
§ 1000.308 Transfer. ary 28, 1974, are not held, directly or indirectly, in the form of foreign balances
The term “transfer" means any act or or in the form of securities of foreign na
transaction, whether or not evidenced by tionals or in the form of any other for- a writing and whether or not done or eign property: Provided, That proceeds performed within the United States, the so allocated may at any time be expended purpose, intent, or effect of which is to in making transfers of capital to affili
create, surrender, release, transfer, or ated foreign nationals.
alter, directly or indirectly, any right, (2) [Revoked]
remedy, power, privilege, or interest (3) A deduction made pursuant to
with respect to any property wherever paragraph (e) (1) of this section from
located. positive direct investment in all sched
§ 1000.309 Property, property interest. uled areas by a direct investor electing to be governed by $ 1000.503 for any
The terms “property” and “property
interest” include any property, real, peryear, commencing with the year 1969, shall be deemed to have been made in
sonal, or mixed, tangible or intangible each scheduled area in the same pro
(including the value of services perportions as the amount of positive di
formed), or interest or interests therein, rect investment (calculated as provided
present, future or contingent. in paragraph (a) of this section and, & 1000.310 Interest. in the case of positive direct investment
The term "interest” when used with in the year 1969, disregarding each
respect to property shall mean an interscheduled area's proportionate share of
est of any nature whatsoever, direct or aggregate annual losses, as defined in
indirect. § 1000.503(b) in effect for the year 1969) in such scheduled area during such year. $ 1000.311 Banking institution. A deduction made pursuant to para
(REVOKED) graph (e) (1) of this section or $ 1000. $ 1000.312 Transfers of capital. 203(d) (2) or (3) from positive direct investment in Schedules B and C by a
(a) Transfers of capital by direct indirect investor that elected to be gov
vestor. Except as otherwise provided in erned by $ 1000.507 for any year shall
paragraph (c) of this section, a transfer be deemed to have been made in each
of capital by a direct investor to an affilisuch scheduled area in the same propor
ated foreign national means any transtions as the amount of positive direct
fer of funds or other property by or on investment (calculated as provided in
behalf or for the benefit of a direct inparagraph (a) of this section) made by
vestor directly or indirectly to or on the direct investor in such scheduled
behalf or for the benefit of an affiliated area during such year. The Secretary
foreign national (including a transfer may, upon application pursuant to described in § 1000.505); and any trans§ 1000.801, permit a direct investor to action or occurrence as a result of or in apportion such deductions in some other connection with which the direct investor
directly or indirectly acquires or in- were made in two or more scheduled creases a debt or equity interest in the areas with respect to such repaid boraffiliated foreign national or the affiliated rowing, the transfer shall be apportioned foreign national directly or indirectly among such scheduled areas in the same disposes of or reduces a debt or equity proportions as the amount of such deinterest in the direct investor held by the ductions in each such scheduled area. affiliated foreign national. Such transfers If any apportionment made by a direct of capital shall include, but not by way investor hereunder is determined by the of limitation:
Secretary to be inconsistent with the (1) The aquisition by the direct in- purposes of this part, the Secretary shall vestor of an equity interest in or debt have the right, in his discretion, to make obligation of an affiliated foreign na- an apportionment consistent with the tional (including the acquisition of an purposes of this part. equity interest in or a debt obligation of (8) A lease of property by a direct ina foreign national as a result of which vestor to an affiliated foreign national, the foreign national becomes an affiliated if the property has a remaining useful foreign national of the direct investor). life when leased of a year or more and is
(2) A contribution by the direct in- not required or expected to be returned vestor to the capital of the affiliated to the direct investor in less than one foreign national.
year. (3) The complete or partial satisfac- (9) A pledge, hypothecation or other tion by the direct investor of a debt obli- transfer by a direct investor of foreign gation of the direct investor held by the balances (as defined in $ 1000.203(a) (1)) affiliated foreign national.
or equity securities of a foreign corpora(4) The reduction of an equity interest tion owned by the direct investor (other in the direct investor held by the affili- than equity securities of an affiliated ated foreign national (as the result of a foreign national of the direct investor), redemption of stock, liquidating divi- which pledge, hypothecation, or other dend, or like transaction).
transfer is made by the direct investor (5) A transfer by the affiliated foreign to or with a foreign national, on or after national of an equity interest in or debt the effective date of the regulations, obligation of the direct investor held by pursuant to an express or implied agreethe affiliated foreign national.
ment with the foreign national whereby (6) The complete or partial satisfac- the foreign national transfers or agrees tion by the direct investor of a debt obli- to transfer funds or other property, as a gation of an affiliated foreign national, loan or otherwise, to an affiliated foreign whether or not such debt obligation was national of the direct investor or to the guaranteed or assumed by the direct direct investor itself for investment in investor.
such an affiliated foreign national: Pro(7) The complete or partial satisfac- vided, That this subparagraph shall not tion by a direct investor of a long-term apply to a pledge, hypothecation or other foreign borrowing made by the direct in- transfer by a direct investor to a foreign vestor before or after the effective date national in connection with a borrowing of the regulations to the extent the pro- by the direct investor for investment in ceeds of the borrowing were expended in an affiliated foreign national, if the bormaking transfers of capital on or after rowing is not a long-term foreign borJanuary 1, 1965, or were allocated by the rowing (as defined in § 1000.324(a)). direct investor (on the books and rec- (b) Transfers of capital by affiliated ords maintained by the direct investor foreign nationals.-Except as otherwise under $ $ 1000.203(b) and 1000.601) provided in paragraph (c) of this secto positive direct investment. A transfer tion, a transfer of capital by an affiliated of capital resulting from the repayment foreign national to a direct investor in of a borrowing by a direct investor such affiliated foreign national means shall be deemed to have been made to any of the following transactions or octhe scheduled area in which such pro- currences as a result of or in connection ceeds were expended or to which they with which the affiliated foreign nawere allocated at the time of such re- tional directly or indirectly acquires or payment and with respect to which a increases a debt or equity interest in the deduction was made under $ 1000.203 direct investor or the direct investor di(d) (2), $ 1000.203(d) (3), § 1000.306(e), rectly or indirectly disposes of or reduces or $ 1000.313(d) (1); or if deductions a debt or equity interest in the affiliated