individual or to a partnership not engaged in trade or business within the United States and not having any office or place of business therein, and composed in whole or in part of nonresident alien individuals, except (1) dividends of a class allowed as a credit by subdivision (a) of section 216, (2) interest on deposits with persons carrying on the banking business, paid to persons not engaged in business in the United States and not having any office or place of business therein, and (3) interest upon corporate bonds containing a tax-free covenant clause; (b) of a tax of 121⁄2 per cent in the case of fixed or determinable annual or periodical income (with the exceptions just stated) payable to a foreign corporation not engaged in trade or business within the United States and not having any office or place of business therein (sec. 237); and (c) of a tax of 2 per cent in the case of interest payable to an individual or a partnership, whether resident or nonresident, or to a foreign corporation not engaged in trade or business within the United States and not having any office or place of business therein, upon bonds or other obligations of domestic or resident foreign corporations containing a socalled tax-free covenant clause. If the owner of bonds or other like obligations is unknown to the withholding agent a tax of 2 per cent must be withheld from interest on so-called tax-free covenant bonds, and a tax of 6 per cent must be withheld from interest on all other corporate bonds or securities. Bonds issued under a trust deed containing a tax-free covenant are treated as if they contained such a covenant. Where neither the bonds nor the trust deeds given by the obligor to secure them contain a tax-free covenant, supplemental agreements executed by the obligor corporation and the trustee containing a tax-free covenant which modify the original trust deeds to that extent are of the same effect from the date of their proper execution as if they had been part of the original deeds of trust, and the bonds from such date are subject to the provisions of subdivision (b) of section 221, provided appropriate authority exists for the modification of the trust deeds in this manner. The authority must be contained in the original trust deeds, however, or actually secured from the bondholders.

A foreign corporation having a fiscal agent or a paying agent in this country is required to withhold a tax of 2 per cent upon the interest on its tax-free covenant bonds. A debtor corporation having an issue of bonds or other similar obligations may appoint a duly authorized withholding agent to act in its behalf, provided notice of such appointment is filed with the collector for the district in which the debtor corporation is located, giving the name and address of the withholding agent. Compensation paid to alien residents of Canada or Mexico for personal services actually performed in the

United States is subject to the rates of normal tax provided by subdivision (b) of section 210 of the statute. The benefit of such reduced rates may be procured by a nonresident alien for withholding purposes only by filing claim therefor on Form 1115 as provided in articles 316, 331, and 373. See also section 217 (g) of the statute. See further sections 200, 217, 237, and 256 of the statute, and articles 1523, 311-317, 331, 601, and 1071-1080.

ART. 362. Fixed or determinable annual or periodical income.-Only fixed or determinable annual or periodical income is subject to withholding. Among such income, giving an idea of the general character of income intended, the statute specifies interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, and emoluments. But other kinds of income may be included, as for instance, royalties. (a) Income is fixed when it is to be paid in amounts definitely predetermined. On the other hand, it is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained. (b) The income need not be paid annually if it is paid periodically; that is to say, from time to time, whether or not at regular intervals. That the length of time during which the payments are to be made may be increased or diminished in accordance with some one's will or with the happening of an event does not make the payments any the less determinable or periodical. A salesman working by the month for a commission on sales which is paid or credited monthly receives determinable periodical income. The income derived from the sale in the United States of property, whether real or personal, is not fixed or determinable annual or periodical income.

ART. 363. Exemption from withholding.—Withholding from interest on bonds or other obligations containing a tax-free covenant shall not be required in the case of a citizen or resident alien individual if he files with the withholding agent when presenting interest coupons for payment, or not later than February 1 following the taxable year, an ownership certificate on Form 1001 claiming a personal exemption or credit for dependents. See section 216 of the statute and articles 301-305. To avoid inconvenience a resident alien individual should file a certificate of residence on Form 1078 with withholding agents, who shall forward such certificates to the Commissioner with a letter of transmittal. See article 315. The income of domestic and resident foreign corporations is free from withholding. No withholding from corporate dividends is required except from the amount distributed as dividends by a corporation organized under the China Trade Act, 1922, to (a) a nonresident alien individual other than a citizen of China resident therein at the time of such distribution; (b) a partnership not engaged in trade or business within the United States and not having any office or place of busi

ness therein, composed in whole or in part of nonresident aliens; or (c) a foreign corporation not engaged in trade or business within the United States and not having any office or place of business therein. In the case of (a) and (b) the rate of withholding applicable is 6 per cent and in the case of (c) 121 per cent. See further sections 213 (b) (13) and 263.

ART. 364. Exemption certificates of nonresident aliens. (a) When the gross income (including bond interest) of a nonresident alien, which is derived from sources within the United States, does not exceed the personal exemption of $1,000, and, in the case of a resident of Canada or Mexico, does not exceed the personal exemption of $1,000 and the credit for dependents, an exemption certificate, Form 1001 B, should be executed and filed with the withholding agent, if any part of the gross income is derived from interest upon bonds or similar obligations of a domestic corporation which contain a taxfree covenant clause. The amount of tax due from the withholding agent, as shown by Form 1013, may be reduced by 2 per cent of the aggregate amount of interest payments made to such nonresident alien upon tax-free covenant bonds during the calendar year. If the withholding agent has paid the tax shown to be due on Form 1013 prior to the receipt of Form 1001 B, a claim for refund of the excess tax paid should be filed by the withholding agent. See section 281(d) of the statute and articles 1301-1308. If assessment has been made upon the basis of Form 1013 prior to the receipt of Forms 1001 B, the withholding agent should file an amended return, Form 1013, accompanied by the exemption certificates, together with a request for adjustment of its account. The collector will forward the return and request to the Commissioner for action.

(b) When the gross income of a nonresident alien derived from sources within the United States does not exceed the personal exemption of $1,000, and in the case of a resident of Canada or Mexico does not exceed the personal exemption of $1,000 and the credit for dependents, such person may file with the withholding agent an exemption certificate on Form 1001 C with respect to interest upon bonds or similar obligations of a domestic corporation not containing a tax-free covenant clause. The debtor organization or withholding agent, upon receipt of such certificate properly filled in and executed, shall release and pay over to the nonresident alien upon demand any tax withheld during the preceding calendar year. The amount of tax due from the withholding agent, as shown by Form 1013, should be reduced by the amount of excess tax withheld. The adjustment of the amount of tax assessed against the withholding agent will be made as provided in subdivision (a) of this article. In case the tax so withheld has been paid to the Government, refund

of the tax withheld can be made only to the bond owner or his duly authorized representative, who should file a claim therefor on Form 843 accompanied with Forms 1001 C. In case the Forms 1001 C are received after the tax has been paid to the Government by the withholding agent, they should be returned to the individual or his duly authorized representative with the advice that claim therefor must be filed with the Government.

The exemption certificates, Forms 1001 B and 1001 C, properly executed, may be filed with the debtor organization or its duly authorized withholding agent at any time after the close of the calendar year, but not later than June 1 of the succeeding year. Ownership certificates, however, must be filed in connection with all interest payments upon bonds and similar obligations of domestic corporations in accordance with the regulations, notwithstanding the fact that Form 1001 B or Form 1001 C is filed.

ART. 365. Ownership certificates for interest coupons.-The owners, except domestic and resident corporations, of bonds or other obligations containing a tax-free covenant clause, issued by a domestic or resident foreign corporation, when presenting interest coupons for payment shall file a certificate of ownership for each issue of bonds, showing the name and address of the debtor corporation, the name and address of the owner of the bonds, the nature of the obligations, the amount of interest and its due date, and the amount of any tax withheld. In case of corporate bonds or similar obligations not containing a tax-free covenant clause, no ownership certificates are required unless the owner of such bonds is a nonresident alien individual or fiduciary, a partnership not engaged in trade or business within the United States and not having any office or place of business therein, composed in whole or in part of nonresident aliens, or a foreign corporation not engaged in trade or business within the United States and not having any office or place of business therein. Ownership certificates are required in the case of such bonds if the owner is unknown to the withholding agent. Ownership certificates need not be filed in the case of interest payments on bonds or similar obligations of a State, Territory, or any political subdivision thereof, or the District of Columbia; or securities issued under the provisions of the Federal Farm Loan Act, or under the provisions of such Act as amended; or the obligations of the United States or its possessions. See section 213 (b) of the statute and articles 74–85. Ownership certificates are not required to be filed in connection with interest payments on bonds or similar obligations issued by an individual or a partnership whether or not such obligations contain a tax-free covenant clause. Ownership certificates need not be filed by a nonresident alien individual or fiduciary, a partnership not

engaged in trade or business within the United States and not having any office or place of business therein, composed in whole or in part of nonresident aliens, or a foreign corporation not engaged in trade or business within the United States and not having any office or place of business therein, in connection with interest payments on bonds or similar obligations of a resident foreign corporation or a domestic corporation qualifying under section 217(a) (1) (B).

Where in connection with the sale of its property payment of the bonds or other obligations of a corporation is assumed by the assignee, such assignee, whether an individual, partnership, corporation, or a State or political subdivision thereof, must deduct and withhold such taxes as would have been required to be withheld by the assignor had no such sale and transfer been made. Where the payment of interest and principal of the bonds issued by an individual or partnership is assumed by a corporation, the character of the bond obligation remains unchanged and as created, notwithstanding the corporation has assumed the payment of the interest and may ultimately pay off the mortgage. As to ownership certificates in the case of bonds of foreign countries or bonds of nonresident foreign corporations, see article 1077.

ART. 366. Form of certificate where withholding required.-For the purposes of article 365, Form 1000 shall be used (a) by citizens or residents of the United States when no personal exemption or credit is claimed against interest on bonds containing a tax-free covenant, and by resident partnerships owning such bonds; (b) by nonresident alien individuals, by partnerships composed in whole or in part of nonresident aliens, not engaged in trade or business within the United States and not having an office or place of business therein, and by foreign corporations not engaged in trade or business within the United States and not having any office or place of business therein, whether or not such bonds contain a tax-free covenant; and (c) where the owner is unknown to the withholding agent whether or not the bonds contain a tax-free covenant.

ART. 367. Form of certificate where no withholding required.-For the purposes of article 365, Form 1001 shall be used by citizens or residents of the United States when personal exemption is claimed against interest on bonds containing a tax-free covenant clause. In case a citizen or resident alien individual receives interest on bonds containing a tax-free covenant clause in excess of the amount of personal exemption which the individual may claim, any such excess must be reported on Form 1000. A citizen or a resident alien individual or a resident partnership is not required to file an ownership certificate in connection with interest on bonds or similar obligations not containing a tax-free covenant clause.