IRS written determination 201519003

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201519003
Release Date: 5/8/2015
Index Number: 9114.01-12
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:INTL:B01
PLR-127535-14
Date:
January 12, 2015
Legend
Taxpayer=---------------------------------------------------------------------------------------------
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Country X=-------------
Dear ------------------:
This responds to a letter from your representative dated July 15, 2014,
requesting a ruling concerning the treatment of royalties under the royalties article of the
United States-Country X income tax treaty (the “Treaty”).
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Taxpayer is a Country X corporation in the television broadcasting business and
owns television channels that are broadcast from Country X via satellite. Taxpayer
licenses access to the channels and their use to its wholly owned U.S. subsidiary. The
U.S. subsidiary entered into a non-exclusive agreement with an unrelated U.S.
distributor to show the channels on the distributor’s platform in the United States. The
U.S. subsidiary will receive fees from the distributor based on subscriptions. The U.S.
subsidiary will then pay a royalty to Taxpayer for the broadcasting of the channels.

PLR-127535-14
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Taxpayer represents that it neither engages in trade or business in the United
States through a permanent establishment, nor carries on business in the United States
through an employee or agent with general authority to contract on its behalf.
RULING REQUESTED
Taxpayer will not receive royalties within the meaning of “royalties or rentals from
motion picture films” and will receive a full exemption from tax under the royalties article
of the Treaty.
LAW AND ANALYSIS
Section 881(a)(1) of the Internal Revenue Code imposes a tax of 30 percent of
the amount received from sources within the United States by a foreign corporation on
fixed or determinable annual or periodic gains, profits, and income. Section 1.1441-
2(b)(1) of the Income Tax Regulationsprovides that royalties are included in fixed or
determinable annual or periodical income.
Section 894(a), however, provides that income of any kind, to the extent required
by a treaty obligation of the United States, shall not be included in gross income and
shall be exempt from taxation under subtitle A of the Code.
The royalties article of the Treaty exempts from U.S. income tax all royalties
except “royalties or rentals from motion picture films.”
The royalties at issue are paid by U.S. distributors for Country X television
programming, and not for the distribution of motion picture films.
CONCLUSION
Based on the foregoing, we rule that royalties paid to Taxpayer for the
broadcasting of television channels are exempt from U.S. income tax under the royalties
article of the Treaty.
Except as expressly provided herein, no opinion is expressed or implied
concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.
This ruling is directedonly to the taxpayer requesting it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

PLR-127535-14
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In accordance with the Power of Attorney on file with this office, a copy of this
letter is being sent to your authorized representative.
Sincerely,
_________________
Elizabeth U. Karzon
Chief, Branch 1
Office of Associate Chief
Counsel (International)