Casa Vinicola Zonnin SpA, an Italian corporation, is engaged in the production o

Question

Casa Vinicola Zonnin SpA, an Italian corporation, is engaged in the production of wine in Italy. Zonnin maintains a branch in the US which acts as importer and distributor of the wine it manufactures in Italy. The branch in the US is required to hold a large current cash balance for business purposes, but the amount of the cash balance so required varies because of the fluctuating seasonal nature of the branch's business. During 2014 at a time when large cash balances are not required the branch invests the surplus amount in US Treasury bills. Is there withholding on the interest?

Explanation / Answer

US treasury bills interest are liable to withholding on the interest. Even if Casa Vinicola Zonnin SpA is an italian corporation and it has its subsidiary in US, the interest income earned in US on the US treasury bills are subject to withholding.

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