Generally, you must withhold 30 percent from the gross amount paid to a foreign payee unless you can reliably associate the payment with valid documentation that establishes either of the following.
- The payee is a U.S. person
- The payee is a foreign person that is the beneficial owner of the income and is entitled to a reduced rate of withholding.
Generally, you must obtain the documentation before you make the payment. The documentation is not valid if you know, or have reason to know, that it is unreliable or incorrect. See Standards of Knowledge .
If you cannot reliably associate a payment with valid documentation, you must use the presumption rules . For example, if you do not have documentation or you cannot determine the portion of a payment that is allocable to specific documentation, you must use the presumption rules.
Joint Owner
If you make a payment to joint owners, you need to get documentation from each owner.
Form W-9
Generally, you can treat the payee as a U.S. person if the payee gives you a Form W-9(PDF). The Form W-9 can only be used by a U.S. person and must contain the payee's Taxpayer Identification Number (TIN). If there is more than one owner, you may treat the total amount as paid to a U.S. person if any one of the owners gives you a Form W-9. U.S. persons are not subject to NRA withholding, but may be subject to Form 1099 reporting and backup withholding.
Form W-8
Generally, a foreign person that is a beneficial owner of the income should give you a Form W-8.
There are four forms in the W-8 series. The old Form "W-8, Certificate of Foreign Status" is not valid. The form to use depends on the type of certification being made. As used in this discussion, the term Form W-8 refers to the appropriate document.
Until further notice, you can rely upon Forms W-8 that contain a P.O. box as a permanent residence address provided you do not know, or have reason to know, that the person providing the form is a U.S. person or that a street address is available. You may rely on Forms W-8 for which there is a U.S. mailing address provided you received the form prior to December 31, 2001.
If certain requirements are met, the foreign person can give you documentary evidence, rather than a Form W-8. You can rely on documentary evidence in lieu of a Form W-8 for a payment made in a U.S. possession.
Other Documentation
Other documentation may be required to claim an exemption from, or a reduced rate of, withholding on pay for personal services. The nonresident alien individual may have to give you a Form W-4, Employee's Withholding Allowance Certificate (PDF) or a Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual (PDF). These forms are discussed in Pay for Personal Services Performed.
Special rules apply to Foreign Beneficial Owners .
References/Related Topics
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