Withholding on Specific Income


Amounts subject to reporting on Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, are amounts paid to foreign persons (including persons presumed to be foreign) that are subject to NRA Withholding, even if no amount is deducted and withheld from the payment because the income was exempt from tax under a U.S. tax treaty or the Internal Revenue Code.

There is a difference between a "withholding requirement" and a "reporting requirement" under NRA withholding.

  • A withholding requirement relates to an amount required to be deducted and withheld from the payment of income paid to a foreign person.
  • A reporting requirement involves the filing of an information return, Form 1042-S, reporting the amounts paid, withheld, and deposited.

For additional information, refer to

Effectively Connected Income

Effectively Connected Income is income that is effectively connected with the conduct of a trade or business in the United States and is not subject to NRA withholding. ECI is, however, often subject to reporting. In addition, partnerships are required to withhold on ECI allocated to foreign partners.

Not Effectively Connected Income (FDAP)

A payment is subject to NRA withholding if it is U.S. source income and it is either FDAP or certain gains. This income is also known as Not Effectively Connected Income or Non Effectively Connected Income (NECI). Refer to the Fixed, Determinable, Annual, Periodical (FDAP) Income page for more information.

Specific Types of Income

This section discusses the specific types of income that are subject to NRA withholding. The income codes contained in this section correspond to the income codes used on Form 1042-S.

You must withhold tax at the statutory rates shown below unless a reduced rate or exemption under a tax treaty applies. For U.S. source gross income that is not effectively connected with a U.S. trade or business, the rate is usually 30%. Generally, you must withhold the tax at the time you pay the income to the foreign person.

Withholding Tax Rates

Type of Income


Taxable part of U.S. scholarship or fellowship grant paid to holder of "F," "J," "M," or "Q" visa


Taxable part of U.S. scholarship or fellowship grant paid to other nonresident aliens


Gross investment income from interest, dividends, rents, and royalties paid to a foreign private foundation


Pensions paid to a nonresident alien - part paid for personal services

Graduated rates in Publication 15, Circular E, Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide

Wages paid to a nonresident alien employee

Graduated rates in Publication 51, Circular A, Agricultural Employer's Tax Guide, or Publication 15, Circular E, Employer's Tax Guide

Each foreign partner's share of effectively connected income of the partnership

37% for non-corporate partners;
21% for corporate partners

Distributions of effectively connected income to foreign partners by publicly traded partnerships

37% for non-corporate partners;
21% for corporate partners

Dispositions of U.S. real property interests

15% (10% for dispositions before February 17, 2016)*

Dispositions of Partnership Interests under Section 1446(f) 10%
Dividends paid to Puerto Rico corporation 10%

All other income payments subject to withholding


* 21% in the case of certain distributions by corporations, partnerships, trusts, or estates.

The list below includes some specific types of income. Most of these types of income are discussed in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities under the heading Withholding on Specific Income.

  • Income from Securities
  • Income Paid to U.S. Branch of a Foreign Bank or Insurance Company
  • Notional Principal Contract Income
  • Interest
  • Original issue discount
  • Dividends
  • Dividend Equivalents
  • Capital Gains
  • Royalties
  • Real Property Income and Natural Resources Royalties
  • Pensions, Annuities, Insurance Premiums, and/or Alimony
  • Scholarships and Fellowship Grants Subject to Chapter 3 Withholding
  • Other Grants, Prizes and Awards Subject to Chapter 3 Withholding
  • Pay for Personal Services Performed
  • Pay for Independent Personal Services
  • Pay for Dependent Personal Services
  • Pay for Teaching
  • Pay During Studying and Training
  • Artists and Athletes - no Central Withholding Agreement
  • Artists and Athletes - Central Withholding Agreement
  • Real Estate Investment Trust (REIT) and Other Trusts Distributions Subject to IRC section 1445
  • Unsevered Growing Crops and Timber Distributions by a Trust Subject to IRC section 1445
  • Publicly Traded Partnership Distributions Subject to IRC section 1446
  • Gambling Winnings
  • Notional Principal Contract Income
  • Substitute Payment - Other
  • Capital Gains Distributions
  • Other Income

References/Related Topics