US Withholding Tax
General Withholding
Payments of US income to foreign persons may be subject to a withholding tax in the United States. Any person making such payment is a withholding agent. Withholding agents are personally liable for any tax, penalties and interest.
When it comes to who is required to withhold, how much, when and on what form, the US system is far from being simple. A general withholding tax of 30% on gross amounts applies to numerous items of income with multiple exceptions. Many income types, like wages and distributive share of partnership income have their own withholding requirements. Tax treaties may reduce partially or entirely the withholding.
Tax-Lynx can help your organization navigate this complexity and:
- Assist payees to obtain a US tax identification number, Form W-7,
- Prepare federal Forms 1042 and 1042-S, including for partnership withholding and waivers of withholding,
- Help your organization complete forms W-8BEN, W-8BEN-E, W-8ECI, W-8 EXP and W-8IMY,
- Identify and claim treaty positions.
FATCA Withholding
A second layer of requirements from the Foreign Account Tax Compliance Act (FATCA) imposes a withholding on income that would be otherwise exempt under the general withholding regime.
Furthermore, foreign persons that are not beneficial owners may assume withholding responsibility through an agreement with the IRS.
Tax Lynx can help your organization identify when a FATCA withholding is required and how to proceed.