FAQ's

 
Frequently Asked Questions
 
 
General Questions
 
 
 
 
 
Q: What is US sourced income?
 
A: For Fixed or Determinable annual or Periodic (FDAP) income paid to a foreign person to be subject to Non-Resident Alien (NRA) reporting and withholding, the payment must be US sourced. Following are some basic rules for sourcing of certain types of FDAP payments by withholding agents and multi-nationals:
 
1- Interest – If the debtor is a US resident, the interest is generally US sourced.
 
2- Royalties – If the subject property is used in the US, the royalty payment is US sourced. Payments made in connection with the sale of certain intangible assets, including copyrights and patents, are generally sourced similar to royalties when the payments are contingent on the productivity, use or disposition of the intangible See I.R.C. Sec. 865(d).
 
3- Rents – If the rental property is located in the US, the rental payment is US sourced.
 
4- Personal Services – If the services are performed in the US, the payment for those services is generally US sourced. The Internal Revenue Code sourcing rules are contained in Sections 861 through 865. Income tax treaties can sometimes modify these rules.
 
 
Q: Please define FDAP income and include some specific examples.
 
A: In general, in order for a payment to be subject to NRA withholding, it must be a payment of FDAP income. FDAP is an acronym for Fixed or Determinable, Annual or Periodic. Some of the more common expenses paid by US withholding agents which would result in FDAP income to their vendors and other service providers are interest, royalties, compensation for personal services, rents, pensions or annuities and gains from the sale or exchange of the patents, copyrights and similar intangibles.
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Q: I have been waiting for the e-mail confirmation to electronically sign in the website, how long does it take?
 
A: The signatory verification email is sent out immediately and should be in your email account very soon. Delay can be caused by a few factors such as your internet connection, email service delay or possibly your spam filter. If you have not received your email token within a few minutes you should first check your spam or junk email folder as it may have been automatically captured there. For security reasons the submission token is time dependent and you may need to complete a new submission if you exceed the time limit.
 
 
Q: I just filled out a W8 and sent, do I need to send again? Must I do it on your website?
 
A: If you have recently sent in a paper form you can still use this service and send in an electronic form. We provide guidance and help through the submission process and where a paper form could not be validated the new e-form could supersede the paper form, potentially reducing the need for a follow up call.
 
 
Q: We received the letter, who should fill out and sign?
 
A: The certificate must be signed and dated by the beneficial owner, or, if the beneficial owner is not an individual, by an authorized representative or officer of the beneficial owner. If the certificate is completed by an agent acting under a duly authorized power of attorney, the certificate must be accompanied by the power of attorney statement, which can be attached through the process. Please note the submission, whether paper or electronic, is made under penalties of perjury. The agent, as well as the beneficial owner may incur liability for the penalties provided for an erroneous, false, or fraudulent form.
 
 
Q: Why have we asked you to provide a valid certificate?
 
A: Domestic US Vendors, (US individuals , US businesses or US organizations): All domestic vendors are required to provide a valid Form W-9 in order to do business with us. The W-9 is required regardless of whether or not the payment to the vendor is considered reportable on a Form 1099. The W-9 states the vendor’s organization type, primary business address, U.S. taxpayer ID number and the full and correct name that corresponds to the taxpayer identification number. The submitted Form W-9 must be signed by a duly authorized representative of the vendor.
 
Foreign Vendors (non-US individuals, non-U.S. businesses or non-organizations): The US Internal Revenue Code and Treasury regulations require that a mandatory 30% income tax withholding is made on payments made to foreign vendors who provide certain services in the US. This may not apply if the income from providing such service is exempt under a provision of a tax treaty between the foreign vendor's country of residence and the US. To avoid US tax withholding liabilities, foreign vendors that are business entities and claiming treaty benefits must have a US Employer Identification Number (EIN) and must submit a valid certificate, Form type W-8BEN, W-8ECI, W-8EXP, or W-8IMY normally prior to receiving payment for such services.
 
If a foreign vendor performs services in the US and does not provide the proper certification, the recipient of the services or product is obligated by the IRS to withhold the appropriate taxes at source and report those taxes annually on IRS Form 1042-S (Foreign Person's US Source Income Subject to Withholding).
 
Annual 1042-S reporting is required regardless of whether or not U.S. tax withholding is required. A copy of the Form 1042-S will be sent to the foreign vendor at the same time the form is filed with the IRS.
 
 
1. Foreign Vendors - Payment for Services Provided in the U.S.: All foreign vendors receiving payments for services performed in the U.S. are required to submit an IRS certificate, Form W-8 (the types include W-8BEN, W-8ECI, W-8EXP, W-8IMY). If the U.S. does not have a current tax treaty with the foreign vendor's country of residence that exempts or reduces the rate of U..S federal income tax withholding on such payments, or if Form W-8 does not contain a valid US taxpayer ID and has therefore not been correctly completed before payment is processed, 30% of the total payment to the foreign vendor will be automatically withheld by us. This liability is then sent to the IRS on the vendor’s behalf.
 
A list of existing tax treaties between the U.S. and other countries can be found in IRS Publications which are available online at ww.irs.gov.
 
If the requirement is for purchase of tangible personal property, and if associated support services are included in the purchase of this property, those services must be identified and valued separately and are subject to the same obligation where treaty benefits should be claimed and the certificate should contain a valid US taxpayer ID (TIN). An example of an applicable service might include the purchase of equipment for use in the U.S. where the vendor's personnel assist with installation at one of our U.S. locations.
 
In order to be valid for tax treaty exemption, the Form W-8 may require a U.S. taxpayer identification number. Instructions and links for obtaining a U.S. taxpayer ID are available through the submission process.
 
 
2. Services Provided Outside the US or Payment for Purchase of Tangible Personal Property (Goods and Materials): For foreign vendors providing services or goods to us from outside of the U.S., the certificate must still be completed, however, no treaty benefits need to be claimed and there is no need for a US taxpayer ID.
 
We requests that every foreign vendor fill out a valid certificate to confirm that:
 
1. They are a foreign vendor and not subject to U.S. tax reporting and/or backup withholding, and that
2. We have undertaken its obligation to the IRS and conducted the necessary step of confirming foreign or domestic status of the vendor.
 
Submitted certificates are stored in our internal files and provide us with ability to apply the correct U.S. taxes due and a record that we met the requirements of U.S. tax law by verifying the foreign status of the company.
 
 
Q: Which form should I submit?
 
A: We appreciate that the process for selecting the correct form for submission is complex, and to try and help guide you through we have created this application. The online e-forms application helps you determine the correct form to submit by comparing the answers you provide to the questions raised, against the type of submission you make. We are not permitted under the IRS regulations to offer tax advice on this choice. BUT, generally:
 
Form W-8BEN is normally used by non-U.S. Persons (non-U.S. individuals, non-U.S. businesses and non-U.S. organizations) who are the beneficial owners of any income that is received or becomes payable. The form is used to identify you as a non-U.S. person and may be used to claim treaty benefits if they apply, reducing or eliminating U.S. tax requirements. A Form W-8BEN is not normally used by individuals claiming treaty benefits for Personal Services, for this you would normally submit a Form 8233 available from the IRS web site directly.
 
Form W-8ECI is normally used by non-U.S. persons (non-U.S. individuals, non-U.S. businesses and non-U.S. organizations) claiming that the income being received is (or is deemed to be) Effectively Connected with the conduct of a trade or business in the U.S. You would normally have a business address in the U.S., which must be entered on the Form.
 
If you expect to receive both income that IS effectively connected and income that is NOT effectively you may need to submit both Forms W-8ECI and either the W-8BEN or potentially Forms W-8IMY or W-8EXP.
 
Form W-9 is used by all U.S. Persons (individuals, business or organizations) to provide the correct tax payer identifier to the payer and if applicable to certify that you are not subject to U.S. back up withholding.
 
Form W-8IMY is normally used by non-U.S. partnerships.
 
Form W-8EXP is normally used by non-U.S. governments, international organizations and non-U.S. tax exempt organizations (amongst others) and should be submitted whether or not you are claiming a reduced rate of, or exemption from U.S. tax withholding.
 
 
Q: Why is this process so complex?
 
A: The process we have adopted is taken from the IRS guidelines on obtaining Forms W-8 and W-9 electronically; unfortunately determining tax status under U.S. tax laws is very complex. We have tried to design this application to simplify the process, putting the required information in one place. The objective is to provide as much guidance as allowed and take you through the process as swiftly as possible completing the correct certification accurately first time. We are restricted by the regulations and limited to how much advice and guidance we can provide to you. Completing your certification submission through this process, we believe, is the most efficient way to confirm your U.S. tax status, enabling us to apply the correct tax treaty benefits. Please note that this application is not meant as an alternative to obtaining your own tax advice.
 
 
Q: Can I send in my certificate by fax or email?
 
A: Unfortunately we cannot accept faxed or e-mail copies of the IRS Forms W-8BEN, W-8ECI, W-8EXP or W-8IMY. IRS regulations stipulate we must have either the signed original or an electronically signed form for our records.