The first task for employers is to determine which foreign national employees are resident aliens (who are taxed like U.S. citizens) and which are nonresident aliens (who are taxed under special rules). Resident aliens include foreign national employees who are green-card holders and nonimmigrants (and illegal aliens) who are substantially ...
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Paying Foreign Employees Part 1
ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on May 15, 2012
At one time, only major multinational corporations and institutions of higher education had to concern themselves with the special tax rules and procedures for paying foreign employees. That time is long gone. Even small and medium-sized companies pay foreign nationals for services both in the U.S. and abroad. In the new IRS initiatives, ...
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Ten Rules of Paying Foreign Nationals
ONESOURCE, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on May 11, 2012
Paying compensation for services to foreign nationals is difficult because of the complexity of the U.S. tax laws and tax treaty provisions and procedures. The ten rules below provide a framework of information to consider when paying foreign nationals for services. Rule #1: All compensation for services performed in the U.S. ...
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U.S. or Foreign Person Part 4: Individuals and Entities in U.S. Possessions
ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on May 9, 2012
Determining the proper withholding and reporting on income paid to individuals or entities in U.S. possessions or territories can be confusing. In addition to the rules for determining U.S. or foreign person, there are special rules that might apply for withholding and reporting purposes. Individuals who were born in Puerto Rico, Guam ...
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U.S. or Foreign Person Part 3: Foreign Person
1099, ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on May 7, 2012
Individuals who are foreign persons include all non-U.S. citizens who are neither green-card holders nor meet the 183-day substantial presence test (called nonresident aliens). Nonresident aliens also include individuals who meet the 183-day substantial presence test for the calendar year but who are also residents of a tax treaty country (called ...
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U.S or Foreign Person Part 2: U.S. Person
1099, ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on May 3, 2012
Individuals who are U.S. persons include U.S. citizens and non-U.S. citizens who are resident aliens for U.S. federal tax purposes. U.S. citizens and resident aliens are subject to withholding and reporting on their worldwide income even when they live and work outside the U.S. U.S. citizens include: Individuals born in the U.S. Individuals born ...
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U.S or Foreign Person Part 1
1099, ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on May 1, 2012
In order for payers (called withholding agents because of their obligation to withhold taxes) to withhold and report income payments appropriately, they must determine whether the beneficial owner of the income is a U.S. person or a foreign person. The broad definition for the term, withholding agent, includes anyone who ...
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Residency for Tax Treaty Purposes for Individuals Part 4: The Tax Expatriation Rule
1099, ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on April 27, 2012
Tax code Sections 877 and 877A (the exit tax) impose special provisions on certain U.S. citizens who terminate their citizenship and long-term green-card holders who lose their status through abandonment (whether or not intentional) or revocation provided they meet certain criteria. As a result, most tax treaties include provisions limiting the eligibility ...
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Residency for Tax Treaty Purposes for Individuals Part 3: The Savings Clause Exception
1099, ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on April 25, 2012
Because the United States imposes worldwide taxation on its citizens and immigrants (popularly called green-card holders), all U.S. tax treaties include a provision commonly referred to as a savings clause because it saves the right of the U.S. to tax its citizens and residents wherever they reside in the world. For ...
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Residency for Tax Treaty Purposes for Individuals Part 2: Eligibility for Treaty Benefits
1099, ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on April 23, 2012
Eligibility for tax treaty benefits in the first instance is based on an individual's tax residency status (not citizenship) in the treaty country. The timing of tax residency in the treaty country varies with the treaty article providing the benefit. Most treaty benefits require an individual to be a tax resident of ...
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Residency for Treaty Purposes for Individuals – Part 1
ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on April 19, 2012
The United States has income tax treaties with over 60 countries for the primary purpose of avoiding double taxation. Double taxation occurs when an individual’s country of residence (or citizenship, in the case of U.S. citizens) taxes an individual on worldwide income and the country where income is derived also ...
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Services-Related Permanent Establishments
ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting 0 CommentPosted on April 17, 2012
A foreign business enterprise without a fixed place of business in the U.S. may nevertheless have a U.S. permanent establishment (PE) based on services provided in the U.S. on its behalf. This can occur in one of two ways: 1) the sales activities for the foreign enterprise are carried on ...
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Treaty Exemptions for Business Profits – Part 5: A Fixed Place of Business
1099, ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting, Withholding Management 0 CommentPosted on April 4, 2012
In order for an enterprise to have a fixed place of business, the place of business must be a building or physical location. The premises need not be owned or leased by the enterprise nor used exclusively by the enterprise. It is enough that the space is at the constant ...
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Treaty Exemptions for Business Profits – Part 4: Permanent Establishment
ONESOURCE, Tax Information Reporting, W-8 & W-9 Foreign Reporting 0 CommentPosted on March 29, 2012
The definition of a permanent establishment may be found in the Permanent Establishment Article (typically article 5) of the applicable treaty. An enterprise has a permanent establishment if it has “a fixed place of business through which the enterprise carries on its business in whole or in part.” It may ...
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