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TaxRobin
TaxRobin, Senior Tax Advisor
Category: Canada Tax
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Experience:  More than 20 years tax expertise
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It is about a Canadian vendor who refused to file a W8, We

Customer Question

it is about a Canadian vendor who refused to file a W8, We can't pay this vendor, are they right to say they are not obligated to send us this form?
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: Form W8 or W9?
JA: Is there anything else important you think the Accountant should know?
Customer: Are we violating IRS FACTA if we don't require vendors to fill out Form W8?
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 5 months ago.
Category: Canada Tax
Expert:  TaxRobin replied 5 months ago.

Hello

You are required to have a W8 form on file for each providing the payment is within the rules.

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 that are described in I.R.C. Sec. 865(d).

If the services are performed in the U.S., the payment for those services is generally U.S. sourced. If it is outside the US then it is not US sourced and would not really be subject to withholding.

If the foreign vendor does not comply with the W8 form then you are to withhold tax. They can then file to have the tax withheld.

Remind the vendor that this form is just to show they are not subject to US tax.

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