Thanks for your quick response. So if I understand you correctly, we need to request that our Russian developer provide us with a Form W-8Ben, correct?
Secondly, with regards XXXXX XXXXX treaty, does this mean that the Russian developer won't be taxed on the income received by the IRS, but rather only by Russia? If so, I assume the burden lies on him to report this income to appropriate Russian taxing agency?
Lastly, you mention that the business will need to complete forms 1042 and 1042-s. When you say "the business" are you referring to our United States based business that has contracted with the Russian programmer or are you saying that the Russian programmer is responsible for filing out these forms? Also, what is the difference between the two forms?
Sorry, but I'm still a little confused. So the Treaty provides that the Russian developer is not subject to the 30% withholding so long as a Form W-8Ben has been timely filed, correct?
If so, then I don't understand what you mean by "What this means is that any taxes that the developer pays in the U.S. will be credited back to him/her on their Russian tax return."? How would he pay taxes on his income unless we were withholding it?
Not a problem Angela. This is all great information. I found some information online, however, that appears to conflict with your answer and I'm assuming this person's advice was just inaccurate (thus the problem of relying on non-experts). It seems she is making a distinction that the work is being done outside the U.S. so none of the reporting you mentioned applies.
Her answer was a follows (if you could briefly comment on this, I would greatly appreciate it):