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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2967
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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How to obtain refund withholding tax ouside of USA?

Customer Question

How to obtain refund for USA withholding tax for company ouside of USA? According to IRS publication 515, 0 to 30% withholding tax applies for sales to USA to other countries. Our company has only a presence in country C and no presence in USA. Goods manufactured by us are exported to USA. Assuming that USA withholding tax applies and is deducted by US purchaser, how is this withholding tax refunded for these two cases:
A) there is a double taxation treaty in place for the case C=Australia (withholding for royalties is 30%).
B) there is NO double taxation treaty in place and according to IRS publication 515 a withholding tax of 30% applies (C=other countries).
Questions:
1.) For these two cases A + B, will IRS refund this withholding tax and what amount?
2.) What is the procedure and forms required for this refund as we have no presence in USA nor a US tax id.
2.1) Do we need to register a US tax id to obtain this refund?
2.2) Is this tax id required to be listed on W-8BENE given to the US wihholding agent? Can this be refunded "for past transactions" without this tax-id being linked to W8-BENE or only for those transactions where this tax id has been specified?
3.) Is it correct that this is a US federal tax regulation and hence the US state of purchaser is irrelevant?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
Let me correct above. US withholding tax for Australia royalties are 5% and not 30% as stated before.
Expert:  Barbara replied 1 year ago.

Welcome to Just Answer. My name is ***** ***** I will be happy to assist you today.

Foreign companies can make a claim for a refund of taxes withheld in the U.S. by filing Form 1120F whether or not there is a tax treaty in place between the U.S. and the foreign country. There is a tax treaty in place between the U.S. and Australia. A foreign corporation must have an EIN (U.S. tax ID) to file Form 1120F.

The following link contains excellent information regarding Form 1120F:

http://www.irs.gov/uac/Form-1120-F,-U.S.-Income-Tax-Return-of-a-Foreign-Corporation

A foreign entity should provide Form W-8BEN-E to the U.S. company advising that it is a foreign entity and the tax treaty that applies in order to avoid the mandatory 30% U.S. withholding amount. The U.S. company keeps the W-8BEN-E in its files. An EIN is not required on Form W-8BEN-E.

http://smallbusiness.chron.com/international-corporations-need-tax-identification-number-60026.html

http://www.irs.gov/uac/About-Form-W-8BEN-E

Lastly, you are correct that the above pertains to U.S. federal tax regulations and the U.S. state of the purchaser is irrelevant.

I realize this is a lot of information, but please feel free to come back to me at your convenience if you have any other questions or concerns.

Thank you and best regards,

Barb