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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Must taxes be withheld from funds collected in the U.S. for

Resolved Question:

Must taxes be withheld from funds collected in the U.S. for a foreign-based corporation where the funds are from the foreign company's sales from abroad to companies in the U.S.?
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello Tax,

If you are collecting money on behalf of a foreign corporation, then before forwarding that money to the foreign corporation you must withhold 30% for federal taxes.

If the foreign corporation provides you with a signed Form W-8BEN, then you may withhold a lower amount of tax, only if they are claiming tax relief under a tax treaty that their country has with the US.

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Thank you.

Customer: replied 8 years ago.
This is the case even though the corporation is located overseas and not in the U.S.?
Expert:  Merlo replied 8 years ago.
Hello again Tax,

Are you collecting funds on behalf of this company and then forwarding them to the foreign location?

Customer: replied 8 years ago.
Yes to your last question above.
Expert:  Merlo replied 8 years ago.
Hello again Tax Novice,

If you are making payments to a foreign person or a foreign corporation, then you are required by law to withhold federal tax at a rate of 30%.

If you have a signed W-8BEN form, the tax withholding rate may be lower, based on whether or not a tax treaty exists between the US and foreign country.

Please refer to the following IRS publication regarding withholding requirements on foreign payments.

http://www.irs.gov/publications/p515/ar02.html#d0e441

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