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Hi I am a Thailand based IT services company. I recently

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Hi I am a Thailand based...
Hi

I am a Thailand based IT services company. I recently bid on a US company's project and own the deal. It is worth USD $30K ($24K software development + $6K travel, ODC).

We have no US branches and do not perform work in the US.

The company sent me a W-8BEN form and told me to fill that in. Is this leading to a 30% withholding? If I pay dual taxes, 30% each county, I will will land up paying 60% in taxes and only get 40%.

a) What options do I have?
b) Are there an tax treaties that will help me? How much?


Appreciate any help and guidance you may have for us. If not, I might have to cancel this project since paying 60% is just not worth it.

Thanks,

Nicky
Submitted: 4 years ago.Category: Tax
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Answered in 16 minutes by:
12/2/2012
Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question. As you are not a US company and are not performing work inside the US, you will not owe tax to the US. You should not have to fill out the form W-8BEN as your income is not beneficial to the United States. This form is not required unless you have ownership in a US Corporation or perform work inside the US.

You need to tell the company that you are not required to fill out the form, as you have no liability to the United States.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

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Customer reply replied 4 years ago

Hi,


 


I just got a response saying that they still need all of their non US vendors to fill a w8BEN regardless. I am guessing they mean they will not withhold any money, which is good.


 


If you don't mind please let me know what I should fill in for question in Part I.3, Part II and Part III. There are just 3 questions that are very cryptic to me.


 


http://www.irs.gov/pub/irs-pdf/fw8ben.pdf


 


Thanks very much.


 


Nicky.

Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
We cannot assist in the preparation of any tax forms, as we can only give you general information. That is against the terms of this site.

Thank you again for using JustAnswer.com

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

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Customer reply replied 4 years ago

I'm sorry, I didn't realize that. Since I don't understand much of the US IRS laws, I was very concerned.


 


You had mentioned that "This form is not required unless you have ownership in a US Corporation or perform work inside the US". Could I just tell them that and tell them hence I I don't need to fill that form.


 


 


Appreciate your guidance.


 


Nicky.

Tax Professional: Megan C, Certified Public Accountant (CPA) replied 4 years ago
Nicky,

Yes, you can tell them that you have no tax liability to the United States, and therefore filling out the form is not required.

Im afraid that if you fill out the form, they will withhold the 30% from your check. You would get that money back, but you would have to file US tax returns, which is an unnecessary burden.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,875
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

Hello I am a different expert her on Just Answer,

All existing foreign vendors should be required to submit the applicable Forms
W-8 as soon as possible. If a valid W-8 is not received, the Treasury Regulations contain presumption rules for withholding agents to apply in determining the status of payees for withholding purpose. (See FAQ section 5 regarding documentation requires and Treas. Reg. Sec. 1.1441-1(b) (3) concerning the presumption rules).

This means that if you do not give them the W8 then they are required to withhold.

Form W-8BEN should be used by the foreign vendor to certify that it has non-U.S. status. If a treaty claim is made by the vendor Part II of the W-8BEN must be completed to be eligible for the treaty benefits. If there is no treaty article to claim and you are just certifying that yo are non US resident then you do not need to complete the Part II.

 

In short you will not be having withholding if you fill out the W8 but they will withhold if you do not because they have to stay within the rules for them when they pay you. Filling out the form by you is the payer's proof that they did not have to withhold.

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Customer reply replied 4 years ago

Thank you. This sounds more in line with what I am have been reading. Thank you, will keep you posted in a day on what the client says.


 


 

Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 years ago

Thank you for getting back to me. It should be in keeping with what you have been reading because I believe you and I were both able to comprehend the purpose of the W8.

If you wish to wait and rate my assistance till you speak with the client that is fine. If you could look for Robin D when you rate I would appreciate it.

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Robin D.
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,875
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