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Foreign Entity doing business with US company may be subject…

Hi Foreign Entity doing business with...
Hi
Foreign Entity doing business with US company may be subject to 30% withholding tax by IRS. The foreign entity is registered in Monaco where there is no tax treaty with USA. How can I avoid or reclaim any of the withholding?
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Answered in 4 minutes by:
11/1/2017
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,387
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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Payments for services provided outside the U. S. by Foreign Entities and individuals are considered foreign source, and are not subject to U.S. reporting or withholding. You would complete the W8 BEN E but just because there is no tax treaty does not mean you are subject to tax withholding. If you have no physical presence in the US and do not conduct business in teh US then you are not to have taxes withheld.

Your foreign status would protect you from withholding.

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Customer reply replied 9 months ago
Hi Robin
That would be great and I hope it's true, but I've seen conflicting statements online.
The services would occur in the US, but the Foreign Entity service provider is from Monaco. There is no business or bank account in the US for the Foreign Entity.

If the services are actually in the US then you would need a treaty provision that avoids or lessens the tax that is due. The US sourcing rules for income determine that if these are performed in the US then they are US sourced and as such taxable.

There need not be a bank account or physical office in the US.

You would need to actually file a US return to request refund of any tax that is withheld and more than the actual tax

liability. Where the service is provided is your main issue.

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Customer reply replied 9 months ago
I've completed the W8-BEN-E form. Could you confirm that I've done this correctly?

I will look at it........................

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Customer reply replied 9 months ago
There must be some way around this? The resourcing come from multiple countries, so then they will again be taxed. It was assumed that there would be no corporate tax, but then the individual resources would pay their respective tax obligations for their country.

Yes you have completed the form correctly and you will not be allowed to avoid the tax withheld based on the fact that the services are performed in the US.

That is generally the case UNLESS the services are actually IN the US.

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Sservices performed outside the U.S. are not considered U.S. source income. Code §861(a)(3) and Treas. Reg. §1.861-4. Treas. Reg. §1.1473-1(a)(2)(i)(B). Consequently, payments for services performed outside the United States should not be “withholdable payments.” Services in the US are not covered under tax law but TREATIES

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,387
Experience: 15years with H & R Block. Divisional leader, Instructor
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Customer reply replied 9 months ago
Thanks Robin. That's a real bummer. Adds so much overhead complexity.
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