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IRS Announces Tax Treaties Resulted in Low Withholding Rates to Foreign Individuals and Entities

Posted on May 9th, 2017 | Author: Naya K. Pearlman

In the 2017 Statistics of Income Bulletin, the IRS reported that foreign recipients of U.S. source income from treaty countries had an average withholding rate of 13.9% compared to 25.6% for payments made to residents of non-treaty countries.   Absent certain exceptions and/or exemptions, a foreign person, including a foreign entity, is generally subject to tax at a flat 30% rate on U.S. source fixed, determinable, annual or periodical income; and subject to tax at progressive rates on income derived from a U.S. trade or business.  Treaties can apply to reduce withholding rates as well as taxes.  This is yet another reminder why it’s important to work with your U.S. tax counsel to take advantage of treaty-based benefits that may be available when properly planned, reported and disclosed.

If you have any questions about this post, please contact me at nkpearlman@nmmlaw.com.

The opinions expressed here are based on the laws as of the date written.  The laws are subject to change, and if they did, the statements expressed would be subject to change.

DISCLAIMER:  To ensure compliance with requirements imposed by the U.S. Treasury Regulations, we inform you that any tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Code or (ii) promoting, marketing or recommending to another party an transaction or matter addressed herein.