FAQ's

 

 

 

 

 

 

 

 

 

 

 

A: For Fixed or Determinable annual or Periodic (FDAP) income paid to a foreign person to be subject to NRA reporting and withholding, the payment must be U.S. sourced. Following are some basic rules for sourcing of certain types of FDAP payments by withholding agents and multi-nationals:

 

1- Interest – If the debtor is a U.S. resident, the interest is generally U.S. sourced.

 

2- Royalties – If the subject property is used in the U.S., the royalty payment is U.S. sourced. Payments made in connection with the sale of certain intangible assets, including copyrights and patents, are generally sourced similar to royalties when the payments are contingent on the productivity, use or disposition of the intangible See I.R.C. Sec. 865(d).

 

3- Rents – If the rental property is located in the U.S., the rental payment is U.S. sourced.

 

4- Personal Services – If the services are performed in the U.S., the payment for those services is generally U.S. sourced. The Internal Revenue Code sourcing rules are contained in Sections 861 through 865. Income tax treaties can sometimes modify these rules.

 

 

 

Q: Please define FDAP income and include some specific examples.

 

A: In general, in order for a payment to be subject to NRA withholding, it must be a payment of FDAP income. FDAP is an acronym for Fixed or Determinable, Annual or Periodic. Some of the more common expenses paid by US withholding agents which would result in FDAP income to their vendors and other service providers are interest, royalties, compensation for personal services, rents, pensions or annuities and gains from the sale or exchange of the patents, copyrights and similar intangibles.

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A: The verification email is sent out immediately and should be in your email account very soon. Delay can be caused by a few factors such as your internet connection, email service delay or possibly your spam filter. If you have not received your email token within a few minutes you should first check your span folder as it may have been automatically captured there.

Q: “I just filled out a W8 and sent, do I need to send again? Must I do it on your website?”

 

A: If you have recently sent in a paper form you can still use this service and send in an electronic form. We provide guidance and help through the submission process and where a paper form could not be validated the new e-form could supersede the paper form, potentially reducing the need for a follow up call.

Q “We received the letter, who should fill out and sign?”

 

A: The certificate must be signed and dated by the beneficial owner, or, if the beneficial owner is not an individual, by an authorized representative or officer of the beneficial owner. If the certificate is completed by an agent acting under a duly authorized power of attorney, the certificate must be accompanied by the power of attorney statement, which can be attached through the process. Please note the submission, whether paper or electronic, is made under penalties of perjury. The agent, as well as the beneficial owner may incur liability for the penalties provided for an erroneous, false, or fraudulent form.

 

A: Domestic Vendors: All domestic (US) vendors are required to provide a valid Form W-9 in order to do business with BP. The W-9 is required regardless of whether or not the payment to the vendor is considered reportable on a Form 1099. The W-9 states the vendor’s organization type, primary business address, US taxpayer ID number and the full and correct name that corresponds to the taxpayer identification number. The submitted Form W-9 must be signed by a duly authorized representative of the vendor.

 

Foreign Vendors (non-US): The US Internal Revenue Code and Treasury regulations require that a mandatory 30% income tax withholding is made on payments made to foreign vendors who provide services in the US. This may not apply if the income from providing such service is exempt under a provision of a tax treaty between the foreign vendor's country of residence and the US. To avoid US tax withholding liabilities, foreign vendors that are business entities must have a US Employer Identification Number (EIN) and must submit a valid certificate, Form type W-8BEN, W-8ECI, W-8EXP, or W-8IMY normally prior to receiving payment for such services.

 

If a foreign vendor performs services in the US and does not provide the proper certification, the recipient of the services or product is obligated by the IRS to withhold the appropriate taxes at source and report those taxes annually on IRS Form 1042-S (Foreign Person's US Source Income Subject to Withholding).

 

Annual 1042-S reporting is required regardless of whether or not US tax withholding is required. A copy of the Form 1042-S will be sent to the foreign vendor at the same time the form is filed with the IRS.

 

1. Foreign Vendors - Payment for Services Provided in the US: All foreign vendors receiving payments for services performed in the US are required to submit an IRS certificate, Form W-8 (the types include W-8BEN, W-8ECI, W-8EXP, W-8IMY). If the US does not have a current tax treaty with the foreign vendor's country of residence that exempts or reduces the rate of US federal income tax withholding on such payments, or if Form W-8 does not contain a valid US taxpayer ID and has therefore not been correctly completed before payment is processed, 30% of the total payment to the foreign vendor will be automatically withheld by BP. This liability is then sent to the IRS on the vendor’s behalf.

 

A list of existing tax treaties between the US and other countries can be found in IRS Publications which are available online at ww.irs.gov.

 

If the requirement is for purchase of tangible personal property, and if associated support services are included in the purchase of this property, those services must be identified and valued separately and are subject to the same obligation where treaty benefits should be claimed and the certificate should contain a valid US taxpayer ID (TIN). An example of an applicable service might include the purchase of equipment for use in the US where the vendor's personnel assist with installation at one of our US locations.

 

In order to be valid for tax treaty exemption, the Form W-8 may require a US taxpayer identification number. Instructions and links for obtaining a U.S. taxpayer ID are available through the submission process.

 

2. Services Provided Outside the US or Payment for Purchase of Tangible Personal Property For foreign vendors providing services or goods to BP outside of the US, the certificate must still be completed, however, no treaty benefits need to be claimed and there is no need for a US taxpayer ID.

 

BP requests that every foreign vendor fill out a valid certificate to confirm that:

 

1. They are a foreign vendor and not subject to US tax reporting and/or backup withholding, and that

2. BP has undertaken its obligation to the IRS and conducted the necessary step of confirming foreign or domestic status of the vendor.

 

Submitted certificates are stored in our internal files and provide us with ability to apply the correct US taxes due and a record that we met the requirements of US tax law by verifying the foreign status of the company.

Q: Can I send in my certificate by fax or email? We cannot accept faxed or e-mail copies of the IRS Form W-8BEN, W-8ECI, W-8EXP or W-8IMY.

 

A: IRS regulations stipulate we must have the signed original, this includes an original electronically signed form for our records.