Is withholding tax applicable on purchases of goods from outside the US?

Question

I run a business in the UK and I have a customer in the US who wants me to fill in a W8 form, something to do with withholding tax connected with a purchase of goods from me. I am pretty certain withholding tax is not applicable to a purchase of goods from outside the US because there is no tax to withhold (except maybe import duty and sales tax). None of my other customers in the US have asked for this. The only difference with this particular customer is that it is a US government department.

I've searched the IRS website for any exact definition of the scope of withholding tax to no avail, at least there's nothing that's written in understandable English. I have to say that wading through IRS forms and documentation makes me feel sorry for anyone who has to deal with them regularly!

Can anyone point me towards a definitive official document that says that withholding tax is applicable / not applicable on purchases of goods from outside the US?

Bash Limpbutt&#39;s Oozing Cyst© · Accepted Answer

Sadly, you're probably dealing with an idiot.  Provide him with a signed statement that you are a non-US person living outside of the US and are therefore not subject to US taxation.  

Unless you are providing intangible services or tangible goods subject to intellectual property laws (software development, artistic works, musical or literary compositions, etc.) AND you retain the intellectual property rights to your work, nothing that you are doing or providing for your customer is "effectively connected" (use that term, it has meaning) to the US and therefore a Form W8-BEN is inappropriate.

If he will not accept that, refer him to his tax advisor (a CPA or EA -- again use those terms -- not a mom & pop tax preparer) for an explanation of what "effectively connected" means under the Tax Code.

If that does not work, you'll have some decisions to make.  Either price your goods or services net of any tax withholding (30% for federal income tax, so a sale of $100 would be billed at $142.86) and then deal with the hassle of filing NR series returns for a refund OR drop the customer.  If he balks at covering the unnecessary tax, offer to rebate whatever is left once you cover the unnecessary compliance costs.

Bobbie · Answer

US government department and that would be your best place to contact and get the correct answer from some that dose work their at that time in your life.
And of course you do know about US source income RIGHT.
So just make sure that you do get it all done correctly at this time in your life.
Question 21:  How can a foreign vendor certify its foreign status?

Answer 21:  The foreign vendor must provide the withholding agent with form
a properly completed W-8 or Form 8233 (see FAQ section 5 for further information).
 
5.  How should the withholding agent properly document the foreign status or treaty claim of a foreign person

Question 22:  Must we obtain documentation from a foreign person to support its claim of foreign status or treaty eligibility?

Answer 22:  In order to reduce the amount that is required to be withheld on a payment of U.S. sourced FDAP income to a foreign person (foreign vendor), or to exempt such a payment from withholding tax, the withholding agent must have documentation from the foreign vendor to certify its non-U.S. status and, if applicable, its eligibility for the treaty benefits claimed.  Such documentation must be submitted by the foreign vendor in the form of a Form W8-IMY Form W-8 or Form 8233.

Question 23:  Which forms would be most commonly used by foreign vendors?

http://www.irs.gov/Businesses/International-Businesses/U.S.-Withholding-Agent-Frequently-Asked-Question

Hope that you find the above enclosed information useful. 09/26/2013

? · Answer

It is not your responsibility to. The only taxes which may be applicable are what you have listed -sales, GST, and import tax

tro · Answer

the W-8BEN is available at  www.irs.gov and would be used when you claim the income made from US sources

Is withholding tax applicable on purchases of goods from outside the US?

4 คำตอบ