Question

Limitation of Benefits (LOBs) clauses in tax treaties ensure that the taxpayer in the treaty partner country is eligible for Treaty benefits. If the entity in the Treaty partner country is a Publicly Traded Foreign Company which LOB clause is the most likely and practical avenue to qualify for Treaty benefits?

Answer 1

It must usually provide Form W-8BEN-E to the U.S. payor, if a foreign entity qualifies for a reduced rate of U.S. withholding tax provided by a treaty, it. Apart from the other things, on Form W-8BEN-E the foreign entity certifies under penalties of perjury that it qualifies for benefits under the relevant income tax treaty. Form W-8BEN-E is not filed with the IRS. Instead, the U.S. payor retains Form W-8BEN-E to speak the reduced rate of withholding in the case of an audit.

By U.S. payors who have made payments of U.S. sourced income to foreign persons Form 1042-S must be filed annually. In general, the form reports to the IRS the amount of income, type of income, name of recipient, and amount of U.S. tax withheld (if any).