Question

If you are a foreign person and you are being paid a royalty from a US source, then withholding taxes usually would apply. However, under the treaty you qualify as a ________________ ________________, and therefore withholding taxes are not required. This is because as a __________________ ________________

the income is not FDAP, but it is ECI. What form for do you give the payor so they know not to withhold based on these facts?

Answer 1

If you are a foreign person and you are being paid a royalty from a US source, then withholding taxes usually would apply. However, under the treaty you qualify as a Non Resident Alien and therefore withholding taxes are not required. This is because as a Non Resident alien the income is not FDAP, but it is ECI.

The Form required to know not to withold based on this facts is Form 8233

This form is used by non resident alien individuals to claim exemption from withholding on compensation for personal services because of an income tax treaty or the personal exemption amount.