International Tax

Payments Directed Outside the United States — Withholding and Reporting Provisions Under Chapters 3 and 4 (Portfolio 915)

  • This Portfolio addresses the withholding of U.S. federal income tax under §§1441-1443 of the Internal Revenue Code from payments of certain U.S. source income made to foreign persons.

Description

Tax Portfolio, Payments Directed Outside the United States – Withholding and Reporting Provisions Under Chapters 3 and 4, sets forth the documentation requirements imposed under §§1441, 1443 and chapter 61 (§§6041-6050W), the requirements and withholding under §§1471-1474, the information reporting requirements under §1461 and chapter 61 and the applicable backup withholding procedures under §3406. The Portfolio also addresses the relationship of withholding under §§1441, 1442, and 1443 with the requirements imposed by chapter 61 and the backup withholding rules under §3406, an important aspect of which is the mandatory presumption rules for withholding and reporting on payments in the absence of reliable documentation as to the classification and status of the payee. Additionally, the portfolio provides a detailed discussion of the procedures applicable to intermediaries, both qualified and non-qualified. Special topics include a discussion of the application of §1441 to specific types of income such as the various types of interest income and effectively connected income. Other special topics include the application of the regulations to specific types of entities such as U.S. branches of certain foreign corporations, partnerships, trusts and estates, foreign governments and international organizations, and tax-exempt organizations.

Further, the Portfolio addresses the procedures applicable to claims of reduced withholding (including exemptions from withholding) under income tax treaties. The detailed rules delineating the responsibilities and liabilities of withholding agents are also discussed. Finally, the portfolio sets forth the rules concerning refund and reimbursement procedures under §§1461-1464 and penalties applicable to failures to comply with the §1441 and/or §1461 regulations.

This Portfolio does not discuss a U.S. employer’s obligation to withhold federal income and employment taxes from “wages” paid to nonresident alien employees, withholding on a foreign partner’s share of effectively connected income under §1446, or withholding on gain from dispositions of U.S. real property interests under §1445.

Table of Contents

I. Introduction
II. Documentation Requirements for Foreign Persons Under Chapter 61 and § 3406
III. Section 6049 – Returns of Information as to Interest Paid and Original Issue Discount Includible in Gross Income
IV. Section 6041
V. Sections 6041A, 6042, 6044 and 6045
VI. Section 6050H – Mortgage Interest Received in Trade or Business from Individuals
VII. Section 6050I – Information Reporting Relating to Cash Received in a Trade or Business
VIII. Section 6050J – Information Returns Relating to Foreclosures and Abandonments of Security
IX. Section 6050M – Returns Relating to Contracts with Federal Executive Agencies
X. Section 6050P – Information Reporting with Respect to Cancellation of Indebtedness Income
XI. Section 6050N – Royalties Paid After December 31, 1986
XII. Section 6050S – Information Reporting for Higher Education Tuition and Related Expenses
XIII. Section 3406
XIV. Mandatory Presumption Rules
XV. Amounts Subject to Withholding
XVI. Determination of Amounts To Be Withheld
XVII. Interest and Other Income Exempt from § 1441 Withholding
XVIII. Effectively Connected Income
XIX. Intermediaries
XX. Payments to U.S. Branches of Certain Foreign Banks or Foreign Insurance Companies
XXI. Partnerships
XXII. Trusts and Estates
XXIII. Special Foreign Exempt Payees
XXIV. Claims for Exemption or Reduction of Withholding Tax Under an Income Tax Treaty
XXV. General Provisions Relating to Withholding Agents
XXVI. Reporting of Payments Made and Tax Withheld Under § 1461
XXVII. Adjustments for Overwithholding or Underwithholding of Tax
XXVIII. Refunds or Credits

Carol-Tello
Carol Tello
Sutherland Asbill&Brennan LLP
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