# Can a US company pay a foreign person without withholding taxes?



## Tiwaz (11 mo ago)

Maybe a person more knowledgeable than me can confirm if I'm seeing this correctly.

From what it looks like, a US corporation can pay a foreign person without withholding taxes. The foreign person should file W-8BEN in case the IRS asks for it from the US corporation.

*The IRS sums it up:*


> As a general rule, wages earned by nonresident aliens for services performed outside of the United States for any employer are foreign source income and therefore are not subject to reporting and withholding of U.S. federal income tax.


If I am understanding this correctly, the US corporation would simply deduct payments made to a foreign person who is a private contractor and deduct those payments as they would any other expense.

Previously I believed that a US company could remit payment to a foreign company without withholding. But from what people said in response to that question, it looks like the US Company should be withholding 30%. I find that strange because how would the other company pay his bills if it lost 30% of its contracted amount right off the top.

Anyway, if I am basically seeing this correctly, could somebody confirm or point me to where I am not.


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## Moulard (Feb 3, 2017)

<EDIT> In hindsight the W-8BEN should be enough, but the following may be a useful addition .. but given your NRA status may not be appropriate..Its been a while since I looked at it or Form 2555 which you would have to be otherwise eligible to file </EDIT>


Short answer .. file Form 673 with your US employer - Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for Exclusions provided by Section 911



https://www.irs.gov/pub/irs-pdf/f673.pdf



Ordinarily that 30% is withheld from US Sourced income but the income in this case would not be considered US Sourced.

If Federal Income tax was ever withheld by your employer you would be able to claim a refund - but you would have to file a US Tax return to do so.

That obviously impacts cash flow but you would get it back


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## Bevdeforges (Nov 16, 2007)

Are you talking about a US company paying *salary* to a US person overseas? Or are you talking about a US company paying a business overseas for goods or services purchased from the business? The 30% thing only applies to US source income being paid out to an NRA (who would generally not be liable for filing a US tax return).


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## Tiwaz (11 mo ago)

Moulard said:


> <EDIT> In hindsight the W-8BEN should be enough, but the following may be a useful addition .. but given your NRA status may not be appropriate..Its been a while since I looked at it or Form 2555 which you would have to be otherwise eligible to file </EDIT>
> 
> 
> Short answer .. file Form 673 with your US employer - Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for Exclusions provided by Section 911
> ...


Form 673 appears to require that a person be a US citizen if I'm seeing it right. The private contractors would not be citizens of the US and would be citizens of another country.

Wouldn't a foreign citizen file a W-8BEN? And it would only be filed with the US company in case it was ever asked for if I'm understanding it right.


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## Tiwaz (11 mo ago)

Bevdeforges said:


> Are you talking about a US company paying *salary* to a US person overseas? Or are you talking about a US company paying a business overseas for goods or services purchased from the business? The 30% thing only applies to US source income being paid out to an NRA (who would generally not be liable for filing a US tax return).


I'm talking about a US company paying a non-US person. So a US company paying a foreign citizen.

What is an NRA?


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## Tiwaz (11 mo ago)

Bevdeforges said:


> Are you talking about a US company paying *salary* to a US person overseas? Or are you talking about a US company paying a business overseas for goods or services purchased from the business? The 30% thing only applies to US source income being paid out to an NRA (who would generally not be liable for filing a US tax return).


Further it looks like making the foreign employee a private contractor, with no hourly requirements or location requirements, just production requirements would pretty much end the issue in the US.

Does it look to you like I have this correct?


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## Bevdeforges (Nov 16, 2007)

OK, if the foreign employee is a private contractor, then yes, the US company would simply pay the bill and the taxes are the responsibility of the contractor and their own government(s).


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## Tiwaz (11 mo ago)

Bevdeforges said:


> OK, if the foreign employee is a private contractor, then yes, the US company would simply pay the bill and the taxes are the responsibility of the contractor and their own government(s).


Thank you Bevdeforges. 

I thought I had responded to you. When I reviewed this thread again I realized I hadn't. Sorry for the time it took.


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