Form W-8BEN is for foreign "individuals". But I (Self-employed) had a foreign "company"' which I paid for their help for my project. Is Form W-8BEN-E the one I should use for foreign company? If someone could help me regarding this, your help is much appreciated.
@PDNEP there two kinds of requirements regarding payments to NRA ( Non-Resident Alien )--- withholding requirement and Reporting Requirements and generally require the use of W-8BEN series and 1042 series of forms. IRC section 1441 through 1443. Publication 515 details all these requirements.
In your particular case --- you need to determine if the income paid to foreign person is " US sourced/connected " income .
Here is a short part of the table providing guidance on income sourcing:
| Item of Income | Factor Determining Source |
|---|---|
|
Salaries, wages, other compensation |
Where services performed |
| Business income: Personal services |
Where services performed |
| Business income: Sale of inventory -purchased |
Where sold |
|
Business income: |
Where produced (Allocation may be necessary) |
As you see from the table for "services performed " by an NRA it is the "where" that rules prime. Thus the contractor doing the work for you in a foreign land is a foreign person ( NRA ) but his/her income is not US sourced / connected for purposes of section 1441/1443.
for ref see this -->https://www.irs.gov/individuals/international-taxpayers/nra-withholding
Therefore my conclusion that you have no reporting nor withholding requirements for this NRA payments
@PDNEP , if the foreign company worked on foreign land, even though you paid from US sources, all you do is show it as expense on your schedule- C. The foreign entity then would claim this income on their filings to local taxing authority . Us generally does no and cannot tax this foreign entity. This is active income. Foreign person having passive income form US sources are indeed taxed and generally get a 1042-S from the withholding agent and would report to their home country as foreign income and taxed at source ( USA).
Does this help ?
Thank you very much for your explanation. I understood "Where they will be taxed" clearly.
I learned that I need to ask our foreign contractors to complete this form W-8BEN as a record to prove that they are not U.S. taxpayer. For the reason we are not issuing 1099-MISC for our foreign contractors.
(We usually issue the form 1099-MISC for any payment to contractors when we report it as our business expenses, but we are not issuing 1099-MISC for our foreign contractors because it is not required if they are not U.S. taxpayer. )
or are the forms W-8BEN and W-8BEN-E not for self-employed like me? Are these forms for the U.S. companies who have contractors in foreign countries?
@PDNEP there two kinds of requirements regarding payments to NRA ( Non-Resident Alien )--- withholding requirement and Reporting Requirements and generally require the use of W-8BEN series and 1042 series of forms. IRC section 1441 through 1443. Publication 515 details all these requirements.
In your particular case --- you need to determine if the income paid to foreign person is " US sourced/connected " income .
Here is a short part of the table providing guidance on income sourcing:
| Item of Income | Factor Determining Source |
|---|---|
|
Salaries, wages, other compensation |
Where services performed |
| Business income: Personal services |
Where services performed |
| Business income: Sale of inventory -purchased |
Where sold |
|
Business income: |
Where produced (Allocation may be necessary) |
As you see from the table for "services performed " by an NRA it is the "where" that rules prime. Thus the contractor doing the work for you in a foreign land is a foreign person ( NRA ) but his/her income is not US sourced / connected for purposes of section 1441/1443.
for ref see this -->https://www.irs.gov/individuals/international-taxpayers/nra-withholding
Therefore my conclusion that you have no reporting nor withholding requirements for this NRA payments