Hiring non US Person

Hiring a non-US Person

If you are a business and hired a non-US Person, do you have to deduct withholding from the amount paid and report to IRS?

U.S. law treats U.S. persons and foreign persons differently for tax purposes. Therefore, it is important to be able to distinguish between these two types of taxpayers.

United States Persons

The term ''United States person'' means:

A citizen or resident of the United States

A domestic partnership

A domestic corporation

Any estate other than a foreign estate

Any trust if:

A court within the United States is able to exercise primary supervision over the administration of the trust, and

One or more United States persons have the authority to control all substantial decisions of the trust

Any other person that is not a foreign person.

Foreign Persons

A foreign person includes:

Nonresident alien individual

Foreign corporation

Foreign partnership

Foreign trust

A foreign estate

Any other person that is not a U.S. person

Generally, the U.S. branch of a foreign corporation or partnership is treated as a foreign person. Refer to Internal Revenue Code section 7701(a)(31) for the definition of a foreign estate and a foreign trust.

References/Related Topics

Foreign Persons

Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of:

• Interest (including certain original issue discount (OID));

• Dividends;

• Rents;

• Royalties;

• Premiums;

• Annuities;

• Compensation for, or in expectation of, services performed;

• Substitute payments in a securities lending transaction; 

or

• Other fixed or determinable annual or periodical gains, profits, or income.

References:

1. Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) 

2. Instructions for Form W-8BEN

3. Withholding of Tax on Nonresident Aliens and Foreign Entities For use in 2021 Publication 515 Cat. No. 15019L