You are a withholding agent if you are a U.S. or foreign person that
has control, receipt, custody, disposal, or payment of any item of
income of a foreign person that is subject to withholding. A
withholding agent may be an individual, corporation, partnership,
trust, association, or any other entity, including any foreign
intermediary, foreign partnership, or U.S. branch of certain foreign
banks and insurance companies. You may be a withholding agent even
if there is no requirement to withhold from a payment or even if
another person has withheld the required amount from the payment.
several persons may be withholding agents for a single payment,
the full tax is required to be withheld only once. Generally, the
U.S. person who pays an amount subject to NRA withholding is the
person responsible for withholding. However, other persons may be
required to withhold. For example, a payment made by a flow-through
entity or nonqualified intermediary that knows, or has reason to
know, that the full amount of NRA withholding was not done by the
person from which it receives a payment is required to do the
appropriate withholding since it also falls within the definition of
a withholding agent. In addition, withholding must be done by any
qualified intermediary in accordance with the terms of its qualified
intermediary withholding agreement.
Withholding Agent Liability
As a withholding agent, you are personally liable for any tax
required to be withheld. This liability is independent of the tax
liability of the foreign person to whom the payment is made. If you
fail to withhold and the foreign payee fails to satisfy its U.S. tax
liability, then both you and the foreign person are liable for tax,
as well as interest and any applicable penalties. The applicable tax
will be collected only once. If the foreign person satisfies its
U.S. tax liability, you may still be held liable for interest and
penalties for your failure to withhold.
Determination of Amount to Withhold
You must withhold on the gross amount subject to NRA withholding.
You cannot reduce the gross amount by any deductions. However, refer
to the sections on "Scholarships and Fellowship Grants" and "Pay for
Personal Services Performed" in
Publication 515, Withholding of Tax on Nonresident Aliens and
Foreign Entities, for when a deduction for a personal exemption
may be allowed.
If the determination of the source of the income or the amount
subject to tax depends on facts that are not known at the time of
payment, you must withhold an amount sufficient to ensure that at
least 30 percent of the amount subsequently determined to be subject
to withholding is withheld. In no case, however, should you withhold
more than 30 percent of the total amount paid.
When to Withhold
Withholding is required at the time you make a payment of an
amount subject to withholding. A payment is made to a person if that
person realizes income whether or not there is an actual transfer of
cash or other property. A payment is considered made to a person if
it is paid for that person's benefit. For example, a payment made to
a creditor of a person in satisfaction of that person's debt to the
creditor is considered made to the person. A payment is also
considered made to a person if it is made to that person's agent.
For treatment of a payment made to the U.S. agent of a foreign
person, refer to
Identifying the Payee, U.S. Agent of Foreign Person.
A U.S. partnership should withhold when any distributions that
include amounts subject to withholding are made. However, if a
foreign partner's distributive share of income subject to
withholding is not actually distributed, the U.S. partnership must
withhold on the foreign partner's distributive share of the income
on the earlier of the date that a
(Form 1065) is provided or mailed to the partner or the due date
for furnishing that schedule. If the distributable amount consists
of effectively connected income, refer to
Partnership Withholding on Effectively Connected Income.
A U.S. trust is required to withhold on the amount includible in
the gross income of a foreign beneficiary to the extent the trust's
distributable net income consists of an amount subject to
withholding. To the extent a U.S. trust is required to distribute an
amount subject to withholding but does not actually distribute the
amount, it must withhold on the foreign beneficiary's allocable
share at the time the income is required to be reported on
For questions related to Qualified Intermediaries refer to
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