By Robyn Guilliams
Dear Law & Disorder Team –
We run an international competition that takes place in a different country every two years and each time we have to learn new lessons around taxation. What is the Withholding Tax situation around jury services or the teaching of master classes for non-US resident jury members? Are they also subject to the 30% Nonresident Alien (NRA) Withholding Tax or not?
As anyone in the U.S. who does business internationally will discover, dealing with tax withholding and other tax laws in foreign countries can be a drag, to say the least. Every country has its own rules and procedures, and it’s often difficult to figure out those rules ahead of time, especially if you don’t speak the language. I feel your pain!
As for the U.S. requirements for NRA tax withholding, the general rule is that any time a payment is made to a nonresident individual or business for services provided in the U.S., the 30% NRA withholding rule applies (i.e., you must withhold 30% of the gross payment toward the NRA’s possible tax liability.) This rule applies not only to performers, but to ANYONE performing services in the U.S. – including those serving on competition juries and teaching master classes.
There may be an exemption from U.S. tax and withholding for a nonresident, however, if the nonresident meets certain requirements. Generally, those requirements are as follows:
- There must be a tax treaty between the U.S. and the nonresident’s country of residence (NOT their country of citizenship):
- There must be a provision in that particular treaty that would exempt the nonresident from tax in the U.S.; and
- The nonresident individual or business must have a U.S. tax identification number, and complete the appropriate form to claim the treaty exemption, and exempt themselves from withholding.
Whether or not a nonresident qualifies for a treaty exemption is very fact-specific. And it’s important to be aware that each treaty is different! Just because the U.S. tax treaty with France might exempt a French individual from tax for performing as a juror at a U.S. competition under certain circumstances doesn’t mean that the U.S. treaty with the U.K. would provide the identical exemption.
Fortunately, the IRS publishes a guide to understanding tax treaties, which goes by the catchy title of “Publication 901 – U.S. Tax Treaties.” (You can download this publication here: http://www.irs.gov/pub/irs-pdf/p901.pdf.) Table 2, which begins on page 39 of the current version of Pub. 901, includes a summary of the rules that apply to nonresident individuals who are performing services in the U.S., country by country. When using this Table, be sure to review all of the information relevant to a particular country, including the footnotes! (It’s all relevant to whether or not a withholding exemption applies.)
Finally, remember that a nonresident individual wishing to claim an exemption from withholding MUST have either a Social Security Number (SSN) or a U.S. Individual Tax Identification Number (ITIN) to do so.
And, as always, if you have any questions about visas or taxes for nonresidents working in the U.S., be sure to check out the Artists from Abroad website (www.artistsfromabroad.org) which has all of the information you could ever need on these topics!
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THE OFFICIAL DISCLAIMER:
THIS IS NOT LEGAL ADVICE!
The purpose of this blog is to provide general advice and guidance, not legal advice. Please consult with an attorney familiar with your specific circumstances, facts, challenges, medications, psychiatric disorders, past-lives, karmic debt, and anything else that may impact your situation before drawing any conclusions, deciding upon a course of action, sending a nasty email, filing a lawsuit, or doing anything rash!
Tags: foreign countries, international competition, irs, ITIN, Robyn Guilliams, SSN, tax identification number, tax liability, tax treaties, tax withholding, withholding tax