Tax question about paying a colleague in another country De persoon die dit onderwerp heeft geplaatst: Kristopher Brame
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Kristopher Brame 
Verenigde Staten
Local time: 08:22
Lid 2018
Duits naar Engels
+ ...
Hello,
I'm an American citizen living in the US. Let's say I need to outsource a French transcription to a colleague living somewhere outside the US. I've spoken to a tax professional who said I would have to withhold 30% tax in this situation, but she said her knowledge was limited on this subject because her clients always subcontract to people within the US. I've looked into it a bit more, and it seems that most countries have a tax treaty with the US, but I was unclear as to whe... See more Hello,
I'm an American citizen living in the US. Let's say I need to outsource a French transcription to a colleague living somewhere outside the US. I've spoken to a tax professional who said I would have to withhold 30% tax in this situation, but she said her knowledge was limited on this subject because her clients always subcontract to people within the US. I've looked into it a bit more, and it seems that most countries have a tax treaty with the US, but I was unclear as to whether these treaties simply reduce the tax rate or exempt it entirely. This is all massively confusing.
Does anyone have any experience with this? ▲ Collapse
| | | | Sadek_A
Local time: 16:22
Engels naar Arabisch
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| Samuel Murray
Nederland
Local time: 14:22
Lid 2006
Engels naar Afrikaans
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Kristopher Brame wrote:
I've spoken to a tax professional who said I [may] have to withhold 30% tax in this situation...
I'm not a US citizen or resident and I work outside of the US, but I do work for many US clients. Not a single one of them have ever withheld any percentage of the agreed upon amount, and certainly not while citing withholding tax as a reason. US clients sometimes deduct transaction fees from the amount that they transfer, but those aren't taxes (and it's typically something like $10, regardless of the full amount paid).
It is possible (and I can't help answer that) that the reason why none of my US clients have ever deducted taxes is because they are registered companies (I mean, perhaps there are different rules for companies vs the public).
I'm sure that whenever you buy anything from an overseas vendor, you don't withhold 30%. If you tried that, no foreign vendor will deliver anything to you, ever, because your payment for the thing you're buying will always be 30% short. But who knows... perhaps the regulations depend on whether you're buying a product or a service...?
It seems that most countries have a tax treaty with the US, but I was unclear as to whether these treaties simply reduce the tax rate or exempt it entirely.
It is as you suspect: a "tax treaty" simply means that **something** was agreed. Different countries would have agreed different things with the US.
[Edited at 2021-04-02 14:19 GMT]
| | | | | Exemption form | Apr 2, 2021 |
It's several years now since I last did this, but I used to work regularly for a US-based company that asked me to fill in a form (I think it was W-8 or something like that) to confirm that I was not subject to tax in the US, and they didn't withhold any tax at all.
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Samuel Murray
Nederland
Local time: 14:22
Lid 2006
Engels naar Afrikaans
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Peter Shortall wrote:
I used to work regularly for a US-based company that asked me to fill in a form (I think it was W-8 or something like that) to confirm that I was not subject to tax in the US...
Yes, some of my clients also require[d] the W8 form (also known as "W8-BEN" or "W-8BEN"). Clients who ask for this form usually ask for it only once.
It is a very simple form that you can download from the IRS web site, and it's simple to fill in (some versions of this form come with brief instructions). The form is not customer-specific -- so a foreign translator can fill it in once, sign it, scan it, and then send the file to all of his US clients. The translator does not submit the form directly to the IRS -- the translator submits it to the client, and the client then gives it to his accountant, who in turn does something with it.
| | | | Kristopher Brame
Verenigde Staten
Local time: 08:22
Lid 2018
Duits naar Engels
+ ...
ONDERWERPSTARTER
Thank you both for your input. Hopefully, this will lead me to the answers I'm looking for. Both the UK and the Netherlands have a tax treaty with the US. It appears you were both fully exempt.
| | | | The Misha
Local time: 08:22
Russisch naar Engels
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| This is not even your problem - it's your party's | Apr 2, 2021 |
There's nothing in IRS regulations that would prevent you from paying any amount to any party, foreign or domestic, for the services they provide you with in the regular course of your business (you do know you ARE a business, don't you?) and then claiming a legitimate cost of labor deduction for it on your tax return - as long as your payee remains a contractor rather than an employee. What the payee does with that money and how/whether he or she accounts for it or pays tax on, and to what juri... See more There's nothing in IRS regulations that would prevent you from paying any amount to any party, foreign or domestic, for the services they provide you with in the regular course of your business (you do know you ARE a business, don't you?) and then claiming a legitimate cost of labor deduction for it on your tax return - as long as your payee remains a contractor rather than an employee. What the payee does with that money and how/whether he or she accounts for it or pays tax on, and to what jurisdiction, is entirely their problem. It has nothing to do with you.
The 30% withholding your tax "professional" mentioned may apply to payments of certain investment income to foreign parties. It has nothing to do with payments for services, i.e. labor. ▲ Collapse
| | | | John Fossey
Canada
Local time: 08:22
Lid 2008
Frans naar Engels
+ ...
I agree with Samuel, the W-8 BEN form is the way to go. I have many clients in the US and none withhold tax (I would consider them a bad payer if they did). Many require me to send in a W 8-BEN form, which they keep on file in case the IRS wants proof.
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| Form W-8 BEN is fine. However... | Apr 2, 2021 |
...make sure that your colleague is not a US citizen living abroad. In that case things are a little different.
Kind regards,
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