Taxes · Accounting

What are the tax implications of a foreign entity?

Roger Wu co-founder at cooperatize, native advertising platform

March 24th, 2015

I'm thinking about utilizing a foreign entity to do some design work for us. Has anyone done this before directly? (not a US company like Elance which issues 1099s). If so, what are the tax implications here? They cannot fill out w-9s or anything like that.

Benjamin Olding Co-founder, Board Member at Jana

March 24th, 2015

Ditto to Gopi's response; use them all the time.  If you want to be super (i.e. unnecessarily) careful, ask them to complete a W-8BEN for you (just google the form to find pdf).  You don't file a W-8BEN.  You just hold on to it in the very unlikely scenario you're audited by the IRS and they have evidence the foreign entity was not actually foreign.  As long as it is though, you are in the clear (with or without the W-8BEN).

Matthew Campbell General Purpose GO Hacker at DigitalOcean

March 26th, 2015

Make sure their country has a tax treaty with the IRS, most countries have this. Only scam countries like St Kitts don't do this (I've ran into this) . If their country doesn't have a tax treaty with the US you may be liable for 30% witholding of their taxes. At minimal you should make them do a W8-BEN. Also non-us entities can get us tax ids (TIN), they suggest this, but not sure how much this actually helps.

Bhakti Soneji Principal at Bhakti Soneji Tax Services

March 27th, 2015

Agree with everyone above. In addition, countries like India may charge an additional 14% service tax on the invoice which may add to total cost...

Anonymous

July 22nd, 2015

The rule is that if a US company pays a foreign company and the work is performed outside the US, then the US company does not need to withhold taxes.