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Determining Payee and US. Foreign Status Under Sec. 1441
The IRS issued final regulations in October 1997 that changed existing rules on withholding on payments to foreign persons under Sec. 1441.These regulations (effective Jan. 1, 2000) apply to any person who is a withholding agent. One of the most significant changes was the issuance of new procedures that a withholding agent must follow to avoid liability for failure to withhold the correct amount under Sec. 1441.The regulations specify the documentation types that a withholding agent must rely on for these purposes. The regulations also provide a set of presumptions that apply when there is no or unreliable documentation.
The presumptions' purpose is to give withholding agents guidance on avoiding liability. The complexity of the new rules and the exceptions may somewhat undercut this objective. Although this item in no way attempts to address every issue imbedded within the hundreds of pages of the final regulations, it seeks to give an overview of the documentation required and the presumptions applied in the absence of documentation. More importantly, by providing an overview of the presumptions, this item may assist practitioners who feel trapped in the maze of rules for withholding on payments to foreign persons.
Documentation Under Regs. Sec. 1.1441-1
To determine a payee's status, a withholding agent must rely (absent actual knowledge or reason to know otherwise) on Form W-9, Request for Taxpayer Identification Number and Certification, Form W-8, Certificate of Foreign Status, or Form 8233, Exception From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual,...