#Form 8802 online software#

If youвЂ™re expecting interest, dividend, rent or royalty income from a customer in one of those countries, itвЂ™s crucial you file the right paperwork with the IRS to avoid payment delays and reduced payments. has active income tax treaties with almost 70 different countries. However, because the United States has many income tax treaties in place that can reduce this rate - sometimes to zero - American companies that file the proper paperwork can qualify for withholding at a much lower rate. In some countries, the rate of withholding for foreign entities can be as high as 35 percent.

#Form 8802 online software#

For instance, if you own a U.S.-based software company and you license your software in India, withholding will apply. But all payments such as interest, dividends, rents and royalties are subject to income tax withholding. If youвЂ™re simply selling products overseas, income tax withholding may not apply to the payments customers make to your company. By understanding the treaty status and filling out the necessary paperwork ahead of time, you will keep your payment schedule on track. The instructions to Form 8802 state that you should apply at least 45 days before you need the certification, but experience has shown that this process usually takes significantly longer. While filing the form is fairly straightforward, the IRS can take quite some time to act on your filing and provide you with the proper documents to get a discount. company has to decide whether they should ask their customer to withhold taxes at the highest rate, or take the time to file and get approval for the proper paperwork in order to reduce or eliminate the income tax withholding. Often, a U.S.-based business gets a contract with an overseas customer, finishes the work and sends an invoice, at which point their client says, вЂњWe donвЂ™t have your income tax treaty paperwork.вЂќ In this situation, the U.S. Understanding When Income Tax Withholding Applies Unfortunately, American businesses are often unaware of the tax withholding laws until theyвЂ™re ready to be paid, which inevitably leads to deep income cuts and long delays. and the country where they are conducting business, and they should make sure the appropriate paperwork has been filed with the IRS.

business owners should know whether income tax treaties exist between the U.S. That withholding tax, however, can be reduced or even eliminated when income tax treaties are in place between the two countries in question. Overall, foreign countries impose withholding taxes on payments made to non-residents of that country. In this scenario, the companyвЂ™s foreign customer will likely withhold at the maximum rate under local law. Such a lapse typically occurs if a company engaging in international transactions doesnвЂ™t have a treaty residency certificate. For U.S.-based companies familiar with doing business overseas, payment delays are no surprise.