IRS Updated Nonresident Withholding Tax Guide

by: Smith and Howard

January 30, 2015

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The Internal Revenue Service (IRS) released revised Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Although the publication is primarily for use in 2015, it also includes information relevant to 2014.

Publication 515 provides guidance for withholding agents who pay income to foreign persons, including nonresident aliens, foreign corporations, foreign partnerships, foreign trusts, foreign estates, foreign governments and international organizations.

The topics discussed in the publication include:

  • The persons responsible for withholding (withholding agents),
  • The types of income subject to withholding,
  • The information return and tax return filing obligations of withholding agents,
  • Withholding by a partnership on its income effectively connected with a U.S. trade or business that is allocable to its foreign partners,
  • Withholding on the transfer or distribution of a U.S. real property interest under the Foreign Investment in Real Property Tax Act (FIRPTA), and
  • How to get tax help from the IRS.

Revised Publication 515 includes a discussion of new rules regarding:

  • The Foreign Account Tax Compliance Act (FATCA) withholding requirements,
  • The temporary regulations coordinating FATCA rules with existing withholding rules (TD 9658),
  • The revision of qualified intermediary (QI), withholding foreign partnership (WP) and withholding foreign trust (WT) agreements,
  • The treatment of a regulated investment company (RIC, or mutual fund) as a qualified investment entity (QIE) under FIRPTA for withholding exemptions on RIC distributions that are attributable to gains from the sale of U.S. real property interests,
  • The withholding exemption on certain interest-related dividends and short-term capital gains dividends paid by a mutual fund or other RIC, and
  • The characterization and source of income received from multilevel marketing companies (lower-tier distributors) by upper-tier distributors that is based on the sales or purchases of the lower-tier distributors.

Future developments

For the latest information about developments related to Publication 515, such as legislation enacted after it was published, click here.

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