skip navigation

Search Help
Navigation Help

Tax Map Index
ABCDEFGHI
JKLMNOPQR
STUVWXYZ#

International
Tax Topic Index

Affordable Care Act
Tax Topic Index

Forms
Publications

Comments
About Tax Map

IRS.gov Website
taxmap/pubs/p515-000.htm#en_us_publink1000224748
Publication 515

Withholding 
of Tax on 
Nonresident 
Aliens and 
Foreign Entities

rule

(Including information for 2014)

Combined Publication for 2014 and 2015


Although this revision of Publication 515 is primarily for use in 2015, it also includes information that is relevant for 2014. This latest revision of Publication 515 was delayed to incorporate recent guidance relating to new withholding and reporting obligations for withholding agents. See What's New, later.

Future Developments


For the latest information about developments related to Publication 515, such as legislation enacted after it was published, go to www.irs.gov/pub515.

What's New


taxmap/pubs/p515-000.htm#en_us_publink100015336
Chapter 4 withholding.
Starting July 1, 2014, withholding agents making withholdable payments to certain foreign entities are required to withhold 30% of these payments. This publication incorporates the requirements for chapter 4 withholding, including certain of the reporting required by chapter 4 and the withholding requirements of foreign financial institutions (FFIs) making withholdable payments. This publication also describes which payments are withholdable payments. For more information, see Chapter 4 Withholding Requirements, later.
taxmap/pubs/p515-000.htm#en_us_publink100015337
Chapter 3 updates.
This publication is also updated to reflect temporary regulations under chapter 3 that were published in early 2014, which are generally effective for payments subject to chapter 3 withholding that are made on or after July 1, 2014. References in this publication to the requirements of chapter 3 take into account these temporary regulations unless otherwise indicated.
taxmap/pubs/p515-000.htm#en_us_publink100015338
New definitions section.
This publication includes new defined terms under chapter 4. A list of frequently used chapter 4 terms and their definitions is in Definitions, later.
taxmap/pubs/p515-000.htm#en_us_publink10001133
Substantial changes to Form W-8 series.
Forms in the W-8 series are used to certify foreign status for withholding purposes. Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY have been revised primarily to provide for the use of these forms for chapter 4 purposes by withholding agents. New Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities), has been added for use by certain foreign entities to certify their status for both chapters 3 and 4 purposes (as required). For more information, see Beneficial Owners and Foreign Intermediaries.
taxmap/pubs/p515-000.htm#en_us_publink100015339
Qualified Intermediary (QI), Withholding Foreign Partnership (WP), and Withholding Foreign Trust (WT) agreements.
QI, WP, and WT agreements entered into before June 30, 2014, expired on June 30, 2014. These agreements were revised effective June 30, 2014, primarily to incorporate the requirements of chapter 4 and changes resulting from the temporary regulations under chapter 3 that apply to these entities. The discussion of these agreements in this publication refers to the agreements effective June 30, 2014, unless otherwise indicated.
taxmap/pubs/p515-000.htm#en_us_publink1000297428
U.S. real property interest.
At the time this publication went to print, only certain distributions from a regulated investment company (RIC) that is a U.S. real property holding company (USRPHC) were considered paid by a qualified investment entity (QIE). Before 2014, generally, all distributions from a RIC were considered paid by a QIE, which made them exempt from withholding under chapter 3 and section 1445. To find out if legislation extended the treatment of a RIC as a QIE for all distributions, go to www.irs.gov/formspubs or www.irs.gov/pub515.
The special rules that apply to distributions from a QIE attributable to the gain from the sale or exchange of a U.S. real property interest continue to apply to certain distributions from a RIC that are directly or indirectly attributable to distributions received by the RIC from a real estate investment trust (REIT). See Qualified investment entities under U.S. Real Property Interest.
taxmap/pubs/p515-000.htm#en_us_publink1000297422
Interest-related dividends and short-term capital gain dividends received from mutual funds.
At the time this publication went to print, the exemption from chapter 3 withholding on certain interest-related dividends and short-term capital gain dividends paid by a mutual fund or other RIC had expired. To find out if legislation extended this exemption from withholding, go to www.irs.gov/formspubs or www.irs.gov/pub515. See Dividends paid by a RIC, later.
taxmap/pubs/p515-000.htm#en_us_publink1000297423
Multi-level marketing.
Clarification regarding the characterization and source of income received from multi-level marketing companies by distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have recruited and sponsored (lower-tier distributors) is provided. See Multi-level marketing.

Reminders


taxmap/pubs/p515-000.htm#en_us_publink10001131
Deposit interest paid to certain nonresident alien individuals.
Deposit interest of $10 or more paid to certain nonresident alien individuals must be reported on Form 1042-S. See Deposit interest paid to certain nonresident alien individuals.
taxmap/pubs/p515-000.htm#en_us_publink1000259715
Exemption from requirement to withhold for certain payments to qualified securities lenders.
If you made U.S.-source substitute dividend payments to qualified securities lenders, you may be exempt from withholding tax on the payments. See Amounts paid to qualified securities lenders.
taxmap/pubs/p515-000.htm#en_us_publink1000259719
Electronic deposits.
You must make all deposits of taxes paid with respect to Form 1042-S (including taxes withheld under either chapter 3 or chapter 4) electronically.
taxmap/pubs/p515-000.htm#en_us_publink1000263940
Substitute forms.
Any substitute forms you use must comply with the requirements in Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns. If they do not, the forms may be rejected as incorrect and the IRS may impose penalties. See Penalties.
taxmap/pubs/p515-000.htm#en_us_publink1000224758
Filing electronically.
If you file Form 1042-S electronically, you will use the Filing Information Returns Electronically (FIRE) system. You get to the system through the Internet at fire.irs.gov.
For files submitted on the FIRE system, it is the responsibility of the filer to verify the results of the transmission within 5 business days. The IRS will not mail error reports for files that are bad. See Publication 1187 for information on the requirements for filing Form 1042-S electronically.
taxmap/pubs/p515-000.htm#en_us_publink1000293254
Requests for extensions on Form 8809 must be filed electronically.
Requests on Form 8809 for an extension of time to file Form 1042-S must be made electronically if the request is for more than one payer. See Extension to file Form 1042-S with the IRS.
taxmap/pubs/p515-000.htm#en_us_publink1000224763
Photographs of missing children.
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

taxmap/pubs/p515-000.htm#en_us_publink1000177213Introduction

This publication is 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. Specifically, it describes the persons responsible for withholding (withholding agents), the types of income subject to withholding, and the information return and tax return filing obligations of withholding agents. In addition to discussing the rules that apply generally to payments of U.S. source income to foreign persons, it also contains sections on the withholding that applies to the disposition of U.S. real property interests and the withholding by partnerships on income effectively connected with the active conduct of a U.S. trade or business.
taxmap/pubs/p515-000.htm#en_us_publink1000268179

Comments and suggestions.

rule
We welcome your comments about this publication and your suggestions for future editions.
You can send us comments from www.irs.gov/formspubs/. Click on "More Information" and then on "Give us feedback".
You can write to us at the following address:

Internal Revenue Service
Tax Forms and Publications
SE:W:CAR:MP:T:TFP
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224


We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
taxmap/pubs/p515-000.htm#en_us_publink1000268180
Ordering forms and publications.
Visit www.irs.gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800- 829-3676), or write to the address below and receive a response within 10 days after your request is received.

Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613


taxmap/pubs/p515-000.htm#en_us_publink1000268181
Tax questions.
If you have a tax question, check the information available on IRS.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.

taxmap/pubs/p515-000.htm#TXMP72af48c5

Useful items

You may want to see:


Publication
 15 (Circular E), Employer's Tax Guide
 15-A  Employer's Supplemental Tax Guide
 15-B  Employer's Tax Guide to Fringe Benefits
 51 (Circular A), Agricultural Employer's Tax Guide
 505 Tax Withholding and Estimated Tax
 519 U.S. Tax Guide for Aliens
 901 U.S. Tax Treaties
 1187 Specifications for Electronic Filing of Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding
 5124 FATCA XML v1.1 User Guide
Form (and Instructions)
 SS-4: Application for Employer Identification Number
 W-2: Wage and Tax Statement
 W-4: Employee's Withholding Allowance Certificate
 W-4P: Withholding Certificate for Pension or Annuity Payments
 W-7: Application for IRS Individual Taxpayer Identification Number
 W-8BEN: Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)
 W-8BEN-E: Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)
 W-8ECI: Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States
 W-8EXP: Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting
 W-8IMY: Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting
 W-8 Inst.: Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY
 W-9: Request for Taxpayer Identification Number and Certification
 941: Employer's QUARTERLY Federal Tax Return
 1042: Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
 1042-S: Foreign Person's U.S. Source Income Subject to Withholding
 1042-T: Annual Summary and Transmittal of Forms 1042-S
 8966: FATCA Report
See How To Get Tax Help at the end of this publication, for information about getting publications and forms.
taxmap/pubs/p515-000.htm#en_us_publink1000224767

Withholding of Tax

rule
In most cases, a foreign person is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to U.S. tax of 30%. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person's country of residence and the United States. The tax is generally withheld (chapter 3 withholding) from the payment made to the foreign person.
The term "chapter 3 withholding" is used in this publication descriptively to refer to withholding required under sections 1441, 1442, and 1443 of the Internal Revenue Code. In most cases, chapter 3 withholding describes the withholding regime that requires withholding on a payment of U.S. source income. Payments to foreign persons, including nonresident alien individuals, foreign entities, and governments, may be subject to chapter 3 withholding. Withholding may also be required on a payment to the extent required under chapter 4. "Chapter 4" refers to chapter 4 of Subtitle A (sections 1471 through 1474) of the Internal Revenue Code. See Chapter 4 Withholding Requirements, later.
EIC
Chapter 3 withholding does not include withholding under section 1445 of the Code (see U.S. Real Property Interest, later) or under section 1446 of the Code (see Partnership Withholding on Effectively Connected Income, later).
A withholding agent (defined next) is the person responsible for withholding on payments made to a foreign person. However, a withholding agent that can reliably associate the payment with documentation (discussed later) from a U.S. person is not required to withhold. In addition, a withholding agent may apply a reduced rate of withholding (including an exemption from withholding) if it can reliably associate the payment with documentation from a beneficial owner that is a foreign person entitled to a reduced rate of withholding.
If an amount subject to chapter 3 withholding is also a withholdable payment and chapter 4 withholding is applied to the payment, no withholding is required under chapter 3. See Chapter 4 Withholding Requirements, later.
taxmap/pubs/p515-000.htm#en_us_publink1000224769

Withholding Agent

rule
taxmap/pubs/p515-000.htm#en_us_publink100015340

Chapter 3
Withholding Requirements

rule
You are a withholding agent if you are a U.S. or foreign person, in whatever capacity acting, that has control, receipt, custody, disposal, or payment of an amount subject to chapter 3 withholding. A withholding agent may be an individual, corporation, partnership, trust, association, nominee (under section 1446 of the Code), or any other entity, including any foreign intermediary, foreign partnership, or U.S. branch of certain foreign banks and insurance companies. You may be a withholding agent even if there is no requirement to withhold from a payment or even if another person has withheld the required amount from the payment.
Although several persons may be withholding agents for a single payment, the full tax is required to be withheld only once. In most cases, the U.S. person who pays an amount subject to chapter 3 withholding is the person responsible for withholding. However, other persons may be required to withhold. For example, a payment made by a flow-through entity or nonqualified intermediary that knows, or has reason to know, that the full amount of chapter 3 withholding was not done by the person from which it receives a payment is required to do the appropriate withholding since it also falls within the definition of a withholding agent. In addition, withholding must be done by any qualified intermediary, withholding foreign partnership, or withholding foreign trust in accordance with the terms of its withholding agreement, discussed later.
taxmap/pubs/p515-000.htm#en_us_publink100015244

Liability for tax.

rule
As a withholding agent, you are personally liable for any tax required to be withheld. This liability is independent of the tax liability of the foreign person to whom the payment is made. If you fail to withhold and the foreign payee fails to satisfy its U.S. tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties.
The applicable tax will be collected only once. If the foreign person satisfies its U.S. tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold.
taxmap/pubs/p515-000.htm#en_us_publink100015245

Determination of amount to withhold.

rule
You must withhold on the gross amount subject to chapter 3 withholding. You cannot reduce the gross amount by any deductions. However, see Scholarships and Fellowship Grants and Pay for Personal Services Performed, later, for when a deduction for a personal exemption may be allowed.
If the determination of the source of the income or the amount subject to tax depends on facts that are not known at the time of payment, you must withhold an amount sufficient to ensure that at least 30% of the amount subsequently determined to be subject to withholding is withheld. In no case, however, should you withhold more than 30% of the total amount paid. You may elect to hold 30% of the payment in escrow until the earlier of the date that the amount of income from U.S. sources or the taxable amount can be determined or one year from the date the amount is placed in escrow, at which time the withholding becomes due or, to the extent that withholding is not required, the escrowed amount must be paid to the payee.
taxmap/pubs/p515-000.htm#en_us_publink100015248

When to withhold.

rule
Withholding is required at the time you make a payment of an amount subject to withholding. A payment is made to a person if that person realizes income, whether or not there is an actual transfer of cash or other property. A payment is considered made to a person if it is paid for that person's benefit. For example, a payment made to a creditor of a person in satisfaction of that person's debt to the creditor is considered made to the person. A payment also is considered made to a person if it is made to that person's agent.
A U.S. partnership should withhold when any distributions that include amounts subject to withholding are made. However, if a foreign partner's distributive share of income subject to withholding is not actually distributed, the U.S. partnership must withhold on the foreign partner's distributive share of the income on the earlier of the date that a Schedule K-1 (Form 1065) is provided or mailed to the partner or the due date for furnishing that schedule. If the distributable amount consists of effectively connected income, see Partnership Withholding on Effectively Connected Income, later.
A U.S. trust is required to withhold on the amount includible in the gross income of a foreign beneficiary to the extent the trust's distributable net income consists of an amount subject to withholding. To the extent a U.S. trust is required to distribute an amount subject to withholding but does not actually distribute the amount, it must withhold on the foreign beneficiary's allocable share at the time the income is required to be reported on Form 1042-S.
taxmap/pubs/p515-000.htm#en_us_publink100015341

Chapter 4
Withholding Requirements

rule
You are a withholding agent for purposes of chapter 4 if you are a U.S. or foreign person, in whatever capacity acting, that has control, receipt, custody, disposal, or payment of a withholdable payment. Similar rules for determining who is a withholding agent as those described in Chapter 3 Withholding Requirements, earlier, also apply for chapter 4. For purposes of chapter 4, a withholding agent includes a participating FFI (including a reporting Model 2 FFI) or registered deemed-compliant FFI to the extent such FFI makes a withholdable payment.
Under chapter 4 of the Code, a withholding agent that makes a withholdable payment on or after July 1, 2014, to a payee that is an FFI must withhold 30% on the payment unless the withholding agent is able to treat the FFI as a participating FFI, deemed-compliant FFI, or exempt beneficial owner. A withholding agent must also withhold 30% on a withholdable payment made on or after July 1, 2014, to a payee that is a foreign entity other than an FFI (i.e., a nonfinancial foreign entity, or NFFE) that fails to identify its substantial U.S. owners (or certify that it does not have any substantial U.S. owners) unless the payment is excepted from withholding under the regulations to section 1472. A participating FFI is a withholding agent under chapter 4 and is required to withhold on a withholdable payment to the extent required under the FFI agreement, including on a payment made to an account holder that the FFI is required to treat as a recalcitrant account holder. A reporting Model 1 FFI is required to withhold under chapter 4 to the extent required in the applicable IGA. A registered deemed-compliant FFI (other than a reporting Model 1 FFI) is required to withhold under chapter 4 to the extent required under the conditions applicable to its registered deemed-compliant FFI status. See Treasury regulations section 1.1471-5(f)(1) for a description of the types of registered deemed-compliant FFIs that may have withholding requirements.
EIC
See Notice 2014-33, 2014-21 I.R.B. 1033, for information on a transition period for the implementation of chapter 4.
Generally, a withholdable payment is a payment of U.S. source FDAP income and, beginning in 2017, gross proceeds from the sale or other disposition of property of a type that can produce interest or dividends that are U.S. source FDAP income. Specific exceptions to withholdable payments apply instead of the exemptions from withholding or taxation provided under chapter 3. See Income Subject to Withholding, later, for more information on payments of U.S. source FDAP income that are excepted from the definition of withholdable payment.
If a withholding agent makes a payment subject to both chapter 4 withholding and chapter 3 withholding, the withholding agent must apply the withholding provisions of chapter 4, and need not withhold on the payment under chapter 3 to the extent that it has withheld under chapter 4.
Similar rules for withholding agent liability for tax, determination of amount to withhold, and when to withhold as those described in Chapter 3 Withholding Requirements, earlier, also apply for chapter 4.
taxmap/pubs/p515-000.htm#en_us_publink1000224773

Forms 1042 and 1042-S
Reporting Obligations

rule
You are required to report payments subject to chapter 3 withholding on Form 1042-S and to file a tax return on Form 1042. (See Returns Required, later.) You are also required to report withholdable payments to which chapter 4 withholding was (or should have been) applied on Form 1042-S and to file a tax return on Form 1042 to report the payments. An exception from reporting may apply for chapter 3 purposes to individuals who are not required to withhold from a payment and who do not make the payment in the course of their trade or business. A similar exception from reporting for chapter 4 purposes may apply to an individual making a withholdable payment outside the course of the individual’s trade or business (including as an agent with respect to making or receiving such payment).
taxmap/pubs/p515-000.htm#en_us_publink100015343

Withholding and
Reporting Obligations
(Other Than Forms 1042
and 1042-S Reporting)

rule
taxmap/pubs/p515-000.htm#en_us_publink100015250

Form 1099 reporting and backup withholding.

rule
You also may be responsible as a payer for reporting on Form 1099 payments made to a U.S. person. You must withhold 28% (backup withholding rate) from a reportable payment made to a U.S. person that is subject to Form 1099 reporting if any of the following apply. In most cases, a TIN must be provided by a U.S. non-exempt recipient (a U.S. person subject to Form 1099 reporting) on Form W-9, Request for Taxpayer Identification Number and Certification. A payer files a tax return on Form 945, Annual Return of Withheld Federal Income Tax, for backup withholding.
You may be required to file Form 1099 and, if appropriate, backup withhold, even if you do not make the payments directly to that U.S. person. For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U.S. person subject to Form 1099 reporting. However, you may not be required to report on Form 1099 if you make a payment to a participating FFI or registered deemed-compliant FFI that provides a withholding statement allocating the payment to a chapter 4 withholding rate pool of U.S. payees. See Identifying the Payee, later, for more information. Also see Section S. Special Rules for Reporting Payments Made Through Foreign Intermediaries and Foreign Flow-Through Entities on Form 1099 in the General Instructions for Certain Information Returns.
Deposit
Foreign persons who provide a Form W-8 (or applicable documentary evidence when permitted in lieu of a Form W-8) are exempt from backup withholding and Form 1099 reporting.
taxmap/pubs/p515-000.htm#en_us_publink100015344

Form 8966 reporting.

rule
For chapter 4 purposes, you may be required to report on Form 8966, FATCA Report, if you make a withholdable payment to an entity you agree to treat as an owner-documented FFI or to a passive NFFE. See Returns Required, later.
taxmap/pubs/p515-000.htm#en_us_publink100015253

Wages paid to employees.

rule
If you are the employer of a nonresident alien, you generally must withhold taxes at graduated rates. See Pay for Personal Services Performed, later.
taxmap/pubs/p515-000.htm#en_us_publink100015255

Effectively connected income by partnerships.

rule
A withholding agent that is a partnership (whether U.S. or foreign) is also responsible for withholding on its income effectively connected with a U.S. trade or business that is allocable to foreign partners. See Partnership Withholding on Effectively Connected Income, later, for more information.
taxmap/pubs/p515-000.htm#en_us_publink100015257

U.S. real property interest.

rule
A withholding agent also may be responsible for withholding if a foreign person transfers a U.S. real property interest to the agent, or if it is a corporation, partnership, trust, or estate that distributes a U.S. real property interest to a shareholder, partner, or beneficiary that is a foreign person. See U.S. Real Property Interest, later.