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Publication 515

of Tax on 
Aliens and 


What's New(p2)


Dividend equivalent payments.(p2)

Beginning September 14, 2010, a dividend equivalent is treated as a U.S-source dividend. Dividend equivalent payments are described under Dividends.

Specified notional principal contracts.(p2)

Beginning September 14, 2010, a payment made under a specified notional principal contract is treated as a dividend equivalent. Specified notional principal contracts are described under Dividend equivalent payments.

Guarantees of indebtedness.(p2)

Payments on certain guarantees of indebtedness issued after September 27, 2010, are U.S. source income. See Guarantee income.

Automatic extension for filing certain Forms 1042 and 1042-S.(p2)

If you paid substitute dividends after September 13, 2010, you have an automatic extension of up to six months to file Form 1042-S for such substitute dividend payments. See Substitute dividend payments.

Exemption from requirement to withhold for certain payments to qualified securities lenders.(p2)

If you made U.S.-source substitute dividend payments after September 13, 2010, to qualified securities lenders, and these payments are part of a chain of substitute dividend payments, you may be exempt from withholding tax on the payments. See Amounts paid to qualified securities lenders.

Extension requests.(p2)

Requests for extensions to provide statements to recipients of more than 10 withholding agents must be submitted electronically. See Extension of time to file.

Deposit coupons eliminated.(p2)

You must make all deposits of taxes electronically. Form 8109 can no longer be used.

Penalties increased.(p2)

The penalties have increased if you fail to file Form 1042 or provide Form 1042-S to the recipients or the IRS or if you provide incorrect or incomplete information. See Penalties.

New tax treaty and protocol.(p2)

The United States has exchanged instruments of ratification for a new income tax treaty with Malta and a new protocol amending the income tax treaty with New Zealand. The effective dates for both are as follows.



Filing electronically.(p2)

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
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.

IRS taxpayer identification numbers for aliens.(p2)

The IRS will issue an individual taxpayer identification number (ITIN) to an alien who does not have and is not eligible to get a social security number (SSN).
An ITIN is for tax use only. It does not entitle an alien to social security benefits or change his or her employment or immigration status under U.S. law.
For more information on ITINs, see U.S. Taxpayer Identification Numbers, later.

Real estate mortgage investment conduits (REMIC).(p2)

Excess inclusion income is treated as income from sources in the United States. The date an excess inclusion allocated to a foreign person by certain pass-through entities is subject to withholding is, generally, the close of the entity's tax year. An excess inclusion is not eligible for any reduction in withholding tax (by treaty or otherwise). See REMIC excess inclusions.

Partnership withholding on effectively connected income (ECI).(p2)

A partnership must withhold tax on ECI allocated to a foreign partner. However, a publicly traded partnership (PTP) cannot elect to withhold tax based on ECI allocable to its foreign partners. The PTP must withhold on the distribution of that income to its foreign partners.
For more information, see Publicly Traded Partnerships under Partnership Withholding on Effectively Connected Income.

Qualified intermediaries.(p2)

A branch of a financial institution may not act as a qualified intermediary in a country that does not have approved know-your-customer rules. See Qualified intermediary under Foreign Intermediaries beginning on page 5.

Photographs of missing children.(p2)

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.


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.

Comments and suggestions.(p2)

We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:

Internal Revenue Service 
Individual Forms and Publications Branch 
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.
You can email us at * (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. You can also send us comments from Select "Comment on Tax Forms and Publications" under "Information About."
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.
Ordering forms and publications.(p2)
Visit to download forms and publications, call 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

Tax questions.(p2)
If you have a tax question, check the information available on or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.


Useful items

You may want to see:

 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
 519 U.S. Tax Guide for Aliens
 901 U.S. Tax Treaties
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
 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
 W-8IMY: Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding
 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
See How To Get Tax Help at the end of this publication, for information about getting publications and forms.

Withholding of Tax(p3)

Generally, 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 (NRA withholding) from the payment made to the foreign person.
The term "NRA withholding" is used in this publication descriptively to refer to withholding required under sections 1441, 1442, and 1443 of the Internal Revenue Code. Generally, NRA 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 NRA withholding.
NRA 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.

Withholding Agent(p3)

You are a withholding agent if you are a U.S. or foreign person that has control, receipt, custody, disposal, or payment of any item of income of a foreign person that is subject to 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. Generally, the U.S. person who pays an amount subject to NRA 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 NRA 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.

Liability for tax.(p3)

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.

Determination of amount to withhold.(p3)

You must withhold on the gross amount subject to NRA 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. Or, you may make a reasonable estimate of the amount from U.S. sources and put a corresponding portion of the amount due in escrow until the amount from U.S. sources can be determined, at which time withholding becomes due.

When to withhold.(p3)

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.

Withholding and 
Reporting Obligations(p3)

You are required to report payments subject to NRA withholding on Form 1042-S and to file a tax return on Form 1042. (See Returns Required, later.) An exception from reporting may apply 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.

Form 1099 reporting and backup withholding.(p3)

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 (1) the U.S. person has not provided its taxpayer identification number (TIN) in the manner required, (2) the IRS notifies you that the TIN furnished by the payee is incorrect, (3) there has been a notified payee underreporting, or (4) there has been a payee certification failure. Generally, a TIN must be provided by a U.S. non-exempt recipient on Form W-9. A payer files a tax return on Form 945 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. 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 (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G).
Foreign persons who provide Form W-8BEN, Form W-8ECI, or Form W-8EXP (or applicable documentary evidence) are exempt from backup withholding and Form 1099 reporting.

Wages paid to employees.(p4)

If you are the employer of a nonresident alien, you generally must withhold taxes at graduated rates. See Pay for Personal Services Performed, later.

Effectively connected income by partnerships.(p4)

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 (ECI), later, for more information.

U.S. real property interest.(p4)

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.