Publication 515 |
2000 Tax Year |
Investment income earned by a foreign government is not included in
the gross income of the foreign government and is not subject to U.S.
withholding tax. Investment income means income from investments in
the United States in stocks, bonds, or other domestic securities,
financial instruments held in the execution of governmental financial
or monetary policy, and interest on money deposited by a foreign
government in banks in the United States. A foreign government must
provide a Form W-8EXP or, in the case of a payment made outside
the United States to an offshore account, documentary evidence to
obtain this exemption. Investment income that is paid to a foreign
government is subject to reporting on Form 1042-S.
Income received by a foreign government from the conduct of a
commercial activity or from sources other than those stated above, is
subject to NRA withholding. In addition, income received from a
controlled commercial entity (including gain from the disposition of
any interest in a controlled commercial entity) and income received by
a controlled commercial entity is subject to NRA withholding.
A government of a U.S. possession is exempt from U.S. tax on all
U.S. source income. This income is not subject to NRA withholding.
These governments should use Form W-8EXP to get this exemption.
International organizations are exempt from U.S. tax on all U.S.
source income. This income is not subject to NRA withholding.
International organizations are not required to provide a Form
W-8 or documentary evidence to receive the exemption if the name
of the payee is one that is designated as an international
organization by executive order.
A foreign organization that is a tax exempt organization under
section 501(c) of the Internal Revenue Code is not subject to a
withholding tax on amounts that are not income includible under
section 512 of the Internal Revenue Code as unrelated business taxable
income. However, if a foreign organization is a foreign private
foundation, it is subject to a 4% withholding tax on all U.S. source
investment income. For a foreign tax-exempt organization to claim an
exemption from withholding because of its tax exempt status under
section 501(c), or to claim withholding at a 4% rate, it must provide
you with a Form W-8EXP. However, if a foreign organization is
claiming an exemption from withholding under an income tax treaty, it
must provide a Form W-8BEN. Income paid to foreign tax-exempt
organizations are subject to reporting on Form 1042-S.
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