We are a U.S vendor making payments to a foreign vendor for insurance premiums. What determines the source of payment for insurance premiums? The vendor never comes into the U.S. Is this type of payment considered U.S. sourced or non-U.S. sourced?


Though under Chapter 3, insurance premiums paid by U.S. sources to a foreign insurer were exempt from reporting, such payments now are subject to FATCA/Chapter 4. So the question is whether FATCA withholding is required. That depends on whether the insurer has provided you with adequate documentation (W-8BEN-E) certifying that it is compliant with FATCA. Without that certification, you must presume that the insurer is a non-compliant foreign financial institution and you must withhold 30% from the gross premiums paid and report on Form 1042-S.

However, if you have documentation of the payee’s status with regard to compliance with FATCA, then no reporting of insurance premiums is required.

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