We paid a Canadian company for a software maintenance agreement and have received a W-8ECI with a U.S. TIN. We believe there is no required withholding, but the payment is reportable on a 1042-S. Is our thinking correct?

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According to information provided on IRS Instructions for Form 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, you are correct that income effectively connected with business conducted in the U.S. is not withholdable.

You are also correct in your understanding that this payment must be reported on a Form 1042-S to the recipient, regardless of whether or not you withheld.

Do make certain you have a current W-8ECI on file, however. The form expires on the last day of the third complete calendar year following the date the form was signed; a form signed September 30, 2015 expires on December 31, 2018, for example.

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