Overseas Business & Double Taxation

Velu: Every transaction is different, and I find companies get into trouble by having a "one size fits all" solution. That said, there are procedures you should put into place to ensure appropriate treatment. First, you should obtain a Form W-8BEN-E (or W-8BEN or a related W-8 series form depending on the identity of the payee) from every foreign vendor prior to making payment. Second, whether US taxation applies depends 100% on the facts and circumstances of the transactions. For instance, a vendor providing services outside the US may have different US tax treatment from a vendor providing services inside the US which is different from a vendor selling tangible property, etc. -- you hopefully get the picture. The nature of the taxability in the US may impact your obligation (such as whether to withhold). Furthermore, you must be aware that simply because a tax treaty may exist between the US and the jurisdiction to which you are making a payment does NOT mean the treaty benefits automatically apply. So - -you should analyze each transaction under domestic law first and then see if the treaty applies if the domestic law answer is undesirable (to see if the treaty provides a "better" answer). I hope this is helpful.

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