U.S. officials can withhold taxpayer's monies from a foreign country under certain conditions. According to the Internal Revenue Service (IRS) tax treaty tables
, the U.S. has income tax treaties with foreign countries that provide exemptions from, or reduced rates of, withholding for certain items of income.
To be subject to withholding, the income must generally be of a type that is FDAP (fixed, determinable, annual, or periodic) and derived from sources within the United States.
Nonresident aliens are individuals who are neither residents nor citizens.
After the withholding occurs, foreign investors generally do not incur further U.S. tax obligations.
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The United States has income tax treaties (or conventions) with a number of foreign countries under which residents (but not always citizens) of those countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain income, profit or gain from sources within the United States.
Tax Treaty Tables | Internal Revenue Service - IRS tax forms
1. Other than backup withholding, only the income of foreign persons is subject to withholding. 2. To be subject to withholding, the income must generally be of a type that is: (a) fixed, determinable, annual, or periodic ("FDAP"), and (b) derived from sources within the United States.
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