Tax withholding
Tax withholding is based on treaty country and income type and is only applicable when income is US sourced.
Determining source of income
If you pay for personal services, then the source of income is determined by where the services are performed.
Enabling tax withholding allows you to apply federal withholding rates to payees. Rates are based on treaty country and income type and are only applicable when income is US-sourced.
Additional withholding can also be enabled to join the existing federal withholding functionality. This feature is used if you want to support additional withholding modules, such as State Withholding. When uploading a payment file (CSV or TXT), include a column titled "AdditionalWithholding" and specify the percentage to be withheld from each payment.
Please note that additional withholding is added to federal withholding. Therefore, if both additional and federal withholding are applicable, the total withholding is the total of both withholdings (federal + additional).
Non-US-sourced income is not subject to withholding. If the payee has no income connection to the US (in terms of location, employees or equipment), withholding rates are not applicable under the following conditions:
- The payee income type is "Other Income (Services)".
- The payee has signed a Certificate of No U.S. Activities.
For further details, see Certificate of No U.S. Activities. For information on US tax withholding for non-US persons, visit this page on the IRSInternal Revenue Service website.