US tax for an owner abroad · A term for founders abroad
What is a tax treaty?
An agreement between the US and another country that lowers withholding, decides which country taxes what, and relieves double taxation.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 96 of 105 in the glossary, filed under T.IRS: tax treaty tables
Tax treaty, for a founder abroad.
The US has income tax treaties with about sixty countries. A treaty sets lower withholding rates on dividends, interest and royalties, defines when a business has a permanent establishment in the other country, and gives relief from double taxation.
Without a treaty, the standard 30% rate applies and relief depends on your own country's rules. A treaty helps only a resident of the treaty country, and you claim it on a W-8BEN with your tax number. Each of our country pages says which applies.
Sources: IRS: tax treaty tables.
Read next · guide · 5 minLLC or C-Corporation for a founder outside the United StatesWhat founders ask next.
- Does my country have a tax treaty with the US?
- Check the IRS's treaty tables, or your country's page here. Many large countries do; many others, including several where our founders live, don't.
- How do I claim a treaty rate?
- On Part II of the W-8BEN you give the payer, naming the article and rate. US tax treaties and your LLC explains it.
03 · See also
- US tax for an owner abroadWithholding taxTax a US payer deducts before paying a foreign person: 30% on US-source passive income, unless a treaty rate is claimed on a W-8.Read the term
- US tax for an owner abroadPermanent establishmentUnder a tax treaty, a fixed place of business or dependent agent in a country, which lets that country tax the business profits linked to it.Read the term
- US tax for an owner abroadForm W-8BEN and W-8BEN-EThe IRS forms a foreign person or foreign company gives a US payer to certify foreign status and, where it applies, claim a treaty rate.Read the term
- US tax for an owner abroadDisregarded entityA single-member LLC the IRS ignores for income tax, treating its income as the owner's; it still files Form 5472 if the owner is foreign.Read the term
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