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Overseas Business & Double Taxation

Velu Muniswamy's Profile

We have to engage the overseas vendor very often for various services. Most of the vendors are not aware of the withholding taxes and double taxation procedures Would like to refer the common forum to provide a reference for those vendors from America, Europe, APAC to avoid the conflict at stage of payment.

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Topic Expert
Marc Schwartz
Title: Partner
Company: Schwartz International
(Partner, Schwartz International) |

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.

Velu Muniswamy
Title: Sourcing Specialist
Company: Intuit Inc
(Sourcing Specialist, Intuit Inc) |

Marc, e.g. US origin vendor delivers service to a overseas customer in UK, Singapore, Indian sub Continent etc. in such cases what are the different challenges both the parties has to face and how they can minimize or avoid the Double Taxation.

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