Instructions For Form W-8eci - Certificate Of Foreign Person'S Claim That Income Is Effectively Connected With The Conduct Of A Trade Or Business In The United States - 2017 Page 3
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5beneficiaries of the trust, if the beneficiary is not a foreign
Effectively connected income, after allowable
partnership, foreign simple or grantor trust, nominee or
deductions, is taxed at graduated rates applicable to U.S.
other agent. The beneficial owners of a foreign grantor
persons and resident aliens, rather than at the 30% rate.
trust (a foreign trust to the extent that all or a portion of the
You must report this income on your annual U.S. income
income of the trust is treated as owned by the grantor or
tax or information return.
another person under sections 671 through 679) are the
A partnership that has effectively connected income
persons treated as the owners of the trust. The beneficial
allocable to foreign partners is generally required to
owners of income paid to a foreign complex trust (a
withhold tax under section 1446. The withholding tax rate
foreign trust that is not a foreign simple trust or foreign
on a partner's share of effectively connected income is
grantor trust) is the trust itself.
35% for corporate partners and 39.6% for all other taxable
Generally, these beneficial owner rules apply for
partners. In certain circumstances the partnership can
purposes of sections 1441, 1442, and 1446, except that
withhold tax at the highest applicable rate to a particular
section 1446 requires a foreign simple trust to provide a
type of income (for example, long-term capital gain
Form W-8 on its own behalf rather than on behalf of the
allocated to a noncorporate partner). Any amount withheld
beneficiary of such trust.
under section 1446 on your behalf, and reflected on Form
8805 issued by the partnership to you, can be credited on
The beneficial owner of income paid to a foreign estate
your U.S. income tax return.
is the estate itself.
Foreign person. A foreign person includes a
A payment to a U.S. partnership, U.S. trust, or U.S.
nonresident alien individual, a foreign corporation, a
estate is treated as a payment to a U.S. payee. A U.S.
foreign partnership, a foreign trust, a foreign estate, and
partnership, trust, or estate should provide the withholding
any other person that’s not a U.S. person.
agent with a Form W-9. However, for purposes of section
1446, a U.S. grantor trust shall not provide the withholding
Nonresident alien individual. Any individual who is not
agent a Form W-9. Instead, the grantor or other owner
a citizen or resident alien of the United States is a
must provide Form W-8 or Form W-9 as appropriate.
nonresident alien individual. An alien individual meeting
either the “green card test” or the “substantial presence
Chapter 3. Chapter 3 means chapter 3 of the Internal
test” for the calendar year is a resident alien. Any person
Revenue Code (Withholding of Tax on Nonresident Aliens
not meeting either test is a nonresident alien individual.
and Foreign Corporations). Chapter 3 contains sections
Additionally, an alien individual who is treated as a
1441 through 1464.
nonresident alien pursuant to Regulations section
Chapter 4. Chapter 4 means chapter 4 of the Internal
301.7701(b)-7 for purposes of computing the individual's
Revenue Code (Taxes to Enforce Reporting on Certain
U.S. tax liability, or an alien individual who is a bona fide
Foreign Accounts). Chapter 4 contains sections 1471
resident of Puerto Rico, Guam, the Commonwealth of the
through 1474.
Northern Mariana Islands, the U.S. Virgin Islands, or
Disregarded entity. A business entity that has a single
American Samoa is a nonresident alien individual.
owner and is not a corporation under Regulations section
See Pub. 519 for more information on resident and
301.7701-2(b) is disregarded as an entity separate from
nonresident alien status including information about the
its owner. A disregarded entity does not submit Form
“green card test” and “substantial presence test.”
W-8ECI to a partnership for purposes of section 1446.
Even though a nonresident alien individual
Instead, the owner of such entity provides the appropriate
married to a U.S. citizen or resident alien can
!
documentation. See Regulations section 1.1446-1.
choose to be treated as a resident alien for certain
CAUTION
Effectively connected income. Generally, when a
purposes (for example, filing a joint income tax return),
foreign person engages in a trade or business in the
such individual is still treated as a nonresident alien for
United States, all income from sources in the United
withholding tax purposes on all income except wages.
States other than fixed or determinable annual or
periodical (FDAP) income (for example, interest,
Withholding agent. Any person, U.S. or foreign, that has
dividends, rents, and certain similar amounts) is
control, receipt, custody, disposal, or payment of U.S.
considered income effectively connected with a U.S. trade
source FDAP income subject to chapter 3 withholding is a
or business. FDAP income may or may not be effectively
withholding agent. For purposes of chapter 4, any person,
connected with a U.S. trade or business. Factors to be
U.S. or foreign, that has control, receipt, custody,
considered to determine whether FDAP income and
disposal, or payment of a withholdable payment is a
similar amounts from U.S. sources are effectively
withholding agent. The withholding agent can be an
connected with a U.S. trade or business include whether:
individual, corporation, partnership, trust, association, or
The income is from assets used in, or held for use in,
any other entity including (but not limited to) any foreign
the conduct of that trade or business, or
intermediary, foreign partnership, and U.S. branches
The activities of that trade or business were a material
treated as U.S. person. Generally, the person who pays
factor in the realization of the income.
(or causes to be paid) an amount subject to withholding to
the foreign person (or to its agent) must withhold.
There are special rules for determining whether income
from securities is effectively connected with the active
For purposes of section 1446, the withholding agent is
conduct of a U.S. banking, financing, or similar business.
the partnership conducting the trade or business in the
See section 864(c)(4)(B)(ii) and Regulations section
United States. For a publicly traded partnership, the
1.864-4(c)(5)(ii) for more information.
withholding agent can be the partnership, a nominee
-3-
Instructions for Form W-8ECI (Rev. 7-2017)
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