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INSTRUCTIONS

NONRESIDENT SHAREHOLDER OR PARTNER AFFIDAVIT AND AGREEMENT

INCOME TAX WITHHOLDING

Requirement to Make Withholding Payments

Code Section 12-8-590 requires an S-corporation or partnership to withhold taxes at the rate of 5% on each nonresident

shareholder's or partner's share of South Carolina taxable income. There are several exceptions to the withholding

requirements. An S-corporation or partnership is not required to withhold income taxes with regard to any nonresident

shareholder or partner (1) who submits an affidavit and agreement or (2) for which the S-corporation or partnership

reports his income on a composite nonresident income tax return.

Purpose of Affidavit

The affidavit is used by a nonresident shareholder or partner to request an exemption from the withholding required

pursuant to Code Section 12-8-590. The affidavit does not need to be completed by shareholders or partners for which the

S-corporation or partnership will file a composite nonresident income tax return.

Who May Execute this Affidavit

Any nonresident shareholder or partner having South Carolina income from an S-corporation or partnership may submit

the agreement to the S-corporation or partnership. Shareholders and partners whose income will be reported on a

composite return are automatically exempt from withholding and are not required to submit an affidavit to the

S-corporation or partnership. Any income tax due must be paid by the unextended due date of the composite return and is

subject to the declaration of estimated tax rules.

Where and When to Execute this Affidavit

Shareholder or Partner Instructions:

A shareholder or partner should fully complete the affidavit and submit it directly to the S-corporation or partnership. The

affidavit should be signed by an officer of the corporation or a partner in the partnership. A separate affidavit must be

submitted by each partner or shareholder for stock that is jointly owned.

The affidavit is valid for all subsequent years and should not be resubmitted to the entity as long as (1) the shareholder's

or partner's nonresident status remains unchanged or (2) the withholding exemption is not revoked by the Department of

Revenue.

S-corporation or Partnership Instructions:

The S-corporation or partnership must remit all affidavits to the South Carolina Department of Revenue.

S-corporation should attach the affidavits to South Carolina form 1120S-WH (Withholding Tax on Income of Nonresident

Shareholders) and file with the Department of Revenue on or before the fifteenth day of the third month following the close

of the S-corporation's tax year.

Partnerships should attach the affidavits to South Carolina form 1065 (Partnership Return of Income) or form SC8736

(Request for Extension of Time to File South Carolina Tax Return for Fiduciary and Partnership) and file with the

Department of Revenue on or before the fifteenth day of the fourth month following the close of the partnership's tax year.

Affidavits remain valid for subsequent tax years and should only be filed with the Department of Revenue in the first year

that the shareholder or partner submits an agreement to the entity.

Social Security Privacy Act

It is mandatory that you provide your social security number on this tax form. 42 U.S.C 405(c)(2)(C)(i) permits a state to use an individual's social

security number as means of identification in administration of any tax. SC Regulation 117-201 mandates that any person required to make a return to

the SC Department of Revenue shall provide identifying numbers, as prescribed, for securing proper identification. Your social security number is used

for identification purposes.

The Family Privacy Protection Act

Under the Family Privacy Protection Act, the collection of personal information from citizens by the Department of Revenue is limited to the information

necessary for the Department to fulfill its statutory duties. In most instances, once this information is collected by the Department, it is protected by law

from public disclosure. In those situations where public disclosure is not prohibited, the Family Privacy Protection Act prevents such information from

being used by third parties for commercial solicitation purposes.

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