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If you don’t obtain this declaration you may be liable for any unpaid payroll tax liability of the sub-contractor. This form contains a declaration that during the financial year in which the sub-contractor performed work for you, the sub-contractor paid its own payroll tax liability. If you engage a sub-contractor, you should obtain a signed copy of this declaration from the sub-contractor even if the payments you make to the sub-contractor are exempt under one of the contractor exemptions. Refer to the ATO employee or contactor decision tool and Revenue Ruling PTA 038 to help you decide if the contractor is an employee.įor more information, read our common errors page. You cannot claim an exemption if the contractor is an employee or if you have an employment agency contract. if your contract is an employment agency contract.if the contractor is an employee, even if they have an ABN or call themselves a contractor or.To determine if an exemption applies, first check: Income Paid to U.S.Payments to contractors are liable for payroll tax unless an exemption applies.The list below includes some specific types of income. Most of these types of income are discussed in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities under the heading Withholding on Specific Income. * 21% in the case of certain distributions by corporations, partnerships, trusts, or estates.

real property interestsġ5% (10% for dispositions before February 17, 2016)*ĭispositions of Partnership Interests under Section 1446(f)ĭividends paid to Puerto Rico corporationĪll other income payments subject to withholding Graduated rates in Publication 51, Circular A, Agricultural Employer's Tax Guide, or Publication 15, Circular E, Employer's Tax GuideĮach foreign partner's share of effectively connected income of the partnershipĭistributions of effectively connected income to foreign partners by publicly traded partnershipsĭispositions of U.S. Wages paid to a nonresident alien employee Graduated rates in Publication 15, Circular E, Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide Pensions paid to a nonresident alien - part paid for personal services Gross investment income from interest, dividends, rents, and royalties paid to a foreign private foundation scholarship or fellowship grant paid to other nonresident aliens scholarship or fellowship grant paid to holder of "F," "J," "M," or "Q" visa Generally, you must withhold the tax at the time you pay the income to the foreign person. trade or business, the rate is usually 30%. source gross income that is not effectively connected with a U.S.

You must withhold tax at the statutory rates shown below unless a reduced rate or exemption under a tax treaty applies. The income codes contained in this section correspond to the income codes used on Form 1042-S. This section discusses the specific types of income that are subject to NRA withholding. This income is also known as Not Effectively Connected Income or Non Effectively Connected Income (NECI). Refer to the Fixed, Determinable, Annual, Periodical (FDAP) Income page for more information. source income and it is either FDAP or certain gains. Not Effectively Connected Income (FDAP)Ī payment is subject to NRA withholding if it is U.S. In addition, partnerships are required to withhold on ECI allocated to foreign partners. ECI is, however, often subject to reporting.

Source Income Subject to Withholding, are amounts paid to foreign persons (including persons presumed to be foreign) that are subject to NRA Withholding, even if no amount is deducted and withheld from the payment because the income was exempt from tax under a U.S. Amounts subject to reporting on Form 1042-S, Foreign Person's U.S.