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US-Source Income
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Stuart O. Bronstein
Sep 7, 2021, 11:31:40 AM9/7/21
to
I have a question about US source income. On the one hand Publication
519 implies that income from a US source is not taxable to a
noncitizen/nonresident whose services are all performed outside the US.
On the other hand in other places the IRS says that all US source
income for nonresident aliens is subject to tax.
In my case there is the director of a US corporation, who receives
directors fees for services that are all performed outside the US. Is
that considered US source income? Sorry, but I haven't been able to
fine the answer to that question.
Thanks for any help you can give.
--
Stu
http://DownToEarthLawyer.com
--
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<< that may be imposed upon the taxpayer. >>
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519 implies that income from a US source is not taxable to a
noncitizen/nonresident whose services are all performed outside the US.
On the other hand in other places the IRS says that all US source
income for nonresident aliens is subject to tax.
In my case there is the director of a US corporation, who receives
directors fees for services that are all performed outside the US. Is
that considered US source income? Sorry, but I haven't been able to
fine the answer to that question.
Thanks for any help you can give.
--
Stu
http://DownToEarthLawyer.com
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
ira smilovitz
Sep 8, 2021, 10:08:43 PM9/8/21
to
On Tuesday, September 7, 2021 at 11:31:40 AM UTC-4, Stuart O. Bronstein wrote:
> I have a question about US source income. On the one hand Publication
> 519 implies that income from a US source is not taxable to a
> noncitizen/nonresident whose services are all performed outside the US.
> On the other hand in other places the IRS says that all US source
> income for nonresident aliens is subject to tax.
>
> In my case there is the director of a US corporation, who receives
> directors fees for services that are all performed outside the US. Is
> that considered US source income? Sorry, but I haven't been able to
> fine the answer to that question.
>
> Thanks for any help you can give.
>
> --
> Stu
> http://DownToEarthLawyer.com
>
> --
I don't have a definitive answer for you, but here's my thinking on the matter. As a corporate director, I would expect that attendance at board meetings would be required. Attendance via teleconference would be for the convenience of the director and not for the necessity of the corporation. Therefore the services would be performed inside the US, regardless of his physical location. This differs from the situation where the corporation might hire someone internationally to perform some service that can be done anywhere or needs to be done internationally. Of course, my reasoning avoids any consideration of COVID impacts on the rtax treatment. Also, you need to consider any tax treaty provisions that might cover this.
> I have a question about US source income. On the one hand Publication
> 519 implies that income from a US source is not taxable to a
> noncitizen/nonresident whose services are all performed outside the US.
> On the other hand in other places the IRS says that all US source
> income for nonresident aliens is subject to tax.
>
> In my case there is the director of a US corporation, who receives
> directors fees for services that are all performed outside the US. Is
> that considered US source income? Sorry, but I haven't been able to
> fine the answer to that question.
>
> Thanks for any help you can give.
>
> --
> Stu
> http://DownToEarthLawyer.com
>
> --
Ira Smilovitz, EA
Leonia, NJ
taxt...@gmail.com
Sep 8, 2021, 10:38:45 PM9/8/21
to
On Tuesday, 7 September 2021 at 11:31:40 UTC-4, Stuart O. Bronstein wrote:
> I have a question about US source income. On the one hand Publication
> 519 implies that income from a US source is not taxable to a
> noncitizen/nonresident whose services are all performed outside the US.
> On the other hand in other places the IRS says that all US source
> income for nonresident aliens is subject to tax.
>
> In my case there is the director of a US corporation, who receives
> directors fees for services that are all performed outside the US. Is
> that considered US source income? Sorry, but I haven't been able to
> fine the answer to that question.
>
> Thanks for any help you can give.
>
> --
> Stu
> http://DownToEarthLawyer.com
My thought, not necessarily definitively correct, is that the director's services are wages, which are typically referred to a compensation for dependent services in model treaties.
> I have a question about US source income. On the one hand Publication
> 519 implies that income from a US source is not taxable to a
> noncitizen/nonresident whose services are all performed outside the US.
> On the other hand in other places the IRS says that all US source
> income for nonresident aliens is subject to tax.
>
> In my case there is the director of a US corporation, who receives
> directors fees for services that are all performed outside the US. Is
> that considered US source income? Sorry, but I haven't been able to
> fine the answer to that question.
>
> Thanks for any help you can give.
>
> --
> Stu
> http://DownToEarthLawyer.com
As such, the wages are performed at the physical location(s) of the US Corporation and are then deemed to be performed within the US. Therefore subject to US withholding taxes. (For example, looking at the other directors, what state taxes are withheld from the compensation? That would be where the work is defined as occurring.)
Alternatively, the US Corporation may instead try to define that the director was performing the service within their country, but then that would subject the US Corporation to payroll obligations within the foreign country, and possibly also to sales taxes, corporate taxes, and other regulatory issues, given that the US Corporation then has stated that they have a physical presence in the foreign country. (Most treaties define physical presence as then also conferring tax and other obligations to the foreign country where the physical presence occurs.) Accordingly, it is highly probable that the US Corporation will not find it to the corporation's benefit to attempt to claim that the director is not subject to US withholding tax due to the issues that will happen should they attempt this. Certainly not for a single person.
Since I do not know the country of residence of the foreign director, I would be unable to research further into any treaty modifiers to the situation. I would suggest that you consult with someone familiar with the applicable treaty to determine further refinements and/or modifiers. For example
Stuart O. Bronstein
Sep 9, 2021, 3:39:03 AM9/9/21
to
ira smilovitz <ira.sm...@gmail.com> wrote:
> I don't have a definitive answer for you, but here's my thinking
> on the matter. As a corporate director, I would expect that
> attendance at board meetings would be required. Attendance via
> teleconference would be for the convenience of the director and
> not for the necessity of the corporation. Therefore the services
> would be performed inside the US, regardless of his physical
> location. This differs from the situation where the corporation
> might hire someone internationally to perform some service that
> can be done anywhere or needs to be done internationally. Of
> course, my reasoning avoids any consideration of COVID impacts on
> the rtax treatment. Also, you need to consider any tax treaty
> provisions that might cover this.
Thanks Ira. I appreciate that. It makes so much sense.
> I don't have a definitive answer for you, but here's my thinking
> on the matter. As a corporate director, I would expect that
> attendance at board meetings would be required. Attendance via
> teleconference would be for the convenience of the director and
> not for the necessity of the corporation. Therefore the services
> would be performed inside the US, regardless of his physical
> location. This differs from the situation where the corporation
> might hire someone internationally to perform some service that
> can be done anywhere or needs to be done internationally. Of
> course, my reasoning avoids any consideration of COVID impacts on
> the rtax treatment. Also, you need to consider any tax treaty
> provisions that might cover this.
Stuart O. Bronstein
Sep 9, 2021, 3:44:03 AM9/9/21
to
"parrisb...@yahoo.ca" <taxt...@gmail.com> wrote:
> My thought, not necessarily definitively correct, is that the
> director's services are wages, which are typically referred to a
> compensation for dependent services in model treaties.
>
> As such, the wages are performed at the physical location(s) of
> the US Corporation and are then deemed to be performed within the
> US. Therefore subject to US withholding taxes. (For example,
> looking at the other directors, what state taxes are withheld from
> the compensation? That would be where the work is defined as
> occurring.)
>
> Alternatively, the US Corporation may instead try to define that
> the director was performing the service within their country, but
> then that would subject the US Corporation to payroll obligations
> within the foreign country, and possibly also to sales taxes,
> corporate taxes, and other regulatory issues, given that the US
> Corporation then has stated that they have a physical presence in
> the foreign country. (Most treaties define physical presence as
> then also conferring tax and other obligations to the foreign
> country where the physical presence occurs.) Accordingly, it is
> highly probable that the US Corporation will not find it to the
> corporation's benefit to attempt to claim that the director is not
> subject to US withholding tax due to the issues that will happen
> should they attempt this. Certainly not for a single person.
Thanks.
> My thought, not necessarily definitively correct, is that the
> director's services are wages, which are typically referred to a
> compensation for dependent services in model treaties.
>
> As such, the wages are performed at the physical location(s) of
> the US Corporation and are then deemed to be performed within the
> US. Therefore subject to US withholding taxes. (For example,
> looking at the other directors, what state taxes are withheld from
> the compensation? That would be where the work is defined as
> occurring.)
>
> Alternatively, the US Corporation may instead try to define that
> the director was performing the service within their country, but
> then that would subject the US Corporation to payroll obligations
> within the foreign country, and possibly also to sales taxes,
> corporate taxes, and other regulatory issues, given that the US
> Corporation then has stated that they have a physical presence in
> the foreign country. (Most treaties define physical presence as
> then also conferring tax and other obligations to the foreign
> country where the physical presence occurs.) Accordingly, it is
> highly probable that the US Corporation will not find it to the
> corporation's benefit to attempt to claim that the director is not
> subject to US withholding tax due to the issues that will happen
> should they attempt this. Certainly not for a single person.
> Since I do not know the country of residence of the foreign
> director, I would be unable to research further into any treaty
> modifiers to the situation. I would suggest that you consult with
> someone familiar with the applicable treaty to determine further
> refinements and/or modifiers. For example
back and pay to have someone look into this more, and specifically
more into the tax treaty.
--
Stu
http://DownToEarthLawyer.com
Adam H. Kerman
Sep 9, 2021, 3:44:45 PM9/9/21
to
parrisb...@yahoo.ca <taxt...@gmail.com> wrote:
>On Tuesday, 7 September 2021 at 11:31:40 UTC-4, Stuart O. Bronstein wrote:
>>I have a question about US source income. On the one hand Publication
>>519 implies that income from a US source is not taxable to a
>>noncitizen/nonresident whose services are all performed outside the US.
>>On the other hand in other places the IRS says that all US source
>>income for nonresident aliens is subject to tax.
>>In my case there is the director of a US corporation, who receives
>>directors fees for services that are all performed outside the US. Is
>>that considered US source income? Sorry, but I haven't been able to
>>fine the answer to that question.
>>Thanks for any help you can give.
>On Tuesday, 7 September 2021 at 11:31:40 UTC-4, Stuart O. Bronstein wrote:
>>I have a question about US source income. On the one hand Publication
>>519 implies that income from a US source is not taxable to a
>>noncitizen/nonresident whose services are all performed outside the US.
>>On the other hand in other places the IRS says that all US source
>>income for nonresident aliens is subject to tax.
>>In my case there is the director of a US corporation, who receives
>>directors fees for services that are all performed outside the US. Is
>>that considered US source income? Sorry, but I haven't been able to
>>fine the answer to that question.
>>Thanks for any help you can give.
>My thought, not necessarily definitively correct, is that the director's
>services are wages, which are typically referred to a compensation for
>dependent services in model treaties. . . .
>services are wages, which are typically referred to a compensation for
A director's services are never wages unless he is also providing
services to the corporation as an employee.
I disagree with your answer.
Alas, I do not know what the correct answer is.
Alan
Sep 9, 2021, 7:35:00 PM9/9/21
to
On 9/8/21 7:07 PM, ira smilovitz wrote:
> On Tuesday, September 7, 2021 at 11:31:40 AM UTC-4, Stuart O. Bronstein wrote:
>> I have a question about US source income. On the one hand Publication
>> 519 implies that income from a US source is not taxable to a
>> noncitizen/nonresident whose services are all performed outside the US.
>> On the other hand in other places the IRS says that all US source
>> income for nonresident aliens is subject to tax.
>>
>> In my case there is the director of a US corporation, who receives
>> directors fees for services that are all performed outside the US. Is
>> that considered US source income? Sorry, but I haven't been able to
>> fine the answer to that question.
>>
>> Thanks for any help you can give.
>>
>> --
>> Stu
>> http://DownToEarthLawyer.com
>>
>> --
> I don't have a definitive answer for you, but here's my thinking on the matter. As a corporate director, I would expect that attendance at board meetings would be required. Attendance via teleconference would be for the convenience of the director and not for the necessity of the corporation. Therefore the services would be performed inside the US, regardless of his physical location. This differs from the situation where the corporation might hire someone internationally to perform some service that can be done anywhere or needs to be done internationally. Of course, my reasoning avoids any consideration of COVID impacts on the rtax treatment. Also, you need to consider any tax treaty provisions that might cover this.
>
>
>
> Ira Smilovitz, EA
> Leonia, NJ
>
I don't have a definitive answer either, BUT, I have always interpreted
> On Tuesday, September 7, 2021 at 11:31:40 AM UTC-4, Stuart O. Bronstein wrote:
>> I have a question about US source income. On the one hand Publication
>> 519 implies that income from a US source is not taxable to a
>> noncitizen/nonresident whose services are all performed outside the US.
>> On the other hand in other places the IRS says that all US source
>> income for nonresident aliens is subject to tax.
>>
>> In my case there is the director of a US corporation, who receives
>> directors fees for services that are all performed outside the US. Is
>> that considered US source income? Sorry, but I haven't been able to
>> fine the answer to that question.
>>
>> Thanks for any help you can give.
>>
>> --
>> Stu
>> http://DownToEarthLawyer.com
>>
>> --
> I don't have a definitive answer for you, but here's my thinking on the matter. As a corporate director, I would expect that attendance at board meetings would be required. Attendance via teleconference would be for the convenience of the director and not for the necessity of the corporation. Therefore the services would be performed inside the US, regardless of his physical location. This differs from the situation where the corporation might hire someone internationally to perform some service that can be done anywhere or needs to be done internationally. Of course, my reasoning avoids any consideration of COVID impacts on the rtax treatment. Also, you need to consider any tax treaty provisions that might cover this.
>
>
>
> Ira Smilovitz, EA
> Leonia, NJ
>
the code (864 and 871) and its accompanying regulations to mean physical
presence in the 48 states and the D.C. whenever it says "engaged in a
trade or business in the United States" when dealing with personal
service income. Sitting in front of a terminal in Belgium is no
different then making a telephone call from Belgium. I don't believe
the issue of convenience or necessity enters into the picture.
I just don't see how an NRA can have effectively connected personal
service income without physically being present in the U.S.
Stuart O. Bronstein
Sep 9, 2021, 9:15:05 PM9/9/21
to
"Adam H. Kerman" <a...@chinet.com> wrote:
> A director's services are never wages unless he is also providing
> services to the corporation as an employee.
The IRS appears to agree with you. According to one of their
> A director's services are never wages unless he is also providing
> services to the corporation as an employee.
publications (I forget which at the moment) directors' fees are
considered self-employment income.
--
Stu
http://DownToEarthLawyer.com
ira smilovitz
Sep 10, 2021, 1:30:21 AM9/10/21
to
The following article supports Alan's position (and contradicts my earlier thinking) that a non-resident alien's director's compensation for services performed outside the US would not be taxable to the US.
https://www.dlapiper.com/en/uk/insights/publications/2015/05/global-tax-news-may-2015/international-tax-and-withholding-considerations/
Ira Smilovitz, EA
Leonia, NJ
https://www.dlapiper.com/en/uk/insights/publications/2015/05/global-tax-news-may-2015/international-tax-and-withholding-considerations/
Ira Smilovitz, EA
Leonia, NJ
Taxed and Spent
Sep 10, 2021, 11:00:55 AM9/10/21
to
On 9/9/2021 10:28 PM, ira smilovitz wrote:
> The following article supports Alan's position (and contradicts my earlier thinking) that a non-resident alien's director's compensation for services performed outside the US would not be taxable to the US.
>
> https://www.dlapiper.com/en/uk/insights/publications/2015/05/global-tax-news-may-2015/international-tax-and-withholding-considerations/
Interesting, though, that this article cites nothing at all in support
> The following article supports Alan's position (and contradicts my earlier thinking) that a non-resident alien's director's compensation for services performed outside the US would not be taxable to the US.
>
> https://www.dlapiper.com/en/uk/insights/publications/2015/05/global-tax-news-may-2015/international-tax-and-withholding-considerations/
any of its positions.
Alan
Sep 11, 2021, 4:07:42 PM9/11/21
to
company is not required to withhold income tax. If the payment was
taxable in the US, then the company would have been required to withhold
30% or the treaty amount.
==========================================================
US federal withholding tax considerations
Under US law, directors’ fees a US company pays to a nonresident alien
director who performs director services while in the United States are
considered US source income that is subject to US federal withholding
tax of 30 percent.
When the same director performs director services for a US company
outside of the United States (such as when a meeting is convened outside
of the United States or he participates by conference call from outside
the country), the portion of fees paid for services performed outside
of the United States are not subject to US federal withholding tax.
===========================================================
Taxed and Spent
Sep 12, 2021, 11:08:55 AM9/12/21
to
not pointing to any supporting document, statute, regulation or
anything. Their statement may be true, or it may just be their position
based on nothing at all.
Alan
Sep 12, 2021, 6:19:22 PM9/12/21
to
In order to be taxed you have to perform your personal services within
the U.S. The code defines the U.S. as the 50 states and D.C.
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