Foreign Corporations and non-resident aliens who have a U.S source income are subject to U.S Taxation.
According to codes section 871 (b) and 882, all Foreign Persons are taxed at graduated rates on the net amount of income connected with trade or business with in United States. U.S source investments incomes are taxed at flat rate of 30% according to code section 871 (a) and code section 881.
According to Code Section 1441 and 1442 the persons who control payment of the U.S source investment income must withhold 30% tax.
Refer articles 10, 11 and 12 of the U.S model tax treaty. Use of tax treaties can reduce withholding tax rate to 15%.
According to Code Section 871 (h) and 881 ( c ), there are some exemptions for portfolio interest income.
Reg 1.441-2(b)(2):
According to this regulation capital gains from sales of stocks, bonds and other securities are generally exempt from U.S taxation.
Refer Code Section 1441 and 1442:
According to these code sections a person who has control, receipt, custody, disposal or payment of an item of U.S Investment income is called a withholding tax agent.
According to Code Section 1461, a withholding agent who fails to withhold is liable for the uncollected taxes.
Ref Code Section 897:
If a foreign person realizes a gain or loss from disposition of a U.S real property is taxed in the same way as income effectively connected with the conduct of a U.S trade or a business.
Disclaimer:
This information is for educational purposes only. It does not constitute any legal advice or opinion. Please do not use any of its contents without seeking a professional advice.
References:
www.jct.gov/publications.html
http://www.law.cornell.edu
http://www.irs.gov/publications
U.S Taxation of International Transactions by Robert J. Misey, Michael S. Schadewald
Introduction to United states International Taxation by Paul R. McDaniel, Hugh j. Ault and James R. Repetti
International Taxation by Joseph Isenbergh
International Taxation in a nutshell by Richard L. Doernberg.
International Income Taxation, Code and Regulations by Robert J. Peroni – CCH
Mansoor Suhail (Mani)
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