IRS Form 8802: how international US companies can reduce tax payments to local governments
Businesses that maintain operations internationally are subject to the withholding rates of the foreign countries they operate in. For tax purposes, local governments withhold tax on income paid from internal sources to residents of other countries, regardless of their residency. The withholding rates depend on the laws of individual countries.
However, for certain types of income paid to residents of the United States, the rates may be reduced to as low as zero percent. These reduced rates are a result of tax treaties between the US and other nations. This is why they are called “treaty-reduced rates.”
In order to claim the benefits provided under these treaties, owners requesting these benefits are required to provide proof of residency. This proof comes in the form of a Tax Residency Certificate (TRC), and is also referred to as IRS Form 6166, Certification of U.S. Tax Residency. It can be obtained by filing Form 8802, Application for United States Residency Certification.
How do I complete IRS Form 8802?
To complete this form, you should provide the following information: your name, TIN or EIN, address during the calendar year, address where the Form 6166 should be sent, appointee information, your status (individual, partnership, trust, estate, corporation, S corporation, etc), information about previous tax forms, calendar year for which the certification is requested, tax period on which certification will be based, purpose of certification (income tax, VAT, other), information about penalties, signature and date of filing.
While completing Form 8802 is generally straightforward, it usually takes up to 30 days for the IRS to issue a TRC, assuming that there are no issues with the application. It is important to attach all of the required documents to the form, as any questions from the IRS regarding an incomplete submission of Form 8802 may delay your TRC.
How do I file IRS Form 8802?
Completing and signing Form 8802 electronically is the fastest way to receive the TRC from the IRS, or accept a reduced payment, net of foreign withholding tax, from the foreign party. Form 8802 can be e-faxed to the IRS at 215-516-1035 or 215-516-2485.
The IRS starts processing Form 8802 for the subsequent calendar year on December 1st of the preceding calendar year. For example, a business seeking a 2019 TRC can file Form 8802 as early as (but not earlier than) December 1, 2018. It’s a good idea to file Form 8802 as soon as possible without waiting for a foreign customer or vendor to request one. Note, that there is an $85 IRS fee to obtain a TRC. But this is a small price to pay for the benefits that having a TRC provides.
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