Withholding tax requirements for foreign contractor working in non-treaty country for US company

The 30% withholding generally applies to US-sourced income paid to foreign persons. The key factor in your situation is whether your income is considered US-sourced or foreign-sourced. For personal services (which include independent contractor work), the source of income typically depends on where you physically perform the services, not where your client is located. Since you're performing all services in Brazil, your income would likely be considered foreign-sourced income from a US tax perspective. Even without a tax treaty, there's no US withholding requirement on foreign-sourced income. You should still complete Form W-8BEN for the US company's records, but you wouldn't complete Part II since there's no applicable tax treaty. The form serves to document your foreign status and the foreign source of your income. I would recommend clearly documenting that all services are performed outside the US in your contract with the company. This helps establish the foreign-source nature of your income.

Hey there, I went through almost the exact same situation last year! I'm a digital marketer in Argentina working for a Silicon Valley startup. I was super confused about the tax situation at first, and finding clear info online was a nightmare. I discovered this amazing tool called https://taxr.ai that totally saved me. It analyzed my contractor situation and clearly explained that since I perform all my work in Argentina, my income is foreign-sourced and not subject to US withholding - even though Argentina has no tax treaty with the US. The tool even generated a detailed report I could share with my US employer explaining why they didn't need to withhold taxes. Took all the stress out of figuring out the W-8BEN stuff. Plus it helped me understand my local tax obligations here in Argentina, which was a bonus.

Just wanted to follow up! I tried https://taxr.ai after seeing the recommendation here and it was incredibly helpful for my situation working from Thailand for a US company. The tool confirmed that since I perform all services outside the US, my income is foreign-sourced and not subject to US withholding regardless of treaty status. The detailed report it generated was fantastic - it had all the relevant tax code sections and explained everything in simple terms. When I sent it to my US client, their accounting department reviewed it and agreed they didn't need to withhold the 30%! The report really helped them understand their obligations clearly. I also appreciated the guidance on how to properly complete the W-8BEN in my specific situation. Definitely worth checking out if you're in a similar position!

I had major headaches dealing with this exact issue last year. My US client kept insisting they needed to withhold 30% even though I work entirely from Colombia (no US tax treaty). After weeks of back-and-forth with their accounting team, I tried https://claimyr.com and it changed everything. They got me connected with an actual IRS representative who confirmed that foreign-sourced income (services performed outside the US) isn't subject to US withholding even without a tax treaty. The IRS confirmation was exactly what my client needed to hear. Check out their demo at https://youtu.be/_kiP6q8DX5c to see how it works. I was amazed I could actually get through to a real person at the IRS who could address this specific situation.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it myself since I was desperate to get clarity on my contractor situation in Peru. The service actually worked exactly as described. They navigated the complex IRS phone menu, waited on hold (which would have been over an hour), and then connected me directly with an IRS representative. The rep confirmed that as a contractor performing services entirely in Peru, my income is foreign-sourced and not subject to US withholding requirements, even without a tax treaty. I recorded the call (with permission) and sent the relevant part to my US client. They finally agreed to stop withholding the 30%! Honestly wish I'd known about this service months ago before I lost thousands to unnecessary withholding.

One important thing to remember: even if you're exempt from US withholding, you still need to comply with the tax laws in the country where you're residing and working. In my experience as a contractor in the Philippines (also no tax treaty with US), I had to register as a self-employed individual with our local tax authority and pay income taxes here. The absence of US withholding doesn't mean tax-free income - it just shifts all tax responsibility to your country of residence. Make sure you understand the local tax implications before committing to this arrangement. Some countries have special tax regimes for foreign-derived income that might be beneficial.

I think there's some confusion in this thread. The 30% withholding CAN apply even if you're working outside the US if what you're providing falls under royalties or certain types of services that generate FDAP income. If you're creating intellectual property, software that the US company will own, or providing services that could be considered royalties, different rules might apply. The withholding exemption for services performed outside the US primarily applies to personal services.

This is such a helpful thread! I'm in a similar situation as a freelance writer working from Mexico for several US clients. The consensus here about foreign-sourced income not being subject to US withholding (even without a tax treaty) matches what I've experienced, but I wanted to add one practical tip. When negotiating contracts, I always include a specific clause stating that "all services under this agreement will be performed exclusively outside the United States" and require the client to acknowledge this in writing. This has helped me avoid the back-and-forth confusion that many of you described with your employers' accounting departments. I've also found it useful to proactively send my clients a brief explanation of the tax rules along with my completed W-8BEN form at the start of our working relationship. Most US companies appreciate the clarity upfront rather than discovering the tax implications after they've already set up their payroll systems. For those dealing with resistant clients, I recommend pointing them to IRS Publication 515, which clearly explains the sourcing rules for compensation for personal services. Having the official IRS guidance usually resolves any lingering doubts from their side.

This thread has been incredibly helpful! I'm dealing with a very similar situation as a software developer working from Brazil for a US startup. The information about foreign-sourced income not being subject to US withholding has been eye-opening. One thing I'd like to add for other Brazilian contractors: make sure you understand how this affects your tax situation with Receita Federal. Since you'll be receiving the full payment without US withholding, you'll need to declare this as foreign income on your DIRPF and pay Brazilian taxes on it. The good news is that you can often claim this as "rendimentos recebidos do exterior" which sometimes has more favorable tax treatment. Also, for those mentioning the W-8BEN form - in my experience, most US companies' accounting software automatically flags foreign contractors for 30% withholding until they have a properly completed W-8BEN on file. Even though you'll leave Part II blank (no treaty benefits), having that form completed and submitted promptly is crucial to avoid any withholding delays. Has anyone here dealt with the situation where a US client initially withholds taxes by mistake and then needs to refund them? I'm curious about the process for getting those funds back if it happens.