Tax withholding
Tax withholding is based on treaty country and income type and is only applicable when income is US sourced.
Determining source of income
If you pay for personal services, then the source of income is determined by where the services are performed.
US-sourced income
Enabling tax withholding lets you apply federal withholding rates to payees. Rates are based on treaty country and income type, and only apply when income is US-sourced.
You can also enable additional withholding alongside federal withholding. Use this if you need to support additional withholding modules, such as state withholding. When you upload a payment file (CSV or TXT), include a column titled "AdditionalWithholding" and specify the percentage to withhold from each payment.
Additional withholding is added to federal withholding. If both apply, the total withholding is the sum of the two (federal + additional).
Non-US-sourced income
Non-US-sourced income isn't subject to withholding. If the payee has no income connection to the US (in terms of location, employees, or equipment), withholding rates don't apply under either of these conditions:
- The payee's income type is "Other Income (Services)."
- The payee has signed a Certificate of No U.S. Activities.
For more information, see Certificate of No U.S. Activities. For details on US tax withholding for non-US persons, visit the Internal Revenue Service (IRS) page on US tax withholding on payments to foreign persons.