I am a nonresident alien living in a foreign country and I will receive U.S. source royalty income. Do I need to obtain an ITIN

Yes, as a nonresident alien receiving U.S. source royalty income, you generally need to obtain an Individual Taxpayer Identification Number (ITIN) for tax reporting purposes. U.S. source royalty income paid to a nonresident alien is typically subject to a 30% U.S. federal income tax. If you are claiming a reduced rate of U.S. federal income tax on this income under a tax treaty, you should obtain an ITIN and provide it to the withholding agent on a Form W-8 BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.

To obtain an ITIN, you must complete Form W-7, Application for IRS Individual Taxpayer Identification Number, and submit it along with the required documentation. The documentation must prove your identity and foreign status. You will also need to provide a signed letter or document from the withholding agent verifying that an ITIN is required to make distributions during the current tax year that are subject to IRS information reporting or federal tax withholding.

Here are the steps to apply for an ITIN:

1. Complete Form W-7: Fill out the form with accurate information.
2. Attach Required Documentation: Include original documents or certified copies from the issuing agency that prove your identity and foreign status. A passport is the only standalone document that can be used for this purpose.
3. Submit a Signed Letter from the Withholding Agent: This letter should verify that an ITIN is required for tax withholding and/or reporting purposes.
4. Mail the Application: Send the completed Form W-7, the required documentation, and the signed letter from the withholding agent to the IRS address provided in the Form W-7 instructions.

For more detailed information on the process and the required documentation, you can refer to IRS Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN).

Sources:
Publication 515 (2024)
Publication 519 (2023)
Publication 4757 (10/2023)
Publication 1915 (2/2021)
IRM Part 5. Collecting Process. Chapter 21. International and Insular Issues. Section 8. Adjustments to International Cases