Form 8233 should be completed by a foreign vendor when they are claiming an exemption from withholding on compensation for independent (and certain dependent) personal services performed in the United States. Specifically, the form is used to claim a tax treaty withholding exemption for compensation for personal services, including compensatory scholarship or fellowship income, and noncompensatory scholarship or fellowship income if received from the same withholding agent.
Here are the key scenarios when a foreign vendor should complete Form 8233:
- Claiming Tax Treaty Benefits: If the foreign vendor is eligible for a tax treaty benefit that exempts them from withholding on compensation for personal services, they must complete Form 8233 to claim this exemption. This includes both independent personal services (self-employment) and dependent personal services (employment).
- Noncompensatory Scholarship or Fellowship Income: If the foreign vendor is also claiming a tax treaty withholding exemption for noncompensatory scholarship or fellowship income, they must complete Form 8233, provided they are also claiming a tax treaty withholding exemption for compensation for personal services received from the same withholding agent.
- Independent Personal Services: If the foreign vendor is performing services as an independent contractor in the United States and is eligible for a tax treaty exemption, they must complete Form 8233. However, they generally cannot claim a treaty exemption if they have an office or fixed base in the United States available to them, unless a specific treaty exception applies.
- Dependent Personal Services: If the foreign vendor is performing services as an employee in the United States and is eligible for a tax treaty exemption, they must complete Form 8233 to claim the exemption for part or all of their compensation.
- Public Entertainers: Generally, athletes and entertainers are not exempt from tax on income derived from their activities, but if a specific treaty provides an exemption under certain conditions, they must complete Form 8233 to claim the exemption.
The form must be given to the withholding agent, who will then review it and, if satisfied, forward it to the IRS. The withholding agent must wait at least 10 days after mailing the form to the IRS to see if there are any objections before applying the exemption.
In summary, Form 8233 should be completed by a foreign vendor to claim a tax treaty withholding exemption for compensation for personal services or noncompensatory scholarship or fellowship income, ensuring compliance with the specific requirements and conditions of the applicable tax treaty.
Sources:
Instructions for Form 8233 (10/2021)
Publication 515 (2024)
Publication 519 (2023)
Instructions for Form 8288 (01/2023)
Instructions for Forms 8804, 8805, and 8813 (11/2022)
Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY (06/2022)
Instructions for Form W-8BEN (10/2021)
