Tax & Accounting Blog

Understanding the Difference between Documented and Undocumented

1042-S, 1099, 6050W, Cost-Basis Reporting, Document and WorkFlow Management, International Reporting & Compliance, Tax Information Reporting, TIN Compliance, Trust Tax, W-8 & W-9 Foreign Reporting, Withholding Management July 13, 2011

It is important to keep in mind that, as a general rule, all US source payments made to non-US residents are subject to 30% withholding. To apply a reduced (or zero) rate of withholding, the non-US person must provide valid documentation.

If your securities account is with a Withholding Agent (a Qualified Intermediary, Non-Qualified Intermediary or US Withholding Agent), it is the responsibility of that withholding agent to collect and maintain the necessary documentation.

Non-US clients are considered to be either documented or undocumented. A client is considered to be documented when the withholding agent has valid documentation regarding the client. This means the withholding agent has either a completed Form W-8BEN from the client or the withholding agent has obtained all of the documentation required under the KYC rules approved by the IRS.

Undocumented clients are non-US clients that have not provided a completed Form W-8BEN, or the KYC documentation obtained by the withholding agent is incomplete or invalid.