Individuals who are foreign persons include all non-U.S. citizens who are neither green-card holders nor meet the 183-day substantial presence test (called nonresident aliens). Nonresident aliens also include individuals who meet the 183-day substantial presence test for the calendar year but who are also residents of a tax treaty country (called dual residents) who make an election with supporting facts that they are nonresidents of the U.S. under a residency tiebreaker rule under an applicable tax treaty. Special rules may apply to nonresident aliens who are former U.S. citizens or former long-term green-card holders.
Foreign corporations who are foreign persons include any corporation not organized under the laws of one of the 50 states or the District of Columbia. The IRS provides a list of per se corporations to assist payers in distinguishing foreign corporations. Although a subsidiary of a foreign corporation organized in the U.S. is not a U.S. person, a branch of a foreign corporation located in the U.S. is a foreign person because it is not an entity separate from the foreign corporation.
A partnership not organized in the U.S. is a foreign person even if some, or all, of the partners are U.S. persons. Because a partnership is a flow-through entity, NRA withholding and reporting is in the name of the foreign person partners who are the beneficial owners of the income, or in the name of “Unknown Recipient” if the partners are not known.
An estate or trust that is not a U.S. person is a foreign person. If the estate or trust is a flow-through entity under U.S. tax principles (some are, some are not), the NRA withholding and reporting must be in the name of the beneficiary or beneficiaries.