How to avoid US withholding tax

Is it possible to avoid US withholding tax when working on a music tour there? W-8 ECI?

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Hello,

My client is UK self-employed and will be working on a music tour in the US next year. She has a US tax number and in the past has had tax withheld there, then taken as a credit on her UK tax return. But can she use a form W-8 ECI to avoid the US tax being taken in the first place?

I'm not sure if the payments she gets there are considered to be "Effectively Connected Income"

Thanks in advance

BD

 

 

Replies (5)

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By sijolees
22nd Nov 2016 09:25

I have had clients in this situation. I could not see how to avoid the withholding tax but so long as the client has got an ITIN you can prepare a US Tax Return as a non-resident alien (so US earnings only) and get a refund. This obviously reduced the Double Tax Relief in the UK but is worthwhile as the withholding rate was 30%.

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Replying to sijolees:
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By Brendonohoe
22nd Nov 2016 17:04

Yes, I couldn't figure out if it was possible to avoid the tax, rather than claim a refund and thought a W8-ECI might do it. Thanks for your help.

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Replying to sijolees:
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By Brendonohoe
22nd Nov 2016 17:08

Your reply has prompted a follow up question. Can double taxation relief not be claimed on her UK tax return for the full amount of US tax deducted?

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By sijolees
24th Nov 2016 09:24

If you do not complete a US Return to get the US tax refunded then the whole of the withholding tax will be available for a DTR claim. But the DTR allowable is restricted to the UK tax liability on the profit attributable to the US earnings - you should not deduct the US tax in full without first calculating the UK tax bill on this part of the profit.
As the US rate is usually 30% the DTR claim is likely to be less than the full amount.

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Replying to sijolees:
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By Brendonohoe
27th Nov 2016 13:50

That's very clear. Thanks again for your help.

BD

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