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Basics of Foreign Inbound Reporting: Effectively Connected Income, FDAP, U.S. Withholding and Reporting Requirements

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, November 1, 2022

Recorded event now available

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This webinar will break down the terminology, filing requirements, and withholding rules for foreign inbound transactions for tax practitioners working with multinational individuals and businesses. Our panel of knowledgeable foreign tax experts will discuss effectively connected income (ECI), fixed, determinable, annual, or periodic (FDAP) income, Form 1040NR, and 1120-F for tax practitioners working in the international realm.

Description

The reporting considerations for foreign inbound activity by foreign taxpayers in the U.S. are complex. To determine how income in the U.S. is taxed and what tax withholding is required, practitioners must first determine the type of income generated and then must understand the withholding and documentation requirements surrounding such income. Effectively connected income (“ECI”) is income generally connected with a U.S. trade or business. On the other hand, income that is not ECI and U.S. sourced may be fixed or determinable, annual, or periodic income which may be considered fixed or determinable, annual, or periodic income or (“FDAP”). FDAP income is generally subject a to 30 percent withholding tax unless an Income Tax Treaty or other income tax provision can apply to reduce the withholding tax rate.

Generally, Nonresidents with ECI should file Form 1040NR, U.S. Nonresident Alien Income Tax Return. Similarly, foreign corporations with ECI generally should file Form 1120-F, U.S. Income Tax Return of a Foreign Corporation. Both Nonresidents and Foreign corporation with U.S. withholding may want to file if an opportunity exists to obtain a refund of the withheld taxes. Often there are ways to mitigate or reduce U.S. withholding taxes at source, depending on Income Tax Treaties and other positions taken. Tax practitioners working with foreign taxpayers should understand basic terms, concepts, reporting and documentation requirements for foreign inbound transactions.

Listen as our international tax reporting professionals walk you through foreign inbound transactions, including U.S. withholding and reporting requirements.

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Outline

  1. Foreign inbound reporting: introduction
  2. Effectively connected income (ECI)
  3. Fixed, determinable, annual, or periodic income (FDAP)
  4. Partnerships with non-U.S. owners
  5. Withholding requirements
  6. Non-resident tax returns: Form 1040NR
  7. Returns of foreign corporations: Form 1120F
  8. Other foreign inbound reporting considerations

Benefits

The panel will cover these and other key issues:

  • What is FDAP income, and how is it taxed in the U.S.?
  • Who is considered a nonresident alien and required to file form 1040NR?
  • What are the U.S. withholding obligations of withholding agents?
  • When is a foreign business considered to have a U.S. trade or business and ECI?

Faculty

Guis, Samantha
Samantha Guis
PCS International Senior Manager
Eisner Advisory Group

Ms. Guis is a Tax Senior Manager in the International Tax Services Group, with nearly 10 years of experience in the...  |  Read More

Halpern, Matthew
Matthew Halpern, CPA, MST
STS-Int'l Senior Manager
BDO USA

Mr. Halpern is a Senior Manager in the International Tax Services group at BDO. With over 10 years of experience, he...  |  Read More

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