Many foreign countries withhold tax on certain types of income paid from sources within those countries to residents of other
countries. The rate
of withholding is set by that country's internal law. An income tax treaty between the United States and a foreign country
often reduces the
withholding rates (sometimes to zero) for certain types of income paid to residents of the United States. This reduced rate
is referred to as the
treaty-reduced rate. For more information on reduced rates, see Tax Treaty Tables in Pub. 515, Withholding of Tax on Nonresident Aliens and
Foreign Entities.
Many U.S. treaty partners require the IRS to certify that the person claiming treaty benefits is a resident of the United
States for federal tax
purposes. The IRS provides this residency certification on Form 6166, a letter of U.S. residency certification. Form 6166
is a computer-generated
letter printed on stationary bearing the U.S. Department of Treasury letterhead, and the facsimile signature of the Field
Director, Philadelphia
Accounts Management Center.
Form 6166 will only certify that, for the certification year (the period for which certification is requested), you were a
resident of the United
States for purposes of U.S. taxation, or in the case of a fiscally transparent entity, that the entity, when required, filed
an information return and
its partners/members/owners/beneficiaries filed income tax returns as residents of the United States.
Upon receiving Form 6166 from the IRS, unless otherwise directed, you should send Form 6166 to the foreign withholding agent
or other appropriate
person in the foreign country to claim treaty benefits. Some foreign countries will withhold at the treaty-reduced rate at
the time of payment, and
other foreign countries will initially withhold tax at their statutory rate and will refund the amount that is more than the
treaty-reduced rate on
receiving proof of U.S. residency.
Other conditions for claiming treaty benefits.
In order to claim a benefit under a tax treaty, there are other requirements in addition to residence. These include
the requirement that the
person claiming a treaty-reduced rate of withholding be the beneficial owner of the item of income and meet the limitation
on benefits article of the
treaty, if applicable.
The IRS cannot certify whether you are the beneficial owner of an item of income or that you meet the limitation on
benefits article, if any, in
the treaty. You may, however, be required by a foreign withholding agent to establish directly with the agent that these requirements
have been met.
You should examine the specific income tax treaty to determine if any tax credit, tax exemption, reduced rate of tax, or other
treaty benefit or
safeguards apply.
Form 6166 may also be used as proof of U.S. tax residency status for purposes of obtaining an exemption from a VAT imposed
by a foreign country. In
connection with a VAT request, the United States can certify only to certain matters in relation to your U.S. federal income
tax status, and not that
you meet any other requirements for a VAT exemption in a foreign country.
