Payment to an Agent (U.S. or Foreign) of a Foreign Artist or Artistic Group
Section 1441(a) of the IRS code states: "any person having the control, receipt, custody, disposal, or payment of any item of taxable income payable to a nonresident alien or other foreign person is subject to the requirements to withhold 30% U.S. federal income tax on the payment of such item of income."
Treasury regulation section 1.1441-1(b)(2)(ii) reads in part, "a withholding agent making a payment to a U.S. person and who has actual knowledge that the U.S. person receives the payment as an agent of a foreign person must treat the payment as made to the foreign person."
University Procedure
University of Richmond, as the payer, is liable for the withholding tax, despite documentation from a booking agent that it will be responsible for taxing the entertainment group.
University of Richmond is required to deduct 30% tax, regardless of whether the payment 0is made to an agent or directly to the entertainment group. The 30% withholding must be made on the gross payment, not on a payment minus the agent's fee.
If University of Richmond is making a payment to a U.S. corporation or other U.S. entity knowing or having reason to know that the U.S. corporation or U.S. entity is acting as an agent to collect funds on behalf of a nonresident alien(s), then the withholding agent must treat the payment as being made to a nonresident alien(s). The gross amount of the payment would therefore be subject to 30% withholding.
The beneficial owner of the payment is the owner of the income for tax purposes and who will benefit from owning the income. An agent, who receives the payment in order to pass it on to the foreign artist, is not the beneficial owner of the income.
If an agent (U.S. or foreign) will not provide the names, addresses and income breakdown for each foreign artist contracted for a specific performance, the IRS advises that 30% of the income is withheld and the name and address of the agent is used on the 1042-S.
If an agent (U.S. or foreign) will not provide the income breakdown for each individual performer in an unincorporated group, but names and addresses of individual performers have been provided, the IRS advises that the gross receipts should be divided equally. NOTE: The IRS advises that large groups obtain a Central Withholding Agreement.
