Page 40 - International Taxation IRS Training Guides

Illustration: U.S. Source FDAP

Example 1: FDAP
• U.S.-Source FDAP subject to
e.g., rents, 30%
withholding tax on gross
Corporation royalties Unrelated amount.

(Country X) U.S. Corp
• FDAP includes U.S.-source:

− Dividends
e.g., dividends, interest − Interest, OID
− Rents, royalties
− Comp. for personal services
U.S. Sub − Commissions

− Pensions, annuities
− Alimony
− Scholarships, grants, prizes

Example 2: ECI − And more…
e.g., comp. • FDAP does not include ECI.
for U.S. − Usually good for taxpayers,

Country X services, Unrelated because FDAP is

30% gross

Resident U.S. Corp withholding, ECI is taxed on net.

− Taxpayer must claim ECI

exemption, else withheld at
30%.
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