A US client is paying you — why 30% may be withheld, and how to bring it down
A US company is withholding 30% of your payment? Here’s why it happens to non-residents and the simple form that can reduce it.
You send your invoice, you wait for the payment, and when it lands it’s 30% short. Your US client didn’t shortchange you the US tax system did. And the frustrating part is that a lot of that withholding may not even be owed. Here’s what’s going on.
Why the 30% shows up
When a US payer sends certain types of income to a foreign person think royalties, certain service fees, interest, and other “FDAP” income the default rule is to withhold 30% and send it to the IRS. It’s a safety mechanism so the US collects tax before the money leaves the country. The payer usually reports it to you on Form 1042-S.
But 30% is the default, not the destiny. If a tax treaty between the US and your country sets a lower rate, you can claim it often by giving your client a Form W-8BEN (for individuals) or W-8BEN-E (for entities) before they pay you.
What’s at stake
- Do nothing and you may hand over 30% when the treaty rate is far lower sometimes zero locking up cash you were entitled to.
- Getting it back later means filing a US return to claim a refund: doable, but slower and more painful than avoiding the over-withholding up front.
- Provide the wrong form, or fill W-8BEN out incorrectly, and the payer will just default back to 30%.
The common fix
- Work out whether your income type and country qualify for a reduced treaty rate.
- Give the payer a correctly completed W-8BEN / W-8BEN-E before they pay you.
- If you’ve already been over-withheld, file the US return that reconciles it and claims your refund.
How Add-wise handles this
Cross-border withholding is core international-tax territory for us. We figure out the treaty rate you actually qualify for, prepare the W-8 forms so your clients withhold correctly going forward, and if you’ve already lost 30% you shouldn’t have handle the 1042-S reconciliation and refund claim. The goal is simple: you keep the money that’s genuinely yours.
Losing 30% of your US payments? Let’s get your withholding down to what you actually owe.