Thomas C. Roberge & Company

AVOIDING THE 30% WITHHOLDING TAX

ON FOREIGN LANDLORDS RENTAL INCOME

June 25, 2007

St. Petersburg and Sarasota

Telephone: (941) 952-5848

Telephone: (727) 822-9393

U.S. tax law requires any person collecting rents on behalf of a foreign property owner to withhold and remit to the IRS 30% of the gross rents they receive on behalf of that foreign property owner unless they have received certain documentation from the owner. Failure to adhere to these rules can subject the rental agent, or his or her company, to that 30% tax being assessed against them.

The IRS has a form, which, if properly completed, completely avoids the 30% withholding tax on rental income collected on behalf of foreign landlords. Form W-8ECI, Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States, accomplishes this task.

The foreign owner must fully complete the form to obtain this exemption from this 30% withholding tax. The owner must provide his or her U.S. social security or tax identification number on line 6 of the form. Until this number is provided the form is not valid and 30% withholding and remittance to the IRS is required. There are procedures we can employ to obtain a refund of this withholding when we file the foreign property owner’s U.S. income tax return the following year.

Form W-8ECI remains in effect for a period starting on the date the form is fully executed (including the providing of a U.S. social security or tax ID number) and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8ECI executed and delivered to the rental agent on July 6, 2007. It remains valid through December 31, 2010. Upon expiration of the three-year period, a new Form W-8ECI must be obtained.

Our firm, as a licensed IRS Acceptance Agent with the IRS, can obtain tax ID numbers for your foreign clients and also provide you with completed exemption forms if we represent them. Feel free to contact us at (941) 952-5848 or (727) 822-9393 if you have questions.

Internal Revenue Service Circular 230 Disclosure – You are hereby advised that any tax advice contained in this newsletter is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or to support the marketing of any tax transactions or matters addressed herein.