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Old 06-07-2015, 07:38 AM
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Application for ITIN

Individual is a foreign partner in a US partnership with 2 years of losses. For Form W-7 would he qualify for Exception 1. Passive Income under item h on
page 1 of Form W-7 ?

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Old 06-07-2015, 05:13 PM
Join Date: Oct 2010
Posts: 5,239
A foreign partner is required to file a U.S. income tax return even if there is no U.S. tax due. A valid itin is required. The Partnership needs to contact the foreign partner to verify that the partner has a valid ITIN. The partnership should notify the foreign partner without a valid TIN of the necessity of obtaining a U.S. ITIN. I guess he needs to check b .Please contact the IRS for more info in detail on the issue.

In general, both foreign and domestic partnership that has income effectively connected with a U.S. trade or business or income treated as effectively connected needs to pay a withholding tax on the effectively connected taxable income that is allocable to its foreign partner(if there is). The withholding tax rate for effectively connected income allocable to non-corporate foreign partner is 39.6%, but remains at 35% for corporate foreign partner.

A publicly traded partnership must withhold tax on actual distributions of effectively connected income, unless it chooses to withhold under special Rules Applicable to Publicly Traded Partnerships; foreign partners need to certify to the partnership prior year deductions and losses that carry over to the current year. Under these regulations a nonresident alien partner is also permitted to certify to the partnership that the partnership investment is (and will be) the only activity of the partner for the partner’s taxable year that gives rise to effectively connected income, gain, deduction, or loss. In that case, the partnership is not required to pay IRC section 1446 tax with respect to the foreign partner if the partnership estimates that the annualized or actual IRC section 1446 tax (Withholding Tax on Foreign Partners' Share of Effectively Connected Income)due is less than $1k. However, as the foreign partner takes losses , he/she does not need to file W8ECI with the US partnership; in general, the a payor ,before making a payment, needs to request a Form W-8 from any person to whom you are making a payment that you presume or otherwise believe to be a foreign person. As far as I know, UNLESS the foreign partner was physically present in US , he doesn’t need to file form W8BEN if he had income from the US partnership. No income ,no need to file W8ECI.your partnership may have to withhold tax on the foreign partner's distributive share of fixed or determinable annual or periodical gains and income not effectively connected with a U.S. trade or business, as well as withhold on any other FDAP income paid to a foreign person regardless of whether he is a partner or notaslongas the partnership pays distributive share of fixed or determinable annual or periodical gains. ALSO the partnership may reduce the foreign partner’s share of the partnership’s gross effectively connected income by certain partner level deductions and losses if the foreign partner certifies these losses on Form 8804-C.

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