Hi,

Currently I am providing software development services from Pakistan (offshore) to a U.S.A based software development company, and they are saying that they will withhold 30% of the amount which is agreed between us for my services.

I am also paying income tax in Pakistan, do they really need to withhold this amount or is there any examption from U.S.A point of view or anything can help for the reduction of 30% amount?

I have found following Tax Treaty agreement between Pakistan/U.S.A but I am unable to understand it correctly.

Regards,
Shamir

Shamir:

No money should be withheld from your payment, because your income, being earned OUTSIDE of the U.S. is NOT subject to U.S. income taxes.

It is probably too late to stop the withholding, so you will need to fle Form 1040NR to get the withholding back, but for 2008 and beyond, NO money should be withheld.

Hi there. I've pretty much a similar scenario i.e. I'm a software company in Pakistan receiving payment from a US company. The customer in the US asked me to fill W-8 form in order to get withholding tax exemption. I'm a bit confused on the following items on the W-8 form:

8. References
9. I certify that (check all that apply) a, b, c, d, e .I've checked (a) and (c). Do I need to check (e) as well?

10. The beneficial owner is claiming the provisions of Article of the -----------------------
Treaty identified on line 9a above to claim a ------- % rate of withholding on (specify type of income):...
Explain the reasons the beneficial owner meets the terms of the treaty article:...

The type of income is SOFTWARE EXPORT and rate I've mentioned is 0... but I'm not sure of which Article to mention and what reasons to specify.

11) [checkbox] I have provided or will provide a statement that identifies those notional principal contracts from which the income is not effectively connected with the conduct of a trade or business in the United States. I agree to update this statement as required.

Should I check this point 11?

Thanks in advance. A prompt response is highly appreciated.

Best Regards,
Ali

BTWS The form I'm filling is: http://www.irs.gov/pub/irs-pdf/fw8ben.pdf