A US company is planning to pay to an Israeli individual independent contractor a fee. Does the independent contractor needs to issue an ITIN? Does the US company should issue the contractor From 1042-S? Thanks for the help.

If the contractor is not living in the US, he would not need an ITIN and the US company is not required to issue form 1042S as this person would not be subject to US taxes.

Thank you. However Form 1042S has a box (box 6) requesting exemption code for payments exempt from US taxes. What do you think?

That would be for someone working in the US and the tax treaty with the US would exempt the income from being taxed, but it still needs to be reported as the person would be liable for taxes if it weren't for the treaty.