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    Tax_Q's Avatar
    Tax_Q Posts: 10, Reputation: 1
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    #1

    Aug 14, 2006, 02:15 PM
    Tax deduction on foreign company invoice
    Hi,
    I have a S-Corp which is mainly engaged in web site design and software development for US customers. I am going to sign an agreement with a foreign company located in India for web site design works. Foreign company will invoice me for the services. All work will be performed outside the US.

    Questions:
    1) do I require to deduct US tax on the invoice payments?
    2) If so, what is the process?
    I will appreciate your advice or guide me to related IRS topics.

    Thank you.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Aug 14, 2006, 04:12 PM
    Payment of bills for services rendered to a company outside of the United States requires no withholding of funds for tax purposes, at least not for the United States government.
    Tax_Q's Avatar
    Tax_Q Posts: 10, Reputation: 1
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    #3

    Aug 15, 2006, 05:43 AM
    ATE, Thanks for a quick response.
    Is the foreign company liable to pay US tax on the amount invoiced to my company?
    Foreign company is not registered in the US and does not have physical presence in the US. All works performed outside the US.

    Once again thanks for your time and help.

    Regards,
    LM
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #4

    Aug 15, 2006, 03:54 PM
    Negative. As a general rule, only companies that do business within the confines of the United States are liable for U.S. taxes.
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    #5

    Aug 16, 2006, 05:48 AM
    ATE,
    Thank you very much for the clarification. I really appreciate your help.

    Regards,
    LM
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #6

    Aug 17, 2006, 09:52 AM
    Glad to help!
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