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azario · Dec 9, 2007, 04:10 AM

Hello there,
Briefly I am a photographer and come to the states for short jobs (less than a week) for advertising clients. My agent in the us represents a number of photographers and I am the only foreign non resident alien. They take 25% of my fee and then send me 75% plus expenses. In filling the form 8233 (which I have been asked to do) I am not sure what to write in part IIfor the treaty article I am basing my exemption from witholding on. Can anyone please shed some light on this? Part of it could come under royalties as in article 12 paragraph 1, but there is also a fee part which I am not sure about.

Many thanks

Stefano

AtlantaTaxExpert · Dec 9, 2007, 08:49 AM

Stefano:

Your photography pay is independent self-employment income and should be exempt from taxes under Article 14 of the U.S.-Italy Tax Treaty IF your total U.S. stay is less than 183 days.

The Texas Tax Expert · Dec 9, 2007, 12:09 PM

What exactly are they paying you for? Are you just being paid a fee to take the photographs and then the client owns the photos? Or do you own the photos and they pay for use of them? Do you develop the photographs and then they buy them from you? These are all slightly different.

azario · Dec 9, 2007, 12:36 PM

Hello Texas tax expert

Thank you for your reply
I am being paid a fee for photography. Added to or included in this fee is normally a smaller portion for usage rights. Finally, the photograph's copyright is always retained by me, but the client pays for its production.

Hope it' clearer now.

Stefano

Originally Posted by The Texas Tax Expert

What exactly are they paying you for? Are you just being paid a fee to take the photographs and then the client owns the photos? Or do you own the photos and they pay for use of them? Do you develop the photographs and then they buy them from you? These are all slightly different.

The Texas Tax Expert · Dec 9, 2007, 01:22 PM

It sounds to me like you have some independent personal services income (Art 14) but also royalty income (Art 12) for the client's use of your copyright. It's probably necessary to look at the agent's contract with you to be sure, but that's my view based on what you have outlined.

AtlantaTaxExpert · Dec 10, 2007, 01:42 PM

Agreed!

However, I stand by my assertion that NO U.S. taxes are due.

The Texas Tax Expert · Dec 10, 2007, 05:17 PM

I believe the treaty gives the US the right to tax the royalty component but at a lower rate so there might be some US tax liability.

AtlantaTaxExpert · Dec 11, 2007, 10:21 AM

I will yield to TTE's greater expertise on this matter.

However, since a non-resident tax return (Form 1040NR with a Schedule E to report royalty payments) will be needed, you can deduct your U.S.-sourced EXPENSES that were incurred when generated these royalties. Thoses expenses, combined with your $3,400 personal exemption, should greatly reduce, if not completely offset, the amount received in royalties.

Recommend that you use a tax professional with expertise in taxes for foreign nationals (like TTE) if you determine that the amount of royalties is high enough to require the filing of a tax return.

The Texas Tax Expert · Dec 11, 2007, 03:49 PM

ATE,

I guess I would say that this is not effectively connected income and thus no tax return is warranted. It should be treated as a straight withholding tax situation (I think 5% on the royalty, per the treaty). Not a straightforward situation though.

AtlantaTaxExpert · Dec 12, 2007, 09:12 AM

TTE,

A straight 5% withholding?

Ye gods, man, do you know what you are saying?

It's a straight flat tax at a very reasonable 5%!

If such an outbreak of common sense were to happen, these people would have no need for our expertise! :-)

Paying a straight 5% might actually be worth it for our Italian friend, because then he would NOT have to deal with our IRS. There are far too many U.S. citizens and resident and non-resident aliens who would KILL to not have to deal with the IRS.