USA Tax withholding on payments to non-resident foreigners for outsourced professional services

[hgrimberg]

I am a foreigner and I live outside the US. I render professional services to American companies via internet, therefore, the work is not performed in US soil. I send invoices to these American companies and now one of them is telling me his accountant is saying that he should be withholding me 30% of my billing and instead of giving it to me, he should give that to the IRS and then I should collect that money from the IRS. Is this correct or if I am a non-resident and perform the work outside the US, I am not subject to any withholding?
Thank you

 

[hgrimberg]

I have to add to my question that I am a citizen of Argentina and that there is no tax treaty between Argentina and the US.

 

[pndaccountants]

You may also have to withhold tax if any of the above payment types have been dealt with (for example, reinvested or capitalized) on behalf of the non-resident.

 

[kirby]

The person telling you that they have to withhold 30% is correct as the US and Argentina have no tax treaty.

 

[kirby]

So if you are filing a personal tax return use form 1040NR. If filing as a foreign company use form 1120F

 

[Werner Reisacher]

Sorry but why adding additional cost to the taxes already paid.
Sorry but under the present conditions, your customer has declared you as a taxable entity in the US and there is little you can do about it. Depending on the size of your business and the frequency of your work for US companies, you may want to consult with a tax lawyer who might advise you how to closing the contract with the customer in your country and supplying the customer with the final product in your country could impact your tax situation.