U.S. IRS Publishes Practice Units on FDAP Payments – Source of Income

On 15 July 2016, U.S. IRS published an international practice unit on the source of income for FDAP Payments, which are generally subject to 30% withholding if from sources within the U.S. unless an exemption or reduction applies. The practice unit covers a five-step process to determine whether payments are subject to withholding:

1. Is the payment made to a foreign person?
2. If yes, is the income FDAP income?
3. If yes, is the income U.S. source income?
4. If yes, is there any exemption from chapte…