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US tax treaties and your LLC: what a treaty changes, and who claims it

How a US tax treaty lowers withholding, limits US tax on business profits and relieves double tax, why the LLC's owner claims it, and royalty rates by country.

Updated 17 September 2026Checked against the sources named in the text

The United States has income tax treaties with about sixty countries. If you live in one of them, three things change. US withholding on royalties, dividends and interest paid to you drops from 30% to the treaty rate. The US generally taxes your business profits only if you have a permanent establishment there. And the two countries agree how to avoid taxing the same income twice. If your country has no treaty, the domestic rules apply, and for a service business run from abroad that still usually means no US income tax.

Who claims it

A treaty covers residents of the two countries. A single-member LLC is disregarded, so the resident claiming the treaty is you, not the company. You give a US payer a W-8BEN in your own name, with the tax number your country issued you, claiming your country's treaty. A platform that asks the LLC for a W-9 is asking for the wrong form, because the IRS's instructions say the owner of a disregarded entity gives the W-8 instead.

Here's the catch. Some countries don't treat a US LLC as transparent. They see it as a company that isn't resident in their country, which can stop the treaty working the way you'd expect. Canada is the best-known example, and the Canada page explains why Canadian founders usually choose a corporation. Japan also treats an LLC as a company, and so do others. Ask an adviser at home how your country classifies a US LLC before you rely on a treaty rate.

The withholding rates that matter

For most founders, the rate that matters is the one on copyright royalties, because that's how YouTube and Amazon KDP pay for US views and sales. Without a treaty the rate is 30%. Under the treaties, the IRS's own rate table gives these:

Withholding on copyright royalties paid to a resident of each country, from the IRS's treaty rate table
Country
Rate on copyright royalties
United Kingdom, Germany, France, the Netherlands, Ireland, Switzerland, Sweden, Japan, Pakistan
0%
Canada
0% on copyright; 10% on film and television
Australia, New Zealand
5%
Thailand
5% on copyright; 15% on patents
Mexico, Indonesia, Poland, Ukraine, Türkiye, Bangladesh
10%
Israel
10% on copyright; 15% on patents
India, the Philippines, Egypt
15%
Hungary
30%, since the treaty ended
Brazil, Nigeria, Argentina, the UAE, Saudi Arabia, Singapore, Malaysia, Vietnam, Hong Kong, Nepal
30%, with no treaty

Other kinds of royalties, and dividends and interest, have their own rates in each treaty. Nothing is withheld on payments for services performed outside the US, with or without a treaty, because that income isn't US-source.

Permanent establishment

Without a treaty, the US taxes a foreign person on income effectively connected with any US trade or business. With one, it generally taxes business profits only where there's a permanent establishment: a fixed place of business, or an agent who habitually concludes contracts in your name. That's a higher and clearer threshold. A founder in a treaty country who runs the company from home, with no US office and no US agent, is outside US tax on business profits under the treaty as well as under the domestic test.

Relief from double tax

Where both countries can tax the same income, the treaty says which one gives way, usually by having your home country credit the tax paid in the US. Most foreign-owned service LLCs pay no US tax, so there's nothing to credit. For creators who have tax withheld in the US, that withholding can usually be credited at home.

Claiming it

On Form W-8BEN, you give your country's tax number and certify on line 9 that you're a resident of your country under the treaty. Line 10 is for the article, rate and type of income when the benefit has conditions line 9 doesn't cover, such as different rates for different kinds of royalties, and many platforms ask you to complete it. The form stays valid until the end of the third calendar year after the year you sign it. If a platform withheld 30% because your form didn't claim the treaty, you can ask the IRS for a refund by filing Form 1040-NR. It's slow, but it works.

Questions

The questions this guide gets asked.

If yours is not here, email us at [email protected] before you order.

A single-member LLC is disregarded, so its owner claims the treaty as a resident of their own country, on a W-8BEN in their own name. Whether your country treats the LLC as transparent is a separate question for a local adviser.

Services performed outside the US aren't US-source, so the US doesn't tax that income, with or without a treaty. The treaty matters for royalties, dividends, interest, and business profits from any US presence.

US-source royalties, dividends and interest are withheld at 30%, and relief from double tax depends on your own country's rules. Income from services you perform at home is still outside US tax.

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