Contracts for personal services of foreign artists frequently request that the payer make payments to either a U.S. or foreign management agent. In considering the appropriate withholding, the payer must determine the beneficial owner of the payment. The beneficial owner is the person who is the owner of the income for tax purposes and who will benefit from owning the income. Thus, a person receiving income strictly to pass the payment on to another person is not the beneficial owner of the income.

If the foreign artist or foreign nonprofit organization is the beneficial owner of a payment made to an agent, then the withholding must be handled similar to a payment directly to a foreign artist or foreign nonprofit organization, but may also require additional documentation from the agent. Failure of the payer to acquire the beneficial owner documentation would preclude the foreign artist or foreign nonprofit organization from either obtaining tax treaty benefits or credit for the withheld taxes.

If the payment is made to a U.S. management agent and the foreign artist is the beneficial owner, the payer must still acquire the regular documentation from the foreign artist, that is, a Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.

If the foreign beneficial owner is a foreign noprofit organization, the payer must still acquire with respect to the foreign nonprofit organization either: (1) a Form W-8EXP, if the organization claims tax-exempt organization status under Internal Revenue Code section 501(c); (2) a Form W-8BEN, if the organization is claiming income tax treaty benefits; or (3) a Form W-8ECI, if the organization's activities are considered a trade or business.

If the payment is made to a foreign management agent and the foreign artist or foreign nonprofit organization is the beneficial owner, the payer should acquire a Form W-8IMY, Certificate of Foreign Intermediary, from the foreign management agent in addition to the documentation of the foreign artist (Form 8233) or foreign nonprofit organization (Form W8-EXP, Form W-8BEN, or Form W8-ECI).

In the event the arts organization determines that the foreign artist or foreign nonprofit organization is not the beneficial owner of the payment, the payer must acquire payee documentation from the person determined to be the beneficial owner. Arts organizations unclear as to the beneficial owner of a payment should contact a tax professional for assistance with such determination.