Florida Foreign National Mortgage Lenders

If you are a foreign national a person who is not a United States citizen and has no lawful residency status in the United States. And, If you are looking to invest in real estate in anywhere in Florida then you have come to the right place.  Florida Mortgage Lenders .com will get you the most competitive loan offer. We will walk you through the application, answering any questions you may have while streamlining the process and helping you to gather the paperwork you need.

• Florida Foreign National Mortgage Lenders Purchase Refinance programs include fixed and adjustable loans for 3, 5, 7, 15, and 30 years.
• Property types include residential, single-family homes, condos, condominiums, condotels, townhouses, co-ops, land  commercial types.
• Looking to finance vacant land? Depending on the location, we can offer private funding for this purpose.

FOREIGN NATIONAL – No FICO – Up to 80% LTV

• DSCR ≥ 1 up to 80% LTV
• No DSCR ratio up to 65% LTV
• 6 months reserves
• No deposit sourcing
• No credit reference letters
• No asset seasoning in US account
• No visa
• Loan amounts up to $2m
• Condotels, condos, studios, 2-4 up to 70% LTV
• ITIN borrowers allowed
• No 3rd party primary address verification
• Bank statement and P&L up to 80% LTV

Foreign National Loan Documentation Requirements

Here is what you need to apply for a Foreign National Mortgage loan:

• Self-Employed Florida Foreign National Mortgage Applicants s must present an Accountant’s income letter and copy of the CPA License stating how long the applicant has owned the business, its current year-to-date income as well as the past two years’ of income. (Periods Jan 1 – Dec 31, 20XX ), Please provide the original before closing. 
• Provide a copy of your company’s articles of incorporation to prove that you are an owner of “x” percentage of shares and opening date.
• Salaried Florida Foreign National Mortgage Applicants s must present an employer’s income letter certifying the time the Florida Foreign National Mortgage Applicants has been employed, the name of the position he occupies in the company, the monthly and annual income over the last 2 years as well as the current year to date income. Please provide the original letter before closing.
• Provide 2 credit card (Visa, Master Card, American Express, etc.) reference letters from your country of origin or USA
  Note: Provide also the last 2 statements. These must indicate the account number, credit limit, actual balance and average balance (in the country of origin’s currency and US Dollars), opening date, and history. Each letter must be written with the institution’s letterhead on the top. If the Florida Foreign National Mortgage Applicants has one or more mortgages, a letter is required from the applicant’s bank describing the mortgages and previous payment history.
• Provide 2 bank reference letters from your country of origin or United States.
  Note: They must indicate the account number, the type of account and it must state that the relationship has been good or satisfactory. Each letter must be written on the Bank’s letterhead, signed, have a contact number for verification and we will need to get the original letters before closing.
• Provide 2 most recent bank statements for each bank account owned or and any other account with liquid investments. ( All pages- screen prints are not acceptable).
• Our completed loan application and corresponding signatures (Documents that authorize us to process the loan)
• Copy of purchase contract and corresponding addendum.
• The escrow letter indicates the dates and monies deposited. Please provide the source of monies used for those deposits.
• A copy of the canceled checks or wire transfers was used to make the initial down payment on the unit.
• If you are a business owner, please provide a website or background on your company.
• Copy of current signed passport
• Copy of current USA Visa, Proof of residence in the country of origin (utility bill like water, cable, telephone, electricity, etc)

Foreign National Loan Submission Checklist  

• BORROWER EXPLANATION LETTER (if applicable) – Explain any non-confirming characteristics, compensating factors, exceptions
  1008 – TRANSMITTAL SUMMARY
  APPLICATION UPLOAD:
  -Borrower Information and Lender Loan Information
  -Supplemental Consumer Information Form
  If applicable: Additional Borrower, Unmarried addendum, Continuation Sheet
  INITIAL LOAN APPLICATION: – Signed and dated by Borrower and Broker. Must be complete, including all addresses (no P.O. boxes allowed). Refer to APPLICATION UPLOAD SECTION ABOVE FOR REQUIRED FORMS. Demographic information must be accurately completed in accordance with the Home Mortgage Disclosure Act and Equal
• UPDATED 1003 APPLICATION: Unsigned, reflecting broker-verified information.
  METHOD OF APPLICATION (ON DIA SECTION) & APPLICATION DATE (ON INITIAL 1003) MUST CLEARLY STATE:
   Face to face interview: Date of application: _________: The date signed by the Borrower and Mortgage Broker must be the same.
   Telephone interview: Date of telephone application/interview taken: _______: The Mortgage Broker must indicate on the 1003 the date the phone interview was taken by his signature. Timing for issuance of disclosures will begin on that date not when borrower signs the application form if it is a later date. LE/GFE to be issued by LENDER within 3 days of this date. (see page 4 TRID/RESPA applicability).
   By the applicant and submitted via fax, mail, e-mail or internet: Date of application: _________: The Mortgage Broker should Indicate the day the broker received the application next to the broker’s signature. This should be a date after the borrower dated/signed the application. Timing for disclosures will begin on the date received by the Mortgage Broker. LE/GFE to be issued by our institution within 3 days of this date. (see page 4 TRID/RESPA applicability).
• CASH OUT LETTER: Required on all loans with a cash out intent. Whether full or partial cash out. A letter from borrower
  explaining purpose of cash out is required at time of the application. Initial 1003 must be specific and in accordance with
  letter. Initial and final 1003 cannot just show “Cash out” as a purpose. ie: Business investments, recoup equity on cash
  purchase, home improvements, future real estate investment, purchase a specific residential property located at……… ) etc.
• COPY OF BORROWER’S ID (Two photo ID’s required):
  -Foreign National: Valid Passport and Visa (if living in the United states also include: Driver’s License). If Visa exempt include foreign DL
  -Permanent Resident Alien: Green Card and Driver’s License United States Citizen: Driver’s License
• Copy of business card if Borrowers website (if self-employed):
• Documentation confirming home address: Such as a recent: Utility Bill, Credit Card Statement
  CREDIT REPORT: Satisfactory US factual credit report on all borrowers/guarantors. Include international Credit Report on all
  Borrowers/Guarantors from: U.K, Ireland & Canada.
  INCOME VERIFICATION FOR FOREIGN NATIONAL BORROWERS:
  -IF SELF-EMPLOYED: Accountant letter- Letter must explain borrower’s source of income. position, title, percentage of ownership and
  must include previous two years of income and current YTD income. All letters are to be on accountant’s company letterhead, with signors
  contact information including email address phone number and business address, dated & executed by the appropriate parties.
  -Include copy of Accountants professional license.
  -SALARIED EMPLOYEE: Letter from Employer – Stating current monthly salary, position & include valid pay stubs if applicable.
  English translations are to be placed in front of the reference letters and signed, dated and certified by a translator.
  INCOME VERIFICATION FOR DOMESTIC BORROWERS:
  • Full income documentation which may include two years personal and corporate (if applicable) income tax returns, pay stubs, W2’s and/or a
  Standard VOE.
  • An original signed form 4506-C is required on all applicants. It must be included in the file at the time of submission.
  If borrower is a self-employed US taxpayer, include a completed and signed form 4506-C. Names and address must
  match exactly as last filing. However LENDER may send borrower one to sign electronically.
  BANK REFERENCE LETTER: One personal banking reference letter (US or foreign bank). Letter of reference must be on
  company letterhead with signors contact information including email address, phone number and business address
  dated and executed by the appropriate parties. Letter must include how the account is titled, type of account, how long it has
  been established and how it is handled. English translations are to be placed in front of the reference letters and signed,
  dated and certified by a translator.
  ASSET VERFICATION: Verification of Deposit, Bank letter or signed account printout required, as applicable: Verification of Initial Down
  payment, cash to close, and reserves is required. All cash to close must be on deposit in a US Banking Institution. (REFER TO BULLETINS
  AND THE LOAN PROGRAMS FOR SPECIFIC RESERVE REQUIREMENTS AND REQUIREMENTS FOR GIFT FUNDS. The borrower’s
  post-closing liquid asset position must be commensurate with the borrower’s financial statement and income level.
• Payment for appraisal: DO NOT COLLECT ANY FEE FROM THE
  BORROWER UNTIL YOU HAVE DETERMINED TRID/RESPA APPLICABILITY.
   If appraisal was ordered by LENDER prior to submission (case by case only) please indicate date the Appraisal Request Form & payment
  was sent by the Mortgage Broker to LENDER: _________________
   Provide copy of borrowers check or payment to Broker for any POC fees. Ie appraisal and credit report.
  ESCROW LETTER – On company letterhead of party holding funds, signed, dated & copy of check/incoming wire and showing cleared
  funds.
  PURCHASE/SALE AGREEMENT – All pages including any addendums, assignments or extensions. Fully executed by all parties.
  CONDO/PUD QUESTIONAIRE- All Condominium/PUD loans require LENDER’s Condo Questionnaire form to be submitted at the time of submission.
  Must include a copy of last year’s and the most current budget for the association.
  CORPORATE DOCUMENTS (IF APPLICABLE): All shareholders must personally guarantee the loan. LENDER accepts
  certain corporations established for the purpose of owning the subject real estate to take title. Those customary are: Florida
  (Corp or LLC), Delaware, Panama, BVI (British Virgin Island). Please ask us. Provide copies of all fully executed corporate
  documents including: Articles of Incorporation, By Laws, Share Certificates, Share Registry, Operating Agreement Tax ID#,
  Certificate of Good Standing.
  All Files: Automatic Payment Program Form: IMPORTANT: UNDERWRITING CONDITIONS WILL NOT BE CLEARED
  UNTIL THIS IS RECEIVED. Borrower must complete and sign an automatic payment authorization form to allow the
  mortgage payment deduction from a U.S. bank account. (Loan number and monthly payment will be filled in by LENDER
  prior to closing) . The name on the account to be debited must match borrowers or guarantors names.
  All Files: APP form support: IMPORTANT A voided check must accompany the APP form listed above, showing account
  holder’s pre-printed name.
  All Files: Affiliated Business Disclosure Statement (if applicable on this loan). If no affiliated businesses are associated
  with MLO’s indicate this on the submission sheet page 3 prior to signing.
  All other required regulatory disclosurese: All files must be submitted with applicable disclosures based on the most
  current regulatory changes. Refer to Disclosures section below and DETERMINING TRID/RESPA APPLICABILITY on page
  4 of this Loan Submission Sheet. Ensure disclosures are dated within the applicable dates AFTER application.
• DISCLOSURES: Before taking the application, refer to TRID/RESPA APPLICABILITYon page 4
  of this Loan Submission Sheet for further clarification and applicability of TRID OR RESPA.
  SEE BELOW REGARDING DISCLOSURE ISSUANCE.
  A. NON TRID, NON-RESPA APPLICABLE LOAN CORPORATE TITLES/INVESTMENT AND BUSINESS PURPOSE
  LOANS: If the contract AND application show the title will be in the name of a corporation, the
  occupancy is an investment. Then this is a NON-TRID/NON-RESPA LOAN. If the guarantor has indicated on the
  application that they will be occupying the property as a primary residence, then this will be treated as a TRID LOAN
  (B). We do not accept second homes from a corporation.
  B. TRID APPLICABLE LOAN:
  Mortgage Broker must not issue a Loan Estimate. The following must be submitted to LENDER within 24 hours of
  Broker’s receipt of an application via the Broker Portal along with the following:
  -FNMA 3.2 FILE OR MISMOV3.4 (as noted on page 1)
  -Initial signed 1003
  -Borrowers ID
  -This Loan Submission Sheet with FEE WORKSHEET completed
  -Fee worksheet from Broker’s system
  -Complete purchase contract (all pages and addendums)
  -Draft Closing Disclosure from the closing agent , including all applicable closing, title, and contract charges
  -Broker must contact AE or Registration desk when uploading the application to confirm receipt THE 
  LENDER WILL ISSUE THE LOAN ESTIMATE, OTHER REQUIRED DISCLOSURES, AND ANY LE REDISCLOSURES.
  Please inform applicants that they will be receiving these disclosures from LENDER and that it is imperative they
  review and sign them electronically if they wish to proceed.
  C. NON-TRID, RESPA  APPLICABLE LOAN:
  -Initial signed 1003
  -Borrowers ID
  -This Loan Submission Sheet with FEE WORKSHEET completed
  -Fee worksheet from Broker’s system
  -Complete purchase contract (all pages and addendums)
  -Draft Preliminary HUD-1 (not a Closing Disclosure) from the closing agent, including all applicable closing, title and contract charges
  -Broker must contact AE or Registration desk when uploading the application to confirm receipt
  LENDER WILL ISSUE THE GOOD FAITH ESTIMATE, OTHER REQUIRED DISCLOSURES AND ANY GFE REDISCLOSURES. Please inform applicants that they will be receiving these disclosures from LENDER and that it is imperative they review and sign them electronically if they wish to proceed.

 

Foreign National Approval Conditions 

UCL002 – Proof and verification that required cash to close come from the borrower(s) verified account at a United States Banking Institution. – Wire to the closing agent must come from borrower’s US verified bank account.
UCL003 – Land Survey Certified to Bradesco Bank – New Survey Certified to: Bradesco Bank, Its Successors and/or Assigns, ATIMA and all applicable parties (i.e. borrower, and Title Underwriter); On refinance transactions: Copy of Existing Survey certified to borrowers with Survey Affidavit;  Elevation certificate is required unless property is in zones B, C, or X as per lenders Flood Determination.
UCL007 – Title Insurance Commitment/Chain of Title (24 months) – -Executed Title Commitment reflecting Bradesco Bank, ISAOA/ATIMA as proposed insured. 
-Effective date must be within 30 days of closing. 
-Must show borrowers names as they appear on the loan approval (as per ID’s provided);
-Must reflect prior year property taxes paid in full and current year if applicable and provide the subject property folio number
-include all applicable endorsements, including:
Alta 8.1 Environmental Protection,
Alta 9: Florida Form #9,
Alta 6: Variable Rate Mortgage
Alta 4: Condominium (If Applicable)
Alta 5: PUD (If Applicable)
Navigational Servitude (If Applicable)
UCL008 – Closing Protection Letter from Title Insurer Required on All Transactions – Closing Protection Letter must be issued within 30 days of closing date and reference the borrower(s) and subject property address. Addressed to: Bradesco Bank, ITS SUCCESSORS AND/OR ASSIGNS, AS THEIR INTEREST MAY APPEAR 3011 PONCE DE LEON BLVD, PH2, CORAL GABLES, FLORIDA 33134
UCL009 – Settlement Agent Wiring Instructions –
UCL011 – Hazard Certificate of Insurance w/ Paid Receipt. – Homeowner’s Evidence of Insurance including correct Mortgagee Clause w/ Paid Receipt and indicate the verbiage “REPLACEMENT COST”.  New policies must be valid for one year.  On a refinance, the policy must have a minimum of 3 months remaining before expiration/renewal or subject to lenders discretion. The amount of coverage should equal to at least the lesser of:  1) 100% of the insurable value of improvements as established by the property insurer or 2) The unpaid principal balance of the mortgage, as long as it equals the minimum amount (80% of the insurable value of the improvements) required to compensate for damage or loss on a replacement cost basis.  The maximum deductible required is 5% of the face amount of the Policy. BORROWER(S) AND ALL PARTIES ON MORTGAGE MUST APPEAR ON EVIDENCE OF INSURANCE. If this is a corporation loan, insurance policy must show the name of the LLC/Corp as the Primary Insured. Proof of payment paid in full is required prior to closing.
UCL012 – Windstorm – Certificate of Insurance w/ Paid Receipt. – Windstorm – Certificate of Insurance w/ Paid Receipt with Correct Mortgagee Clause. New policies must be valid for one year. On a refinance, the policy must have a minimum of 3 months remaining before expiration/renewal or subject to lenders discretion. The amount of coverage should be equal to the hazard insurance coverage. When a policy provides for a separate wind-loss deductible (either in the policy itself or in a separate endorsement), that deductible must be no greater than 5% of the face amount of the policy. Proof of payment paid in full is required prior to closing.
UCL014 – Preliminary HUD from Settlement Agent – Preliminary GFE HUD-1 OR CD (For TRID Applicable Loans)

Qualifying for Foreign National Credit

The Qualifying Foreign Credit designation refers to NPRA Florida mortgage applicants who do not meet the Standard Tradeline requirements in
Florida Mortgage Lenders. com Tradeline Requirements guidelines. Qualifying Foreign Credit Florida Foreign National Mortgage Applicants may or may not have a U.S. credit report with no
credit score, a single score, or a score with insufficient tradelines. If no credit score is available, a 680 FICO score will be used to
determine the rate and LTV. Qualifying Foreign Credit Florida Foreign National Mortgage Applicants s must establish an acceptable credit history subject to the following requirements:
• Three open accounts with a 2-year history must be documented for each Florida Foreign National Mortgage Applicants reflecting no late payments.
• A 2-year housing history can be used as a tradeline.
• U.S. credit accounts can be combined with letters of reference from verifiable financial institutions in a foreign country to establish the 3 open accounts and an acceptable credit reputation. If letters of reference are obtained, they must:
o State the type and length of the relationship,
how the accounts are held, and the status of the account;
o Provide contact information for the person signing the letter; and
o Translations must be signed and dated by a certified translator

Qualifying for Foreign National Credit Reports

The following minimum credit references are required:
• A U.S. credit report with at least two (2) trade lines with a minimum age of two (2) years for one tradeline; or
• An international credit report is required if a U.S. credit report cannot be produced; or
• An original credit reference letter from an internationally known financial institution.
If no U.S. FICO is available, a 680 score will be assigned for qualifying
and pricing purposes.
The borrower(s)’ primary residence must be validated. Cash-out limited to $250,000 if LTV is over 65% and the borrower has
owned the property for less than 3 years.

Eligible Borrowers

• Permanent Resident Aliens
• Non-Permanent Resident Aliens (Max 75% LTV purchases and 70% LTV all refinances)
• Foreign Nationals (DSCR only. Must close in a Legal Entity with a domestic agent). (Max 75% LTV purchases and 70% LTV all refinances)
• Legal Entities (S Corp, LLC, Limited Partnership – subject to approval).Note: Legal entities not in good standing will be ineligible to execute
• loan documents

Funds to Close

Funds to close must be sourced and seasoned for 10 days. Gift funds are allowed with 5% of the borrower’s own funds in the transaction. If the borrower does not have the minimum 5% funds to close, a 10% reduction to the LTV will be required. Note: Gift funds not allowed if the borrower is a Foreign National

Property Types

• Single Family Residence
• Condominium (Warrantable and non-warrantable)
• High Rise Condominium Max 80% LTV (FL High Rise Max 75%)
• Planned Unit Development (PUD)
• Townhouse
• Condotel (Max 75% purchase and 65% all refinances and Foreign National purchase)
• 2-4 units
• Rural Properties (Max 75% LTV on purchase and 70% on refinances)

Assets in Foreign Accounts

Assets in foreign accounts must meet the following requirements:
• Must be verified in U.S. Dollar equivalency at the current exchange rate via either www.xe.com or the Wall Street Journal conversion table.
• Sufficient funds to close must be on deposit at a domestic bank three (3) days prior to any closing date.
• A copy of the two (2) most recent bank statements of the foreign account. If the funds are not seasoned a minimum of sixty (60) days, a letter of explanation is required along with the information to comprise a sixty (60) day chain of funds.
• No Russian based banks allowed.

Specific Closing Documentation Requirements

The following is required on all Foreign National loans:
• A copy of current Passport.
• All loans must be closed with a title and closing agent approved and/or vetted by Foreign National Mortgage Lenders.
• Documents signed outside of the U.S. must be notarized by a U.S. embassy or consular official. The certificate of acknowledgment must include the embassy or consular seal and be acceptable to the title company.
• For documents signed in a country that is a party to the “Hague Convention Treaty Abolishing the Requirement of Legalization for Foreign Public Documents” a certificate of acknowledgment completed and signed by a notary public authorized or commissioned to perform such duties plus authentication by aan postle in English and attached to the executed documents and certification of acknowledgment with title company acceptance is agreeable to lender.
• Executed W-8 (BEN) IRS form.
• Loan must be made to a domestic LLC and a domestic agent of service is required. Total ownership of the LLC must be greater than 50% for bthe orrower(s) and all owners of the LLC must submit a loan application.
• No parties may be of Russian citizenship.

Foreign Persons

Withholding on payments of U.S. source income to foreign persons under IRC 1441 to 1443 (Form 1042)

Generally, a foreign person is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to U.S. tax of 30%. A reduced rate, including exemption, may apply if an Internal Revenue Code Section provides for a lower rate, or there is a tax treaty between the foreign person’s country of residence and the United States. The tax is generally withheld (NRA withholding) from the payment made to the foreign person.

The term NRA withholding is used in this area descriptively to refer to withholding required under sections 1441, 1442, and 1443 of the Internal Revenue Code. Generally, NRA withholding describes the withholding regime that requires 30% withholding on a payment of U.S. source income and the filing of Form 1042 and related Form 1042-S. Payments to all foreign persons, including nonresident alien individuals, foreign entities and governments, may be subject to NRA withholding

In referring to NRA withholding in this area, it does not include withholding done under section 1445 of the Internal Revenue Code, dealing with Withholding of Tax on Dispositions of U.S. Real Property Interests (FIRPTA), or under section 1446 of the Internal Revenue Code, dealing with Withholding Tax on Foreign Partners’ Share of Effectively Connected Income (Partnership Withholding) or withholding under section 1446(f) on disposition of certain partnership interests.

Rules relevant to Chapters 3 and 4

A payee is subject to withholding only if it is a foreign person. A foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch of a U.S. financial institution if the foreign branch is a qualified intermediary. In most cases, the U.S. branch of a foreign corporation or partnership is treated as a foreign person.

If an amount is both a withholdable payment and an amount subject to Chapter 3 withholding and the withholding agent withholds under Chapter 4, it may credit this amount against any tax due under Chapter 3.

Nonresident alien

A nonresident alien is an individual who is not a U.S. citizen or a resident alien. A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding.

Married to U.S. citizen or resident alien. Nonresident alien individuals married to U.S. citizens or residents may choose to be treated as resident aliens for certain income tax purposes. However, these individuals are still subject to the chapter 3 withholding rules that apply to nonresident aliens for all income except wages. Wages paid to these individuals are subject to graduated withholding.

U.S. person

The term “United States person” means:

• A citizen or resident of the United States,
• A partnership created or organized in the United States or under the law of the United States or of any State, or the District of Columbia,
• A corporation created or organized in the United States or under the law of the United States or of any State, or the District of Columbia,
• Any estate or trust other than a foreign estate or foreign trust. (See Internal Revenue Code section 7701(a)(31) for the definition of a foreign estate and a foreign trust.), or
• Any other person that is not a foreign person.

U.S. citizen

The term “United States citizen” means:

• An individual born in the United States,
• An individual whose parent is a U.S. citizen,
• A former alien who has been naturalized as a U.S. citizen,
• An individual born in Puerto Rico,
• An individual born in Guam, or
• An individual born in the U.S. Virgin Islands.

Resident alien

A resident alien is an individual that is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year.

In most cases, the days the alien is in the United States as a teacher, student, or trainee on an “F”, “J”, “M”, or “Q” visa are not counted. This exception is for a limited period of time. For more information on resident and nonresident status, the tests for residence, and the exceptions to them, refer to Publication 519, U.S. Tax Guide for Aliens.

Section 937 of the Internal Revenue Code establishes the filing requirement for Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession. This form reports each change of residency to or from a U.S. possession. The IRS is authorized to impose a $1,000 penalty on any taxpayer who is liable to file this form, but who fails to file it. Also, you may owe this penalty if you do not include all the information required by the form or the form includes incorrect information.

For a detailed explanation of the U.S. possession residency rules and income sourcing rules, please refer to Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.

Foreign corporations

A foreign corporation is one that does not fit the definition of a domestic corporation. A domestic corporation is one that was created or organized in the United States or under the laws of the United States, any of its states, or the District of Columbia.

Guam or Northern Mariana Islands corporations. A corporation created or organized in, or under the laws of, Guam is not considered a foreign corporation for the purpose of withholding tax for the tax year if:

• At all times during the tax year less than 25% in value of the corporation’s stock is owned, directly or indirectly, by foreign persons, and
• At least 20% of the corporation’s gross income is derived from sources within Guam or the CNMI for the 3-year period ending with the close of the preceding tax year of the corporation (or the period the corporation has been in existence, if less).

Note: The provisions discussed below under U.S. Virgin Islands and American Samoa Corporations will apply to Guam or CNMI corporations when an implementing agreement is in effect between the United States and that possession.

U.S. Virgin Islands and American Samoa corporations. A corporation created or organized in, or under the laws of, the U.S. Virgin Islands or American Samoa is not considered a foreign corporation for the purposes of withholding tax for the tax year if:

• At all times during the tax year less than 25% in value of the corporation’s stock is owned, directly or indirectly, by foreign persons.
• At least 65% of the corporation’s gross income is effectively connected with the conduct of a trade or business in the U.S. Virgin Islands, American Samoa, Guam, the CNMI, or the United States for the 3-year period ending with the close of the tax year of the corporation (or the period the corporation or any predecessor has been in existence, if less), and
• No substantial part of the income of the corporation is used, directly or indirectly, to satisfy obligations to a person who is not a bona fide resident of the U.S. Virgin Islands, American Samoa, Guam, the CNMI, or the United States.

Foreign Tax Credit: Special issues

A private foundation that was created or organized under the laws of a foreign country is a foreign private foundation. Gross investment income from sources within the United States paid to a qualified foreign private foundation is subject to withholding of a 4% rate (unless exempted by a treaty) rather than the ordinary statutory 30% rate.

Other foreign organizations, associations and charitable institutions

An organization may be exempt from income tax under section 501(a) of the Internal Revenue Code and chapter 4 withholding tax even if it was formed under foreign law. In most cases, you do not have to withhold tax on payments of income to these foreign tax-exempt organizations unless the IRS has determined that they are foreign private foundations. As a general rule, such foreign tax-exempt organizations should file Form W-8 EXP with the withholding agent in order to establish their status as a foreign tax-exempt organization.

Payments to these organizations, however, must be reported on Form 1042-S if the payment is subject to chapter 3 withholding, even though no tax is withheld.

You must withhold tax on the unrelated business income (as described in Publication 598, Tax on Unrelated Business Income of Exempt Organizations) of foreign tax-exempt organizations in the same way that you would withhold tax on similar income of nonexempt organizations when the organization does not provide you a Form W-8 ECI to certify that the income is effectively connected with a U.S. trade or business of the organization.

U.S. branches of foreign persons

In most cases, a payment to a U.S. branch of a foreign person is a payment made to the foreign person. You may, however, treat payments to U.S. branches of foreign banks and foreign insurance companies that are subject to U.S. regulatory supervision as payments made to a U.S. person, if you and the U.S. branch have agreed to do so, and if their agreement is evidenced by a withholding certificate, Form W-8 IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding. For this purpose, a territory financial institution acting as an intermediary or that is a flow-through entity is treated as a U.S. branch.

Additional rules specific to Chapter 4

A payee may be subject to Chapter 4 withholding only if it is a foreign entity. A foreign entity for Chapter 4 purposes means any entity that is not a U.S. person and includes a territory entity as defined in Regulations section 1.1471-1(b)(129).

A foreign entity is subject to Chapter 4 withholding if it is a nonparticipating foreign financial institution (FFI) or a passive non-financial foreign entity (NFFE) that does not provide the appropriate certification regarding its substantial U.S. owners. A nonparticipating FFI is an FFI other than a participating FFI, deemed-compliant FFI, or exempt beneficial owner.

A passive NFFE is:

• An NFFE other than a publicly traded corporation,
• Certain affiliated entities related to a publicly traded corporation,
• Certain territory entities,
• Active NFFEs, or
• Excluded FFIs.

For Chapter 4 purposes, a U.S. person does not include a foreign insurance company that has made an election under section 953(d) if it is a specified insurance company and is not licensed to do business in any state. Notwithstanding the foregoing, a withholding agent should treat such entity as a U.S. person for purposes of documenting the entity’s status for purposes of Chapters 3 and 4.

NRA withholding does include FATCA provisions under IRC 1471 to 1474.

• Withholding of tax
  • Withholding agent
• Persons subject to NRA withholding
  • Identifying the payee
    • Flow-through entities
    • Foreign intermediaries
    • Qualified intermediary
    • Withholding foreign partnership and foreign trust
  • Foreign persons
• Documentation
  • Beneficial owners and documentation
  • Forms for foreign beneficial owners
  • Payments made to foreign intermediaries and foreign flow-through entities
  • Form W-8IMY
  • Standards of knowledge
  • Presumption rules
  • Withholding certificate forms under I.R.C. sections 1441-1464
• Income subject to NRA withholding
  • Fixed, determinable, annual, periodical (FDAP) income
  • Nonresident aliens – Source of income
  • Who must file Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding
  • Amounts subject to NRA withholding and reporting
  • Amounts not subject to NRA withholding and reporting
  • Withholding on specific income
• Foreign governments and certain other foreign organizations
• U.S. Taxpayer Identification Number (TIN) requirement
• Depositing withheld taxes, when deposits are required, and adjustment for overwithholding in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
• Returns required
  • Discussion of Form 1042, Form 1042-S and Form 1042-T
  • Electronic reporting of Forms 1042-S

Related

• NRA withholding
• Publication 15, (Circular E), Employer’s Tax Guide
• Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
• Publication 519, U.S. Tax Guide for Aliens
• Publication 570, Tax Guide for Individuals With Income From U.S. Possessions