Non–U.S. directors who attend board meetings in the United States may discover that their temporary presence can create unexpected U.S. tax implications — both for themselves and for the company. The IRS considers directors’ fees to be self–employment income and, when paid to a nonresident alien, such fees will generally be subject to 30% withholding at the source and require the filing of tax reporting forms.

Nonresident aliens have few opportunities under the Internal Revenue Code (IRC) to exempt U.S.-source compensation from U.S. income tax. Only one provision, the de minimis exception of Sec. 861(a)(3), would generally apply to nonresident alien directors. Given this provision’s history and limitations, however, these directors will often need to rely on an income tax treaty between the United States and their home country for potential relief. READ MORE