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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
later. Use Income Code 43 to report payments to artists 1042 and 1042-S. Chapter 4 withholding does not apply to
and athletes who have signed a CWA. these proceeds.
No tax is imposed on nonbusiness gambling income a
Income Code 42. You must withhold tax at a 30% rate on nonresident alien wins playing blackjack, baccarat, craps,
payments to artists and athletes for services performed as roulette, or big-6 wheel in the United States. A Form
independent contractors. See Pay for independent per- W-8BEN is not required to obtain the exemption from with-
sonal services, earlier, for more information. You must holding, but a Form W-8BEN may be required for purpo-
withhold tax at graduated rates on payments to artists and ses of Form 1099 reporting and backup withholding. Gam-
athletes for services performed as employees. See Pay for bling income that is not subject to chapter 3 withholding is
dependent personal services, earlier, for more informa- not subject to reporting on Form 1042-S.
tion. However, in any situation where the nature of the re- Nonresident aliens are taxed at graduated rates on net
lationship between the payer of the income and the artist gambling income won in the United States that is effec-
or athlete is not ascertainable, you should withhold at a tively connected with a U.S. trade or business.
rate of 30%.
Tax treaties. Gambling income of residents (as de-
Income Code 43. NRAAEs who perform or participate fined by treaty) of the following foreign countries is not tax-
in events in the United States can request a CWA for a able by the United States: Austria, Belgium, Bulgaria,
lower rate of withholding. A CWA is an agreement entered Czech Republic, Denmark, Finland, France, Germany,
into by the athlete or entertainer, a designated withholding Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania,
agent, and the IRS. Under no circumstances will a CWA Luxembourg, Netherlands, Russia, Slovak Republic, Slov-
reduce taxes withheld to less than the anticipated amount enia, South Africa, Spain, Sweden, Tunisia, Turkey, Uk-
of income tax liability. raine, and the United Kingdom.
We’ve temporarily waived the income requirement for Gambling income of residents of Malta is taxed at 10%.
which form to use when applying for a CWA. Form Claimants must give you a Form W-8BEN (with a U.S.
13930-A is currently unavailable. While the waiver is in ef- or foreign TIN) to claim treaty benefits on gambling in-
fect, individuals with income below $10,000 can apply for come that is not effectively connected with a U.S. trade or
a CWA using Form 13930, Instructions on How to Apply business. See U.S. or Foreign TINs, later, for when you
for a Central Withholding Agreement PDF. For more infor- can accept a Form W-8BEN without a TIN.
mation on how to apply for a CWA, see Form 13930.
For more information on the CWA program, go to Transportation income. U.S. source gross transporta-
IRS.gov/Individuals/International-Taxpayers/Central- tion income (USSGTI), as defined in section 887, is not
Withholding-Agreements. subject to 30% gross withholding tax, and chapter 4 with-
holding does not apply to this income. Transportation in-
Tax treaties. Under many tax treaties, compensation come is income from the use of a vessel or aircraft,
paid to public entertainers or athletes for services per- whether owned, hired, or leased, or from the performance
formed in the United States is exempt from U.S. income of services directly related to the use of a vessel or air-
tax if the artist or athlete derives receipts for the tax year craft. U.S. source gross transportation income includes
concerned, including expenses reimbursed to them or 50% of all transportation income from transportation that
borne on their behalf, not in excess of $10,000, or in more either begins or ends in the United States. USSGTI does
recent treaties, $20,000. See Tax Treaties, later, for infor- not include transportation income of a foreign corporation
mation about treaty benefits. taxable in a U.S. territory. The recipient of USSGTI must
Employees and independent contractors may claim an pay tax on it annually at the rate of 4% on Section I of
exemption from withholding under a tax treaty by filing Form 1120-F, unless the income is effectively connected
Form 8233. Often, however, you will have to withhold at with the conduct of a U.S. trade or business and is report-
the statutory rates on the total payments to the entertainer able on Section II of Form 1120-F. Special rules apply to
or athlete. This is because the exemption may be based determine if a foreign corporation's USSGTI is effectively
upon factors that cannot be determined until after the end connected with a U.S. trade or business.
of the year.
Canadian truck and rail income. Under Article VIII
(Transportation) of the U.S.–Canada treaty, any U.S.
Other Income source income derived by a Canadian company engaged
in the operation of trucks or a railway as a common carrier
For the discussion of Income Codes 24, 25, and 26, see or contract carrier, and attributable to the transportation of
U.S. Real Property Interest, later. For the discussion of In- property between Canada and the United States, is ex-
come Code 27, see Publicly Traded Partnerships, later. empt from tax in the United States, provided the company
is otherwise eligible for treaty benefits. Payments for the
Gambling winnings (Income Code 28). In general,
use of trucks (including trailers) or railway rolling stock, or
nonresident aliens are subject to chapter 3 withholding at
from the use, maintenance, or rental of containers (includ-
30% on the gross proceeds from gambling won in the Uni-
ing trailers and related equipment for the transport of con-
ted States if that income is not effectively connected with
tainers) used to transport property between Canada and
a U.S. trade or business and is not exempted by treaty.
the United States are also exempt from U.S. tax, provided
The tax withheld and winnings are reportable on Forms
the company is otherwise eligible for treaty benefits.
Publication 515 (2024) 57
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