Definition:
A nonresident alien (NRA) is subject to U.S. income tax on income that is effectively connected with a trade or business in the United States (ECI) and on income that is fixed, determinable, annual, and periodical that is not effectively connected with a U.S. trade or business (FDAP). The payer (referred to as the “withholding agent”) making a payment of FDAP income to a NRA is generally required to withhold 30 percent of the gross amount of the payment under Internal Revenue Code (IRC) 1441. The 30 percent withholding tax rate may be reduced or eliminated by an income tax treaty or other exemption (such as portfolio interest).See Pages 4 and 6-8