Treas. Reg. 1.1441-3(f)(1): when the payer pays the tax for the holder, the payment is grossed up (26 CFR 1.1441-3(f)(1))
If a contract promises the holder a fixed net amount, the buyer paying the US tax on top can itself be income to the holder and grossed up. The contract should say whether the fee is gross or net of US tax.
Dated 18 Oct 2026Source checked 18 Oct 2026Basis: primary text
In the source's own words
“Whether the payment of the tax by the withholding agent constitutes a satisfaction of the beneficial owner ... must be determined under all the facts and circumstances surrounding the transaction, including any agreements between the parties and applicable law.”
Figures it counts in
It is shown on its own, not counted into a figure.
Cited in this guide