When you are a business doing business with another company that is outside of the U.S., you are responsible for submitting documents to the Internal Revenue Service for the money you pay to the foreign corporation. The IRS specifies your obligations in publication 515. You must understand what your obligations are to stay compliant with the law.
Form W-8 is the correct form to file for non-U.S. citizens and foreign corporations. This document is a replacement for the standard information form filed for individuals doing business in the United States. The W-9 form collects certain information about the corporation you are doing business with. This information is then transmitted to the IRS.
A 1042-S document is used for all foreign corporations doing business in the U.S. This document is a withholding certificate. Generally, the IRS requires that up to 30 percent of income received by the foreign corporation be withheld for income tax purposes in its own country. Sometimes, a graduated withholding is required. The nature of withholding depends on the location of the foreign corporation.
Form 8233 is used when the foreign corporation can file an exemption for withholding. This is normally only done when there is a tax treaty which allows the corporation to earn income in the U.S. without the requirement for withholding. Otherwise, the foreign entity must file the 1042-S form.
A 1099 is normally issued to individuals living in the U.S. and who are also citizens of the country. Any person making more than $600 per year is issued a 1099-MISC for income earned in the U.S.. However, foreign corporations are not issued this document. They are not subject to this filing since they are foreign entities.