Why is my US client withholding tax when the treaty rate is nil?
Because backup withholding does not answer a treaty question, it answers a documentation one. It is applied where the payer does not hold a valid taxpayer identification number or certification for you, and it applies independently of whatever the treaty would give you if the paperwork were in order. A payer withholding on that basis is protecting itself, not disputing your entitlement. The treaty position becomes available again once the certification the payer needs sits on its file, and until then the argument to have is with the missing document rather than with your client.
Can I get backup withholding refunded?
Yes, but not usually from the payer. Once the amount has been remitted to the US revenue, the payer has paid it away and cannot hand it back to you. The route is a US return for that year, on which the amount withheld is claimed against the tax on the same income; where that tax is lower than the amount withheld, the difference comes back. Two pieces of paper therefore matter: the payer's statement of what it withheld, and evidence of who you are for US purposes. Correcting the certification is what stops the next payment being withheld on.
What makes my taxpayer identification number invalid to a US payer?
Often it is not invalid at all, it simply does not match. The payer checks the name and number you gave against the records the US revenue holds, and a middle name, a trading name, a married name, or an entity's brand name given instead of its registered one is enough to fail that check. A payer may also be told directly that the number it holds is wrong. A certification that has expired, is unsigned, or is incomplete has the same effect as no certification at all. The cure in each case is the same: correct the details at source so the check passes.
Does backup withholding apply to a foreign company with no US office?
Presence is not the test. A foreign payee establishes its foreign status by certifying it to the payer, and where that certification is absent, out of date, or inconsistent with what the payer already knows, the payer falls back on withholding rather than carry the risk itself. So a company with nothing at all in the United States can still be withheld on, purely because its paperwork has not reached the payer's accounts system. The question to ask of your own file is not whether you are foreign, but whether each payer holds a current certificate saying so.
If I send my number now, will earlier payments be repaid?
No. Withholding is applied at the moment of payment, on the strength of the documentation the payer holds at that time, and nothing arriving afterwards changes the rate applied to a payment already made. Sending the certification now stops withholding on the payments that follow it. Amounts already taken are recovered through a return for the year in which they were withheld. It is worth separating those two jobs in your own mind, because clients spend months chasing a payer for money the payer no longer holds.
Is backup withholding a penalty for doing something wrong?
No. It is a collection mechanism, and it is applied to payees who have done nothing except leave a form incomplete. What it costs you is cash and time: money sits with the revenue until a return releases it, and the reconciliation at the end of the year takes longer. The heavier exposure sits on the payer, which can be left carrying tax it should have withheld and did not. That is why payers apply it readily, and why arguing about fault with an accounts department is rarely a productive route.
How do I get back tax withheld in another country?
By the route that country provides, and it is rarely automatic. Where an elective return is available — on rent or pension income, for instance — filing it recomputes the tax on net income and refunds the difference. Where it is not, you file a refund claim with the withholding authority, supported by evidence of your residence and entitlement to the treaty rate. Both take time, which is why fixing the rate before payment is worth more. See withholding refund and recovery.
Do I pay tax twice on a foreign dividend?
Not at full rates if the relief is claimed. The paying country usually withholds at source, capped by treaty where one applies and the paperwork is in place; your residence country then taxes the dividend and credits the foreign withholding against its own charge. Where the withholding exceeded the treaty rate because no declaration was filed, the excess is recovered from the paying country, not credited at home. See the dividends article.
