At PIP Traders Funding LLC, all traders who pass their evaluation are hired as independent contractors under the role of Certified PIP Trader. As part of this role, we ensure compliance with tax laws applicable to payments. Below is our updated tax withholding policy and procedures to ensure transparency and compliance.
1. Independent Contractors Residing in Puerto Rico
In accordance with the Puerto Rico Internal Revenue Code, tax withholdings are applied as follows:
10% Tax Withholding: Applies to contractors who provide:
A Merchant Certificate (for companies), or
A Compliance Certificate (for natural persons without a Merchant Certificate).
20% Tax Withholding: Applies to contractors who fail to provide either the Merchant Certificate or Compliance Certificate.
Required Documents:
W-9-PR Form: Must be submitted by all Puerto Rico residents.
Tax Withholding Exemption Certificate: If applicable, this must be provided to PIP Traders Funding LLC to avoid withholding.
Our Process:
We verify the documentation provided by the contractor.
We apply the appropriate withholding to the total payment after the profit split is applied.
We report payments annually using Form 480.6C to the Puerto Rico Department of Treasury and provide a copy to the contractor.
2. Independent Contractors Residing in the United States
For contractors residing in the United States, here are the key points:
When do we apply withholding?
If the services provided are related to activities conducted in Puerto Rico, we will withhold 29% of your payments, as this income is considered Puerto Rican-sourced (Section 1141).
When do we not apply withholding?
If the services are performed entirely outside Puerto Rico and have no connection to its operations, we will not apply any tax withholding.
Required Documents:
W-9 Form: Must be submitted by all U.S. residents.
Annual Reporting:
We will send Form 1099-NEC to the IRS and to the contractor if payments exceed $600 in the fiscal year.
3. Independent Contractors Not Residing in Puerto Rico or the United States
For contractors who are not residents of Puerto Rico or the United States, payments are not subject to withholding as their income is not considered Puerto Rican-sourced (Section 1035.02 of the Puerto Rico Internal Revenue Code).
Our Process:
We verify the contractor’s tax residency status.
We document the contractor’s tax status using appropriate international forms if applicable.
We process payment without withholding.
4. Withholding Applies to All Payment Methods
Tax withholding applies to all payment methods, including bank transfers and cryptocurrency payments. For cryptocurrency payments, the market value at the time of the transaction is used to calculate the amount subject to withholding and for reporting to tax authorities (Notice 2014-21).
5. Our Responsibilities
At PIP Traders Funding LLC:
We verify the contractor’s tax residency and documentation before processing payments.
We apply the appropriate withholding in compliance with Puerto Rico and U.S. tax laws.
We report payments to the relevant tax authorities within established deadlines.
Frequently Asked Questions (FAQ)
What happens if a contractor does not submit the required forms?
We cannot issue payments until the contractor provides the required forms (e.g., W-9 or W-9-PR). If forms are submitted late, applicable withholding (10%, 20%, or 29%) will be applied retroactively.
Does using a U.S. bank account affect withholding?
No. The source of the income determines the withholding, not the location of the bank account. The contractor’s tax residency and the source of the income are the determining factors.
What does Puerto Rican-sourced income mean?
Puerto Rican-sourced income refers to income derived from services performed in Puerto Rico or related to commercial activities within the territory, as defined by Section 1035.01 of the Puerto Rico Internal Revenue Code.
Are cryptocurrency payments subject to withholding?
Yes, cryptocurrency payments are subject to withholding. The withheld amount is calculated based on the cryptocurrency’s market value at the time of payment.
What forms will PIP Traders Funding LLC send to contractors?
Depending on residency, contractors will receive:
Form 480.6C: For Puerto Rico residents.
Form 1099-NEC or 1099-MISC: For U.S. residents.
If you have questions or need more information, our team is available to assist you. At PIP Traders Funding LLC, we are committed to transparency and ensuring compliance with all applicable tax regulations.