US LLC wants to purchase services of Canadian DBA in a third country. How?

What do I have to do and which steps do I have to take to legally hire and pay the canadian company?

Sign a contract. Get other company registration codes. Pay.

You make it overcomplicated. The reason a canadian company has none of the stuff you menation is because THEY DONT CARE - and neither does the US government. Basically, you deal with a NON-US-Entity you make sure they are valid (i.e. busines registered, have a number, account in company name) and then gou sign contracts, get an invoice and pay. Your accountant can handle the rest.

The answer from NetTecture isn't consistent with my experience of selling to US companies. Increasing, over the past 2 years, I've been asked to provide a W-8BEN IRS form to companies we sell to. Now, a new trend is starting where they expect an original of that form, not just a scan.

As a side note, the US is the country in my experience that thinks that companies outside its borders are accountable to its revenues services, the general view I've encountered is this utterly absurd.

By now I went through a sequence of CPA based misundertandings and false advice. e.g. I was told the canadian person working in Chile is my employee, then I was told to have the canadian company issue a W( and get a 1099, then I was told they have to sign a form 8233 and finally the CPA went down to a W8-BEN after I told him that there are no services performed within the US and there is no involvement of any business done within the US. After I returned from Chile and had a face to face meeting with the CPA he now tells me that there is no need for a W8-BEN or any other document to be filed for by the canadians - however I am told that now I have to file a 1042 and 1042S. How reliable is this information? I have lost the trust into this CPA. He seems to be lost the moment I subcontract on an international base.

DBA services would fall under what IRS calls personal services. The following IRS and UCLA links show that you have NO US tax reporting or withholding obligations when paying for personal services performed by a foreign person OUTSIDE the US (it is considered foreign-source income).

This (http://www.irs.gov/businesses/small/international/article/0,,id=106263,00.html) is a notice about foreign source income for services performed outside the US paid by a US payor.

This IRS publication (http://www.irs.gov/publications/p519/ch02.html) has 2 illustrative examples for determining US source income.

This (http://www.irs.gov/businesses/small/international/article/0,,id=106065,00.html) talks about how to determine the source of income for personal service income.

These UCLA tax guidelines (http://www.tax.ucla.edu/portal/fsis-guidelines-payments-for-services.pdf) also say that payment for services to non-US residents which are foreign source are not subject to US withholding and reporting requirements.

Based on the fact that the Canadian company is earning its revenue from doing work in Chile and not in the US, there is no reporting to be done in the US.

You do not need to ask them to furnish you a completed W8 BEN form, you do not need to file form 1042, nor do you or do they need to complete or file any tax form related to the US.

You only need to sign an agreement, pay the invoice once it is submitted. Whether the services are provided by a Canadian sole proprietor or a Canadian corporation do not matter. The source of income of the Canadian is not US based and as such is not subject to US taxes.

You may want to visit www.zarig.com. They deal with these kinds of issues (international business and expansion) and even have a page where you can ask your questions.