W-8 BEN Tax Form: What It Is & Who Needs To File One

For a list of jurisdictions treated as having in effect a Model 1 or Model 2 IGA, see /resource-center/tax-policy/treaties/Pages/FATCA-Archive.aspx. Validating tax identification information is recommended for all new and existing suppliers. HICX offers digitalized solutions to help drive logic for suppliers to know which form they should fill out and to help collect relevant information and manage these activities with suppliers at scale, through initiatives that can be initiated for collecting and storing all required information. Internal Revenue Service’s TIN and European Union’s VAT are tax ID numbers used for this exact purpose, that is, in the administration of tax laws and as such are a critical part of W-8 and W-9 forms. „EY“ refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity.

The W 8 Form: Who It’s For and What It Does

Simply put, US organizations require these forms in order to calculate how much tax they should hold from foreign suppliers, an activity which is complicated due to different tax treaties US has with different countries around the world – such as a double taxation treaty between the US and UK. Withholding agents that utilize substitute Forms W-8 will need to make the appropriate updates to the penalty of perjury statements. The updated Form W-8 requester instructions may address the particular specifications and whether this statement is needed for substitute Forms W-8 used to only document accounts that cannot hold PTP interests (e.g., cash depository accounts). The instructions for Forms W-8BEN-E and W-8BEN have also been updated to reference treaty claims on business profits and gains to reduce withholding under Section 1446(f). This is largely consistent with the Preamble to the final Section 1446(f) regulations. Brokers must withhold 10% of the gross proceeds on the sale of a PTP interest under Section 1446(f) unless an exception applies.

How to File W-8 Forms

Line 6b (new), FTIN not legally required, has been added for account holders otherwise required to provide a foreign taxpayer identification number (FTIN) on line 6 (redesignated as line 6a) to indicate that they are not legally required to obtain an FTIN from their jurisdiction of residence. Although foreign workers aren’t US citizens, they are subject to tax withholdings based on the tax treaty of their country of residence. Any employee who is a non-resident foreign person and who is the beneficial owner of an amount subject to withholding must fill out Form W-8 BEN. By filling out the W-8 BEN, the worker claims the benefits of any existing tax treaties. The employer can then use the corresponding rate for income tax withholding.

An EOR like Remote is a service provider that helps you onboard, hire, manage, and pay international workers.
Unlike a W8 form, it plays no role in applying for tax exemption or rate reduction status.
If you receive an alternative certification under an applicable IGA described in the preceding paragraphs, you may rely on such certification unless you know or have reason to know the certification is incorrect.
A disregarded entity with a U.S. owner or a disregarded entity with a foreign owner that is not otherwise able to fill out Part II (that is, because it is in the same country as its single owner and does not have a GIIN) may provide this form to an FFI solely for purposes of documenting itself for chapter 4 purposes.
A foreign person includes a foreign corporation, a foreign partnership, a foreign trust, a foreign estate, and any other person that is not a U.S. person.

What is a W-9 tax form?

Instead, the person or entity that requires your W-8BEN withholding tax — such as a partnership or the person paying you — will formally request it from you. If you give them the form before they pay you for your product or service, they will not have to withhold the 30 percent, or similar, rates. The law states that foreign individuals or entities who have worked or earned income in the US must pay a 30% tax on some types of income earned.

What is the Difference Between Form W-8BEN and Form W-8BEN-E?

Another purpose of the W8 BEN form is to simply verify your identity as an income-earning foreign entity. However, a W8-EXP is filed by payees to directly apply for a tax reduction or exemption from the withholding rate. Typically, income for foreign businesses is also withheld at a rate of 30% if no W8-BEN-E is submitted and there are no applicable exemptions or special rates due to relevant tax treaties. Entities from countries that have tax treaties with the US may enjoy lower tax withholding rates on types of income that are exempted from tax withholding or qualify for lower rates. Different countries that have tax treaties with the US may have different terms and enjoy different tax benefits. The good news is that you may be exempt from withholding taxes or be eligible for a reduced withholding rate based on the tax treaties your country of residence has with the US.

Understanding Form W-8BEN: Purpose and When to Use It

Later, the investor purchases U.S. stock and claims treaty benefits on dividend income. The withholding agent must obtain a new Form W-8BEN at that time that provides the information required in Part II to be able to withhold based on the treaty claim and not at the 30% withholding tax rate. You must give Form W-8BEN to the withholding agent or payer if you are a nonresident alien who is the beneficial owner of an amount subject to withholding, or if you are an account holder of an FFI documenting yourself as a nonresident alien. If you are the single owner of a disregarded entity, you are considered the beneficial owner of income received by the disregarded entity. Submit Form W-8BEN when requested by the withholding agent, payer, or FFI whether or not you are claiming a reduced rate of, or exemption from, withholding.

If the beneficial owner is required to explain the additional conditions in the treaty that it meets to be eligible for the rate of withholding on line 15, you may accept a brief explanation. You may accept a treaty claim without this explanation under an interest or dividends (other than dividends subject to a preferential rate based on ownership) article of a treaty or other income article, unless such article requires additional representations. If the beneficial owner is required to explain the additional conditions in the treaty that it meets to be eligible for the rate of withholding on line 10, you may accept a brief explanation for this purpose. The accompanying instructions for certain Forms W-8 were https://stocktondaily.com/navigating-financial-growth-leveraging-bookkeeping-and-accounting-services-for-startups/ updated (Rev. October 2021) to reference the use of the forms by a foreign person that is a seller of a life insurance contract (or interest therein) or a foreign person that is a recipient of a reportable death benefit for purposes of reporting under section 6050Y. Income from transactions with a broker or a barter exchange is subject to reporting rules and backup withholding unless Form W-8BEN or a substitute form is filed to notify the broker or barter exchange that you are an exempt foreign person. For example, if a partnership is listed as the holder or owner of a financial account, then the partnership is the account holder, rather than the partners of the partnership (subject to some exceptions).

W-8BEN: When to Use It and Other Types of W-8 Tax Forms

See Alternative Certifications Under an Applicable IGA, earlier, for circumstances in which the chapter 4 certifications may be replaced with alternative certifications. If you are a foreign individual who is the single owner of a disregarded entity that is not claiming treaty Navigating Financial Growth: Leveraging Bookkeeping and Accounting Services for Startups benefits as a hybrid entity, with respect to a payment, you should complete this form with your name and information. If the account to which a payment is made or credited is in the name of the disregarded entity, you should inform the withholding agent of this fact.

Individuals are required to pay income tax in the same way, without reduced rates, if they live in a country without an existing tax treaty.
The form must include the name and address of the individual that is the payee or beneficial owner; all countries in which the individual is resident for tax purposes; the individual’s country of birth; a TIN, if any, for each country of residence; and the individual’s date of birth.
You must treat a Form W-8 as invalid when you know or have reason to know of a change in circumstances that affects the correctness of the form.
Form W-8 BEN may also be considered valid indefinitely under certain circumstances.
See, however, Substitute Forms W-8 for Payments of Reportable Amounts and Withholdable Payments, earlier, for when you may omit a chapter 4 certification on a substitute Form W-8.
If you are a hybrid entity making a claim for treaty benefits as a resident on your own behalf, you may do so as permitted under an applicable tax treaty.

Failure to submit a Form W-8BEN could result in paying either the full 30% rate or the backup withholding rate under section 3406.
Other persons may need to complete this line if they claim benefits that require them to meet conditions not addressed on W-8BEN.
Brokers must withhold 10% of the gross proceeds on the sale of a PTP interest under Section 1446(f) unless an exception applies.
If you are a certified resident of Canada, a W-8BEN form allows you to make a claim (a tax treaty benefit) for a reduction on the tax withheld from U.S. income you may receive in your account.
This form details all monies transferred to individuals or entities during the tax year.

Your Form W-8BEN is effective for international status starting on the date you sign it and ending on the last day of the third calendar year following. Some situations and exceptions apply, including a change in circumstance that could render the information you’ve filed incorrect or outdated. A summary of the specific changes to each withholding certificate is provided in the grid below.

A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would complete Form W-9. Generally, only a nonresident alien individual can use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income. However, most tax treaties contain a provision known as a „saving clause“ which preserves or „saves“ the right of each country to tax its own residents as if no tax treaty existed. Exceptions specified in the saving clause may permit an exemption from tax to continue for certain types of income even after the recipient has otherwise become a U.S. resident alien for tax purposes.

A W-8 BEN form is a United States Internal Revenue Service (IRS) tax form used to determine the foreign status of non-resident aliens for the purposes of taxation. It certifies which country of residence an individual is submitting their taxes to, as it is not the U.S. A W-8 form is a document that the Internal Revenue Service (IRS) requires foreign entities—individuals and corporations—to fill out if they have financial dealings within the US. This form authenticates their status as non-US residents for taxation and is key in managing US source income for these entities—which includes income earned from sources like US property rentals or dividends from US companies.

A payment to a U.S. partnership, U.S. trust, or U.S. estate is treated as a payment to a U.S. payee. A U.S. partnership, trust, or estate should provide the withholding agent with a Form W-9 pertaining to itself. However, for purposes of section 1446(a), a U.S. grantor trust or disregarded entity shall not provide the withholding agent a Form W-9.