Tax Forms for Contractors: Does a Non-US Company Need W-9 and W-8 Forms?

Wondering if a non-US company needs to collect W-8 and W-9 forms for independent contractors? Learn all you need to know about it.

Written by Anja Simic
October 18, 2021

Tax Forms for Contractors: Does a Non-US Company Need W-9 and W-8 Forms?

Wondering if a non-US company needs to collect W-8 and W-9 forms for independent contractors? Learn all you need to know about it.

Written by Anja Simic
October 18, 2021

Tax Forms for Contractors: Does a Non-US Company Need W-9 and W-8 Forms?

Wondering if a non-US company needs to collect W-8 and W-9 forms for independent contractors? Learn all you need to know about it.

Tax Forms for Contractors: Does a Non-US Company Need W-9 and W-8 Forms?

Wondering if a non-US company needs to collect W-8 and W-9 forms for independent contractors? Learn all you need to know about it.

Global hiring is booming, and it’s made possible for companies all over the world to look outside of their talent pool.

However, the process raises the question of taxes, which can be confusing both for employers and employees. Who pays what? One of the crucial questions for employers is - what tax forms do I need to send out to employees and contractors in different situations?

Read on to learn all you need to know about tax obligations when doing work in the US or with US workers.

Tax forms for contractors: general rules

Simply put, only US-based companies need to collect Forms W-8 or W-9. If a company is based outside of the US, there’s no need to collect them. The tax compliance matter still needs to be handled, but it’s going to be according to the laws of the country where the company is located.

When a company is based in the US and hires US citizens, they need to comply with domestic tax regulations and use Form W-9. If a US-based company hires foreign contractors, it’s the employer’s responsibility to issue the Form W-8BEN to independent contractors acting as individuals, or W-8BEN-E forms to those acting as business entities.

In the following sections, we’ll explain these forms more in-depth.

Form W-9

The tax form W-9 is used to collect and verify the necessary information from US-based independent contractors. When tax season approaches, employers issue these forms to their independent workers and keep the completed document in their premises. Note that employers aren’t bound to submit the form to the IRS, but they need to have it.

Form W-9 contains different data about the independent contractor. Other than their name and current address, there’s also the TIN (Tax Identification Number) or Social Security number. This number has nine digits and must be provided in the form to avoid potential penalties from the IRS.

Only independent contractors are required to fill in this form. In case you’re a part-time or full-time employee on a company’s payroll, you will be completing Form W-4. If you’re not sure what your status is, you can talk to your employer, look it up in your contract, or check out this article.

As form W-9 only serves to identify the contractor and get their personal information, another form must be completed to prove to the IRS that an independent worker will pay their taxes. They will use form 1099-NEC to report their income.

Further reading: What is IRS Form W-9 and How to Fill it out?

Form W-8BEN

When an employer hires contractors outside of the US, they need different forms to get information from their workers. Forms W-8 are used to collect data from foreign independent contractors, and a business that hires them may need either a W-8BEN or a W-8BEN-E form, depending on how the contractor is structured- as an individual or a business entity.

Form W-8s are necessary for all foreign contractors who perform work for US-based employers. If a contractor doesn’t submit a completed form timely or they provide invalid information, they may need to have the full withholding tax rate applied to their income, which is 30%.

Form W-8BEN is also called Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting. It proves that a contractor is indeed a non-US person and that they complete their work outside of the States. The other type of W-8 form, Form W-8BEN-E is used when a foreign person acts as a business entity rather than an individual and also gives the contractor a chance to claim a tax exemption.

This tax exemption is possible in both cases (individual contractor or a business entity) if the US has a tax treaty with the country the contractor comes from.

Further reading: IRS Form W-8BEN & W-8BEN-E: Tax Forms You Need When Contracting Foreign Persons & Entities

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Global hiring is booming, and it’s made possible for companies all over the world to look outside of their talent pool.

However, the process raises the question of taxes, which can be confusing both for employers and employees. Who pays what? One of the crucial questions for employers is - what tax forms do I need to send out to employees and contractors in different situations?

Read on to learn all you need to know about tax obligations when doing work in the US or with US workers.

Tax forms for contractors: general rules

Simply put, only US-based companies need to collect Forms W-8 or W-9. If a company is based outside of the US, there’s no need to collect them. The tax compliance matter still needs to be handled, but it’s going to be according to the laws of the country where the company is located.

When a company is based in the US and hires US citizens, they need to comply with domestic tax regulations and use Form W-9. If a US-based company hires foreign contractors, it’s the employer’s responsibility to issue the Form W-8BEN to independent contractors acting as individuals, or W-8BEN-E forms to those acting as business entities.

In the following sections, we’ll explain these forms more in-depth.

Form W-9

The tax form W-9 is used to collect and verify the necessary information from US-based independent contractors. When tax season approaches, employers issue these forms to their independent workers and keep the completed document in their premises. Note that employers aren’t bound to submit the form to the IRS, but they need to have it.

Form W-9 contains different data about the independent contractor. Other than their name and current address, there’s also the TIN (Tax Identification Number) or Social Security number. This number has nine digits and must be provided in the form to avoid potential penalties from the IRS.

Only independent contractors are required to fill in this form. In case you’re a part-time or full-time employee on a company’s payroll, you will be completing Form W-4. If you’re not sure what your status is, you can talk to your employer, look it up in your contract, or check out this article.

As form W-9 only serves to identify the contractor and get their personal information, another form must be completed to prove to the IRS that an independent worker will pay their taxes. They will use form 1099-NEC to report their income.

Further reading: What is IRS Form W-9 and How to Fill it out?

Form W-8BEN

When an employer hires contractors outside of the US, they need different forms to get information from their workers. Forms W-8 are used to collect data from foreign independent contractors, and a business that hires them may need either a W-8BEN or a W-8BEN-E form, depending on how the contractor is structured- as an individual or a business entity.

Form W-8s are necessary for all foreign contractors who perform work for US-based employers. If a contractor doesn’t submit a completed form timely or they provide invalid information, they may need to have the full withholding tax rate applied to their income, which is 30%.

Form W-8BEN is also called Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting. It proves that a contractor is indeed a non-US person and that they complete their work outside of the States. The other type of W-8 form, Form W-8BEN-E is used when a foreign person acts as a business entity rather than an individual and also gives the contractor a chance to claim a tax exemption.

This tax exemption is possible in both cases (individual contractor or a business entity) if the US has a tax treaty with the country the contractor comes from.

Further reading: IRS Form W-8BEN & W-8BEN-E: Tax Forms You Need When Contracting Foreign Persons & Entities

Automate your tax document collection

From collecting tax forms to storing them all in one place, we automate everything, so you can stay focused on growing your business.

Learn more