Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, is a form that foreign individuals (non-US citizens) or business entities need to verify their country of residence for tax purposes. This form is issued by the Internal Revenue Service of the United States (IRS). If a foreign individual or business fails to use Form W-8, they risk a full tax withholding of 30%.
This article will guide you through the different W-8BEN versions and detail its purpose with directions of filling and submission.
Disclaimer: This article serves as for informational purposes only and is not intended as tax advice. IRS regulations can be subject to change, so before you submit the forms, please check for the newest updates on www.irs.gov. We also advise you to consult an official tax advisor before taking any action.
Staying compliant and in accordance with labor laws and regulations is crucial for any business, especially the one working with foreign entities.
Any business in the United States is requested to collect Form W-8 from any non-US persons (foreign individuals) or businesses that are engaged in a contractual agreement.
What is Form W-8BEN
As we mentioned above, Form W-8BEN or Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting serves as proof that a contracted person is a foreign individual is a non-US citizen and performers work outside of the United States.
This form, sometimes referred to as a certificate of foreign status, establishes that the contracted individual is both a foreign person and the beneficial owner of the business in question.
Although the form W-8BEN is issued by the United State's IRS, this form should be issued to the withholding agent or payer, not the IRS.
When receiving income in the United States, foreign individuals are usually subject to a 30% tax withholding rate, depending on the type of income. Interest, dividends, rents, royalties, premiums, annuities, and compensation for services rendered are all considered for the tax withholding.
Submitting a Form W-8BEN can support the claim of a reduced rate of withholding, or exemption from withholding if a person is a resident of a foreign country with whom the United States has an income tax treaty, under the Internal Revenue Code.
The list of foreign governments who have a tax treaty with the United States can be found on the Internal Revenue Service's website.
When not to use Form W-8BEN
These are the cases where must not file Form W-8BEN:
- If you are not an individual, you need to use Form W-8BEN-E instead (see below).
- If you are a U.S. citizen or other U.S. person, including a resident alien individual, you need to use Form W-9 instead.
- If you are a beneficial owner claiming that income is effectively connected with the conduct of trade or business within the U.S. (other than personal services), use Form W-8ECI instead.
- If you are a beneficial owner who is receiving compensation for personal services performed in the United States, use Form 8233 or W-4 instead.
- If you are a person acting as an intermediate, use Form W-8IMY instead.
What is Form W-8BEN-E
Form W-8BEN-E is also called "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting," but it is filed and submitted by a foreign entity, not an individual.
Similarly to foreign persons receiving a certain type of income, the generated income by foreign entities is typically subject to a tax withholding of 30% by the payer or withholding agent in the United States. However, the form W-8BEN-E allows the foreign business to claim a reduction in US taxes if its foreign government has a tax treaty with the United States.
Non-U.S. businesses must provide the Form W-8BEN-E for the same sources of income as an individual would with a Form W-8BEN. If foreign entities do not provide an accurate Form W-8BEN-E when required, they risk paying the full 30% tax rate.
View the form here.
When should Form W-8BEN and Form W-8BEN-E be issued
Form W-8BEN or W-8BEN-E needs to be generated and submitted for every foreign individual that enters the contractual agreement and will receive income in the United States.
With a taxpayer identification number (TIN), the form W-8BEN or W-8BEN-E is effective indefinitely or until the facts change, provided that it is used at least annually. Without the taxpayer identification number, W-8BEN is valid for three calendar years from the date the form was created. For example if you hire someone in February 2018, the W-8BEN form will be valid until February 2021.
In the next sections, we will guide you through filling in W-8BEN and W-8BEN-E, respectively.
Filling in Form W-8BEN
Part I: Identification of Beneficial Owner:
In this part, a person is asked about personal information, such as:
- Name of the individual - Enter your legally given name as shown on your income tax return
- Country of citizenship
- Permanent residence address(street, apt. or suite no., or rural route) - Enter your detailed residence address. Keep in mind that you cannot use a P.O. box or in-care-of address.
- If your mailing address is different than your permanent residence address, please include it in the designated field.
- U.S. taxpayer identification number (SSN or ITIN), if required. If you don't have a U.S. tax number, you should fill in your Foreign Tax Identifying Number (TIN) issued from your country of residence. If you don't have a tax identification number, fill in your ID number instead.
- Date of birth- When entering the date of birth, make sure to use the format mm-dd-yyyy.
Part II: Claim of Tax Treaty Benefits:
If you reside in one of the countries listed below, please select your country of residence under the section “Claim of Treaty Benefits (Part II)”.
List of countries with a tax treaty with the United States
Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, India, Hungary, Iceland, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Korea (South), Luxembourg, Mexico, Malta, Moldova, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russian Federation, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Tunisia, Trinidad and Tobago, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan, Venezuela.
If your country of residence doesn't have a tax treaty with the US, leave this section empty.
Part III Certification
To finalize the form, you need to declare that you have examined the information on this form and to the best of your knowledge and belief it is true, correct, and complete, under penalties of perjury. You will do this by signing the form with your full legal name, and add the date of the signature. Again, keep in mind the date format is mm-dd-yyyy.
Filling in Form W-8BEN-E
Part I: Identification of Beneficial Owner
I this part, you are required to fill in the basic entity information, such as:
- Name of organization that is the beneficial owner - Enter the full legal name of the company used for the business registration
- Country of incorporation or organization
- Name of disregarded entity receiving the payment (if applicable, see instructions form the IRS)
- Chapter 3 Status (entity type) - You must check one box only. You can choose between the following: Foreign Corporation, Foreign Disregarded entity, Foreign Partnership, Foreign Simple trust, Foreign Grantor trust, Complex trust, Estate Government, Central Bank of Issue, Foreign Tax-exempt organization, Private foundation or International organization. If the business status differs in your country, tick the one that is the closest to the local entity type.
- If you entered disregarded entity, foreign partnership, foreign simple trust, or foreign grantor trust in the question above, you will need to state if the entity is a hybrid making a treaty claim. If you tick "Yes", you will need to complete Part III. If you tick "No", you can skip Part III.
- 5 Chapter 4 Status (FATCA status) (See instructions for details and complete the certification below for the entity's applicable status.)
- Permanent residence address(street, apt. or suite no., or rural route) - Enter detailed business residence address. Keep in mind that you cannot use a P.O. box or in-care-of address.
- If your business mailing address is different than your permanent residence address, please include it in the designated field.
- U.S. taxpayer identification number (TIN), if required
- GIIN and Foreign Tax Identification Number (TIN)
Part II: Disregarded Entity or Branch Receiving Payment.
Complete only if a disregarded entity with a GIIN or a branch of an FFI in a country other than the FFI's country of residence.
- Chapter 4 Status (FATCA status) of disregarded entity or branch receiving payment
- Address of disregarded entity or branch (street, apt. or suite no., or rural route). Keep in mind, you cannot use a P.O. box or in-care-of address (other than a registered address).
- GIIN (if any)
Part III: Claim of Tax Treaty Benefits (if applicable)
In this section, you should certify all the following if they apply to your business:
- The beneficial owner's country of residence that has a tax treaty with the US
- The beneficial owner derives the item (or items) of income for which the treaty benefits are claimed, and, if applicable, meets the requirements of the treaty provision dealing with limitation on benefits.
- The beneficial owner is claiming treaty benefits for U.S. source dividends received from a foreign corporation or interest from a U.S. trade or business of a foreign corporation and meets qualified resident status.
Add any special rates and conditions, if applicable to your case. If you are claiming the provisions, state the article and paragraph of the treaty identified on the lines above to claim a % rate of withholding and specify the type of income. Explain the additional conditions you meet to be eligible for the rate of withholding.
In Part IV to Part XXIX, you need to state all the applicable elements regarding foreign financial institutions that have a tax treaty with the United States.
To finalize the form, you need to declare that you have examined the information on this form and to the best of your knowledge and belief it is true, correct, and complete, under penalties of perjury. The following statements need to be certified:
• The entity identified on line 1 of this form is the beneficial owner of all the income to which this form relates, is using this form to certify its status for chapter 4 purposes, or is a merchant submitting this form for purposes of section 6050W;
• The entity identified on line 1 of this form is not a U.S. person;
• The income to which this form relates is: (a) not effectively connected with the conduct of a trade or business in the United States, (b) effectively connected but is not subject to tax under an income tax treaty, or (c) the partner's share of a partnership's effectively connected income; and
• For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions.
Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which the entity on line 1 is the beneficial owner or any withholding agent that can disburse or make payments of the income of which the entity on line 1 is the beneficial owner. I agree that I will submit a new form within 30 days if any certification on this form becomes incorrect.
Sign the form with your full legal name, and add the date of the signature. Again, keep in mind the date format is mm-dd-yyyy.
Fill in and collect W-8BEN automatically through Deel
Deel users can fill and and collect W-8BEN and W-8BEN-E forms automatically through Deel. When collected, the forsm are safely stored on Deel, under Tax forms. Learn more about the process in this tutorial. To learn more about the tax compliance on Deel, see this page.