What Is the W-8BEN-E Form? A Guide for Non-US Small Businesses

A W-8 form is a grouping of tax forms specifically for non-resident aliens and foreign businesses who have either worked in or earned income in the US. It declares the applicant’s status as a non-resident alien or foreign national and informs financial companies that they will be taxed differently than a resident. They are only for foreign people and/or entities without citizenship or residency—a US resident or resident alien will never be required to fill out a W-8 tax form.

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. A recalcitrant account holder includes an individual who fails to comply with the requests of an FFI for documentation and information for determining the U.S. or foreign status of the individual’s account, including furnishing this Form W-8BEN when requested. A PSE is a merchant acquiring entity or third-party settlement organization. Under section 6050W, a PSE is generally required to report payments made in settlement of payment card transactions or third-party network transactions.

Form W-8BEN-E – Introductory Material

A transfer is a sale, exchange, or other disposition of a partnership interest, and includes a distribution from a partnership to a partner, as well as a transfer treated as a sale or exchange under section 707(a)(2)(B). A GIIN is the identification number assigned to an entity that has registered with the IRS for chapter 4 purposes. I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc.

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. This may be done by including the name and account number of the disregarded entity on line 7 (reference number) of the form. However, if the disregarded entity is claiming treaty benefits as a hybrid entity, it should complete Form W-8BEN-E instead of this Form W-8BEN.

Types of W-8 Forms

To clarify, in the US common forms of IRS TIN are social security numbers, individual taxpayer identification numbers and employer identification numbers. On the other hand, VAT numbers play a crucial role in validating supplier identities for businesses based both within and outside of the EU. A W-8 form from the US Internal Revenue Service (IRS) allows non-US individuals and businesses to confirm they are not a US taxpayer.

Should none of those exemptions apply, the entity must file a W-8BEN or W-8ECI (if it received «effectively connected income»). Form W-8ECI is the «Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States.» It is filed by foreign individuals who engage in a trade or business in the United States and receive income from U.S. sources. These proceeds are generally considered «effectively connected income» (ECI) whether or not there is a connection between the income and the trade Why does bookkeeping and accounting matter for law firms or business being conducted in the United States in a particular year. For example, a nonresident foreigner who earns interest or dividends from U.S.-issued securities would likely file a W-8BEN, while a foreign nonprofit with operations in the U.S. might need to file form W-8ECI. Former U.S. residents who earn retirement income, or who occasionally perform freelance work for U.S. clients, might also have to submit the form to reduce their tax withholdings. Although the W-8 forms are issued by the IRS, they are submitted only to payers or withholding agents, not to the IRS.

Tax services

A withholding agent may request this Form W-8BEN-E to establish your chapter 4 status and avoid withholding at a 30% rate on such payments. Line 14, Claim of tax treaty benefits, has been updated with a new box for an entity to indicate that the income tax treaty with the United States under which they are claiming treaty benefits does not include a limitation on benefits article. Typically, these are treaties that entered into force prior to December 31, 1986. If you do not obtain a Form W-8ECI or the U.S. branch’s EIN, the income paid cannot be treated as income effectively connected https://personal-accounting.org/accounting-for-small-start-up-business/ with a U.S. trade or business. If an entity receiving a withholdable payment selects a certified deemed-compliant FFI status on line 5 of Form W-8BEN-E but does not complete the corresponding required certifications in Part V, the form is invalid for chapter 4 purposes. On the other hand, if you receive a Form W-8 for which the person signing the form does not also print a name before the signature when required on the form, you are not required to treat the form as incomplete if you have documentation or information supporting the identity of the person signing the form.

• You should provide Form W-8BEN to a payment settlement entity (PSE) requesting this form if you are a foreign individual receiving payments subject to reporting under section 6050W (payment card transactions and third-party network transactions) as a participating payee.
• In lieu of the certifications contained in Parts IV through XXVIII of Form W-8BEN-E, in certain cases you may provide an alternate certification to a withholding agent.
• 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.
• Foreign individuals are ordinarily subject to a tax rate of 30% on the income they receive from US payers.
• Once the W-8BEN-E form  expires, a new form has to be filled out by the foreign vendor and submitted to its American employer before any more payments can be processed.

The beneficial owners of a foreign grantor trust (that is, a foreign trust to the extent that all or a portion of the income of the trust is treated as owned by the grantor or another person under sections 671 through 679) are the persons treated as the owners of the trust. If you use Form W-8BEN to certify that you are a foreign person, a change of address to an address in the United States is a change in circumstances. Generally, a change of address within the same foreign country or to another foreign country is not a change in circumstances. However, if you use Form W-8BEN to claim treaty benefits, a move to the United States or outside the country where you have been claiming treaty benefits is a change in circumstances.

How to File W-8 Forms

The certifications in Part II must be included in a substitute form if you are making a withholdable payment to a disregarded entity or a branch that must be reported in Part II. The certifications in Part III must be included only if treaty benefits are claimed, and then only to the extent that the certifications are required. See Alternative Certifications Under an Applicable IGA, earlier, for circumstances in which the chapter 4 certifications may be replaced with alternative certifications.

A list of U.S. tax treaties is available at IRS.gov/Individuals/International-Taxpayers/Tax-Treaties. If you own the income with one or more other persons, the income will be treated by the withholding agent as owned by a foreign person that is a beneficial owner of a payment only if Form W-8BEN or W-8BEN-E (or other applicable document) is provided by each of the owners. An account will be treated as a U.S. account for chapter 4 purposes by an FFI requesting this form if any of the account holders is a specified U.S. person or a U.S.-owned foreign entity (unless the account is otherwise excepted from U.S. account status for chapter 4 purposes). The substitute Form W-8EXP must contain all of the information required in Part I, lines 1 through 5, line 7 (if a U.S. TIN is required), and line 8. 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. In certain cases, a GIIN may be required based on the chapter 4 status claimed on the form.