The good news is that these issues can be corrected by submitting the proper form and, if necessary, working with a qualified expat tax professional. Depending on both the entity that has requested the W-8 and the entity who is required to complete it, there are a number of different variations of the W-8 form that you may need to complete. Filing a W-8BEN form is a straightforward process that requires gathering key personal information and submitting it to the income payer. The W-8 and W-9 forms serve different purposes and apply to different groups of people. This form is used by intermediaries, flow-through entities, and certain U.S. branches that act on behalf of others to ensure proper tax treatment. Form W-8 is generally valid for three years from the date of signing unless there are changes in tax residency or entity status.

What is Form W8-BEN-E?

This form allows these entities to certify their foreign status to avoid excessive withholding tax on U.S. sourced income. Typically, the completed W-8BEN is then submitted to the financial institution or U.S. payer, not the IRS. This ensures that the payer has accurate documentation to apply the correct withholding rate.

Form W-8BEN-E: Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)

Though they require basic information such as name, country of origin, and taxpayer identification number (TIN), they also ask for the contacts from which the filer is receiving the reported income. These forms are requested by the payers or withholding agents and kept on file with them—not filed with the IRS. Part https://www.bookstime.com/ III of Form W-8BEN-E is used to claim a reduced treaty rate and requires the claimant to specify how the claimant meets any requirements.

Keep accurate tax documentation

This guide will help you understand each form, when and why it’s needed, and how to stay compliant. If W8 contractors don’t file the W8 forms, they need to pay the full 30% tax rate that applies to non-citizen and non-resident contractors doing business what is a w8 with US entities. W8 forms, meanwhile, should also be received as early as possible, before you make the first payment.

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• With the form, you indicate that you are not a citizen of the United States.
• This is possible because of the tax treaties the US has with numerous countries, which aim to prevent double taxation for taxpayers abroad.
• Need help navigating the W‑8 rules, treaty claims, or complex ownership chains?
• Alternatively, you may request the Form W-8 or W-9 directly from each grantor or owner.
• In the case of withholding, the company would then be required to file a US tax return to claim back the overwithheld tax – leading to both additional costs and potential liquidity issues.

While the IRS does provide comprehensive guidelines for each form, there might still be circumstances that aren’t explicitly addressed. If you are filling out a W-8 BEN form and get stuck, the best thing to do is seek counsel from a tax professional with expertise in US tax laws and regulations. Awareness of common mistakes and applying best practices for compliance will allow you to confidently navigate U.S. tax regulations. When filling out Form W8-BEN-E, entities must provide detailed information, including their legal name and country of incorporation. Simple errors or missing information can lead to considerable tax liabilities. Due to the complexity of the W-8 form, many who are required to fill it out work with a professional, such as an income tax preparation service, to do so.

However, an account that is held by a single-member disregarded entity is treated as held by the entity’s single owner. If a change in circumstances makes any information on the Form W-8BEN you have submitted incorrect, you must double declining balance depreciation method notify the withholding agent, payer, or FFI with which you hold an account within 30 days of the change in circumstances and you must file a new Form W-8BEN or other appropriate form. 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. The US has a number of Income Tax treaties with foreign countries that allow reductions on taxed amounts.

For additional information and instructions for the withholding agent, see the Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY. Need help navigating the W‑8 rules, treaty claims, or complex ownership chains? Without a valid W‑8, the payer must withhold 30% of interest, dividends, rents, royalties, or service fees, even when a tax treaty would otherwise reduce or eliminate that tax. Of course, the complexity of US tax laws—and the chance that laws could change—mean that the scenarios outlined above might not encompass all situations in which a W-8 form is necessary.

FREE U.S. Tax Guide for Americans Abroad

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. Choosing the correct Form W-8 depends on your status as an individual or entity, the nature of the income you receive, and whether you qualify for tax treaty benefits. Below is a breakdown of the different types of Form W-8, their specific purposes, and when to use them. As a contractor, you’ll need to complete and submit a W-8 form whenever you start receiving payments from a new client. Any non-US individuals or businesses earning passive income, like dividends, interest, and royalties from US sources also need to submit a W-8 form if they wish to avoid full withholding rates. The form establishes that the person is a foreign individual and owner of a business.

FORM W8

The instructions for this line have also been updated to include representations required by individuals claiming treaty benefits under an income tax treaty that provides for treaty benefits related to a remittance-based tax system. If a QI checks line 15f of Part III of the form to certify that it assumes primary Form 1099 reporting and backup withholding responsibility, you may accept the form even if you do not know if there are any U.S. accounts receiving reportable payments at the time of the certification. However, a QI is not required to check line 15i of Part III of the form until it provides a withholding statement identifying an intermediary or flow-through entity that receives a payment allocated to a chapter 4 withholding rate pool of U.S. payees. If you become a U.S. citizen or resident alien after you submit Form W-8BEN, you are no longer subject to the 30% withholding rate under section 1441 or the withholding tax on a foreign partner’s share of effectively connected income under section 1446.