Global Work Glossary
Table of Contents
When is Form W-8BEN necessary and what is it for?
Form W-8BEN serves as a declaration of foreign status for non-US citizens and businesses to prevent full 30% tax withholding on income earned in the US. It certifies foreign status and allows individuals and entities to claim treaty benefits or exemptions from withholding tax.
Importance of Compliance:
Compliance with Form W-8BEN is crucial for foreign contractors and entities working with US companies to avoid unnecessary tax withholdings. Failure to submit the form may result in full tax withholding on income earned in the US.
2021 IRS Update:
The IRS released an updated version of Form W-8BEN in 2021 to align with changes in US tax regulations. It's essential to use the most current form to ensure compliance with tax laws.
Eligibility and Validity:
Form W-8BEN is intended for individual foreign persons, while businesses should use Form W-8BEN-E. The form remains valid for three years unless personal circumstances change. It enables individuals and entities from countries with tax treaties with the US to enjoy reduced withholding rates.
Tax Treaty Benefits:
Properly completed W-8 forms allow individuals and entities from treaty countries to claim reduced withholding rates, preventing double taxation. This benefit applies to various types of income, including compensation for services, interest, dividends, rents, royalties, premiums, and annuities.
Form W-8BEN-E:
Form W-8BEN-E is for foreign entities receiving US income. Similar to Form W-8BEN, it allows foreign businesses to claim treaty benefits or exemptions from withholding tax. Failure to provide an accurate Form W-8BEN-E may result in full tax withholding.
When to Issue Form W-8BEN or Form W-8BEN-E:
Companies should collect Form W-8BEN or W-8BEN-E from every non-US person or business receiving US income. The forms should be kept by the withholding agent or payer, not submitted to the IRS.
How to Fill Out Form W-8BEN:
Part I: Identification of Beneficial Owner Provide personal information, including name, country of citizenship, permanent residence address, mailing address (if different), and date of birth. Part II: Claim of Tax Treaty Benefits Declare eligibility for tax treaty benefits if applicable or leave blank if no treaty applies. Part III: Certification Declare that the information provided is true, correct, and complete under penalties of perjury. Sign and date the form.
How to Fill Out Form W-8BEN-E:
Part I: Identification of Beneficial Owner Provide entity information, including name, country of incorporation or organization, entity type, address, taxpayer identification number (if applicable), and Chapter 4 status. Part II: Disregarded Entity or Branch Receiving Payment Complete only if applicable, providing additional information about the disregarded entity or branch. Part III: Claim of Tax Treaty Benefits (if applicable) Certify eligibility for tax treaty benefits and provide relevant information about the treaty and type of income.
