What is a W-8BEN Form and Why Does It Matter?


what is a w8

The W-8BEN-E form also expires if any information on the form changes, such as the address of the foreign vendor. Then a new W-8BEN-E has to be filled out and submitted, according to the University of Washington. Contractor Management Outsourcing (CMO) is on the rise in the global expansion industry. This expansion solution allows companies to delegate the tasks of managing a contingent workforce to a trusted partner.

  • They differ in their purpose, depending on who is filling the form, and for what reason.
  • 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.
  • If a change in circumstances makes any information on the Form W-8BEN you have submitted incorrect, you must 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.
  • 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.

They’re obligated to collect Form W-8 from any payee they have reason to believe is a foreign person or entity to exempt them from tax withholding. Otherwise, they must withhold taxes from payments made to them at a rate of 30%. You should complete only one part of Parts IV through XXVIII certifying to your chapter 4 status (if required). You are not required to complete a chapter 4 status certification if you are not the payee of withholdable payment or you do not hold an Nonprofit Accounting: A Guide to Basics and Best Practices account with an FFI requesting this form. Identify which part (if any) you should complete by reference to the box you checked on line 5. An entity that selects nonparticipating FFI, participating FFI, registered deemed-compliant FFI (other than a sponsored FFI), reporting Model 1 FFI, reporting Model 2 FFI, or direct reporting NFFE (other than a sponsored direct reporting NFFE) on line 5 is not required to complete any of the certifications in Parts IV through XXVIII.

Form W-8BEN – Notices

In general, if you are treated as a nonreporting IGA FFI under an applicable IGA, you should check „Nonreporting IGA FFI” even if you meet the qualifications for deemed-compliant status or are an exempt beneficial owner under the chapter 4 regulations. In such a case, you should not also check your applicable status under the regulations but should provide your GIIN on line 9, if applicable. If you are an owner-documented FFI that is treated as a nonreporting IGA FFI under an applicable IGA you must check „Owner-documented FFI” and complete Part X. This tax is imposed on the gross amount paid and is generally collected by withholding under section 1441 or 1442 on that amount. A payment is considered to have been made whether it is made directly to the beneficial owner or to another person, such as an intermediary, agent, or partnership, for the benefit of the beneficial owner. Depending on the type of income you’ve earned, the means by which you’ve earned it, your country of citizenship, and a number of other factors, you’ll be required to fill out one or more tax forms that all fall under the umbrella of a W-8.

what is a w8

Whether you are looking for specific experts in the USA, you have operational challenges to address as you grow, or you need to build an expansion plan from scratch with accurate budget estimates and a structured timeline, we are here to help. You are a software developer located in Europe and you deliver an online platform to a US entity. If you have not heard about the W8 form yet, you may be surprised as you receive a laconic email from your clients (“Could you please send us the W8 form?”) with an 8-page document attached. If you are a non-US SMB that is selling services to US entities, these US entities will most likely ask you to fill out a W8 form.

Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)

Provide Form W-8BEN-E to the withholding agent or payer before income is paid or credited to you. Failure to provide a Form W-8BEN-E when requested may lead to withholding at a 30% rate or the backup withholding rate in certain cases when you receive a payment to which backup withholding applies. Like all W8 forms, it must be submitted to the payer or withholding agent prior to receiving income or credits. Otherwise, you might be subject to the 30% tax withholding https://business-accounting.net/top-5-best-software-for-law-firm-accounting-and/ rate or the backup withholding rate under section 3406. Certain Forms W-8 were updated (Rev. October 2021) to include a new line, “FTIN not legally required,” for account holders otherwise required to provide a foreign taxpayer identification number (FTIN) on the form to indicate that they are not legally required to obtain an FTIN from their jurisdiction of residence. Form W-8BEN is submitted by foreign individuals that receive income in the U.S.

The term participating FFI also includes a reporting Model 2 FFI and a QI branch of a U.S. financial institution unless such branch is a reporting Model 1 FFI. Generally, a Form W-8BEN-E will remain valid for purposes of both chapters 3 and 4 for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2014, remains valid through December 31, 2017. So, if you’re wondering whether you should complete and file a W8 or W9 form, it simply comes down to your residency status. If you have US citizenship or you’re an alien resident, you need to file a W9 with your employer. That is why the application form with its reasons for exemption/rate reduction must be filed with your payers before receiving any payment.

Instructions for Form W-8BEN-E (10/

Under U.S. law, this student will become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, paragraph 2 of the first protocol to the United States-China treaty (dated April 30, 1984) allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States. A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would complete Form W-9.

what is a w8

See the Instructions for Form W-8BEN-E for further information for when a beneficial owner is required to complete line 15. For a beneficial owner that is claiming treaty benefits for gain or income with respect to a PTP that is subject to withholding under section 1446(a) or (f), the name of each PTP to which the claim relates must be identified. If the beneficial owner receives gain or income with respect to multiple PTPs, it may attach a separate statement to the form that identifies each PTP. If the beneficial owner provides the separate statement after it has provided the Form W-8BEN-E, it must indicate that the statement relates to the applicable form. If you are a withholding agent (including an FFI), you may also request and rely upon an alternative certification from an entity account holder to establish that the account holder is an NFFE (rather than a financial institution) under an applicable IGA. An entity providing such a certification will still be required, however, to provide its chapter 4 status (that is, the type of NFFE) in Part I, line 5, as determined under the regulations if you are a withholding agent other than an FFI documenting an account holder under Annex I of an applicable IGA.

The W-8BEN-E form asks for information such as:

It also includes a foreign branch or office of a U.S. financial institution or U.S. clearing organization if the foreign branch is a qualified intermediary. Generally, a payment to a U.S. branch of a foreign person is a payment to a foreign person. Foreign partnerships, foreign simple trusts, and foreign grantor trusts are not the beneficial owners of income paid to the partnership or trust. The beneficial owners of income paid to a foreign partnership are generally the partners in the partnership, provided that the partner is not itself a partnership, foreign simple or grantor trust, nominee or other agent. The beneficial owners of income paid to a foreign simple trust (that is, a foreign trust that is described in section 651(a)) are generally the beneficiaries of the trust, if the beneficiary is not a foreign partnership, foreign simple or grantor trust, nominee, or other agent.

If this is the case, you can provide a U.S. address on line 3 and still be eligible for the exemption if all other conditions required by the tax treaty are met. You must also identify on line 9 the tax treaty country of which you were a resident at the time of, or immediately prior to, your entry into the United States. If you do not have an SSN and are not eligible to get one, you can get an individual taxpayer identification number (ITIN).

How Does an IRS Form W-8 Work?

Having a written agreement for your independent contractor is essential, and one of the reasons you want one, in addition to the factors cited above, is that you want to be prepared if you receive questions from the IRS or have to undergo a tax audit. You should separate international contractor payment from local contractor payment and payroll. If you are a Non-Resident Alien (NRA) living outside of the US, you are taxed at a different rate from US citizens living outside of the US. As part of digital transformation initiatives in Procurement, one of the areas that will be very much in scope is that of Supplier Information Management, or SIM. Supplier information management describes a framework or governance structure for collecting and validating all data relating to the onboarding of suppliers and for the maintenance of that data during the relationship with the supplier, and beyond.

  • As with other W-8 forms, Form W-8EXP must be sent to the payer or withholding agent before income is paid to you.
  • Below are the step-by-step W8 BEN instructions for filling in and submitting the form.
  • If you are claiming a reduced rate of, or exemption from, withholding under an income tax treaty you must enter the country where you are a resident for income tax treaty purposes and check the box to certify that you are a resident of that country.
  • If you’re a non-US citizen and a non-US resident (known as a non-resident alien) who has earned money in the US, taxes can be that much more difficult.
  • Unlike a W8 form, it plays no role in applying for tax exemption or rate reduction status.
  • The list of agreements is maintained at /resource-center/tax-policy/treaties/Pages/FATCA-Archive.aspx..

There are different variations to the W-8 form, each of which serves a different purpose. When you opt to complete a W-8 form via Stripe Express, a suggested form will be selected and pre-filled for you based on the information you have already provided about your business. Any information, opinions or views provided in this document, including hyperlinks to the RBC Direct Investing Inc. website or the websites of its affiliates or third parties, are for your general information only, and are not intended to provide legal, investment, financial, accounting, tax or other professional advice.

 

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