These include foreign governments, foundations, and tax-exempt organizations, as well as governments of a U.S. possession or foreign central banks of issue. Form W-8BEN is used by foreign individuals who receive nonbusiness income in the U.S., whereas W-8BEN-E is used by foreign entities who receive this type of income. These forms are requested by the payers or withholding agents and kept on file with them—not filed with the IRS. The value of your investments can go down as well as up and you may get back less than you put in.
- Residents of certain states may also be subject to state income tax withholdings.
- Chapter 3 contains sections 1441 through 1464, excluding sections 1445 and 1446.
- However, you may continue to treat an FFI as having the same chapter 4 status that it had prior to the change in circumstances until the earlier of 90 days from the date of the change or the date that new documentation is obtained.
- An independent contractor is a professional who engages with a company to provide services according to the terms of a contract.
- See the Instructions for Form W-8BEN-E for further information for when a beneficial owner is required to complete line 15.
Correctly fill out the details requested
- These include foreign governments, foundations, and tax-exempt organizations, as well as governments of a U.S. possession or foreign central banks of issue.
- A broker for a transfer of an interest in a PTP to which withholding applies under section 1446(f) is a withholding agent for the amount realized on the transfer and must withhold 10% of the amount realized and file Forms 1042 and 1042-S.
- If you are not a US taxpayer and do not have a distinct US entity (with Employer Identification Number) for your business, a W-8 form may be the correct form choice for your business.
- Article 20 of the United States-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States.
It’s a good idea to consult a tax professional if you think that you need to submit a W 8 form. These forms don’t look complicated, but there are many rules related to them, and it’s easy to get confused. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
W-8 BEN tax form: What it is and who needs to file one
This means that non-United States citizens who do not live in the US but work for a US-based company — regardless of whether they are freelancing or contracting. If none of those factors applies to the employee you are looking to hire, then you don’t need to provide this form to them. Instead, the employer is responsible for giving their workers — whether freelance or contractor — the form to fill out. As a worker for a US company, they are perfectly within their rights to request the form from their employer before beginning any https://x.com/BooksTimeInc work. The employer then will have to use the tax rate determined by the IRS for withholding income for tax reasons, if any.
Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY (06/
Generally, this will be the person from whom you receive the payment, who credits your account, or a partnership that allocates income to you. An FFI may also request this form from you to document your account as other than a U.S. account. Give Form W-8BEN to the person requesting it before the payment is made to you, credited to your account, or allocated. If you do not provide this form, the withholding agent may have to withhold at the 30% rate (under chapters 3 and 4), backup withholding rate, or the rate applicable under section 1446. If you receive more than one type of income from a single withholding agent for which you claim different benefits, the withholding agent may, at its option, require you to submit a Form W-8BEN for each different type of income.
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. 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.
Form W-8 series and instructions updated to facilitate compliance with new tax requirements
For example, if the contractor is located in a country that has a tax treaty with the United States, they may be entitled to claim a reduced rate of withholding tax on certain types of income. However, if they’re located in a country that doesn’t have a tax treaty with the United States, they may be subject to a higher rate of withholding tax. A W8 form is a form required by the Internal Revenue Service (IRS) to be filed by both foreign individuals and businesses in order to verify their country of residence for tax purposes. In other words, it is filled out and filed by foreign individuals or companies who lack US residency status but have worked or earned income in the US. The good news is that you may be exempt from withholding taxes or be eligible for a reduced withholding rate based on the tax treaties your country of residence has with the US.
Why Is a W-8BEN-E Required?
Provide Form W-8BEN to the withholding agent or payer before income is paid or credited to you. Failure to provide a Form W-8BEN when requested may lead to withholding at the foreign-person withholding rate of 30% or the backup withholding rate under section 3406. Crucially, ECI is not subject to the same 30% withholding that applies to interest, rents, and other nonbusiness income. Instead, after subtracting applicable deductions, it is taxed at the graduated rate that U.S. citizens and resident aliens pay.
- Understanding the differences between the W-9 and W-8 forms for tax purposes is crucial for both US taxpayers and non-resident aliens.
- See the Instructions for Form 8833 for more information on the filing requirements.
- 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.
- As we know from a majority of this article, the W-8BEN form is one provided to and signed by any non-US citizen who earns an income from the United States.
If neither of these applies, the company must submit a Form W-8BEN or, if it received ECIs, Form W-8ECI. Payees who are eligible for a reduction or exemption from tax withholding in the United States must file Form W-8EXP, formally known as “Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting,” https://www.bookstime.com/articles/accountant-for-self-employed with their payers. Foreign governments, tax-exempt organisations, and foundations, as well as governments of U.S. possessions and foreign central banks of issue, fall under this category. Again, only “non-resident aliens” should fill out and sign the W-8BEN form.
A substitute form does not need to contain all of the provisions contained on the official form, so long as it contains those provisions that are relevant to the transaction for which it is furnished. You may omit the chapter 4 certifications on your substitute form if such certifications are not required based on the payments made to the payees. If you are an FFI documenting the chapter 4 status of your account holders under your chapter 4 requirements or an applicable IGA, however, you may not omit the chapter 4 certifications. If you are making a withholdable payment, you may choose to provide a substitute form that does not include what does w8 mean all of the chapter 4 statuses provided on the Form W-8, but the substitute form must include any chapter 4 status for which withholding may apply. In certain cases, a GIIN may be required based on the chapter 4 status claimed on the form. See Requirements for Obtaining and Verifying a Global Intermediary Identification Number (GIINs), earlier.
