W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting Individuals UW Madison


There are five W-8 forms, each designed for certain payees or withholding agents. Use of a non-current form will delay payment processing because the non-current form has to be returned to the preparer. The current form must be completed before the payment can be processed so the university can be in compliance with IRS and WI DOR regulations and forms. However, foreigners whose sole U.S. income is based on the trading of securities or commodities through a U.S.-based broker are not considered to be engaged in a trade or business with the United States.

  • Questions may be referred to the Title IX Coordinator, Office of Investigations and Civil Rights Compliance, or to the Office for Civil Rights.
  • The employer can then use the corresponding rate for income tax withholding.
  • If a contractor fails to submit the form, they will be subject to the full 30% tax rate that ordinarily applies to foreign entities.
  • These include white papers, government data, original reporting, and interviews with industry experts.
  • When payment is not made directly to the foreign entity and goes through foreign or U.S. sources, like an accounting institution, then this section should not be skipped.

Your FATCA status will determine which parts of the W8BEN-E form you fill out later. If nothing seems to fit, it’s best to check “Corporation” if the business is solely owned, or “Partnership” if it’s owned by several people. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.

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In order to receive a reduction or an exemption from tax withholding, the entity must be eligible under IRS code 115, 501, 892, 895, or 1443. Should none of those exemptions apply, the entity must file a W-8BEN or W-8ECI (if it received “effectively connected income”). Though they require basic information such as name, country of origin, and taxpayer identification number , they also ask for the contacts from which the filer is receiving the reported income. W-8 forms are used by foreign persons or business entities to claim exempt status from certain withholdings. Whether you’re hiring US citizens or foreign contractors, correctly filling out each form and cooperating with the IRS is non-negotiable for businesses. You’ll need the IRS TIN and European Union VAT tax numbers to complete the W-8 and W-9 forms.

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All US residents and citizens, credit card holders, and those with green cards must complete Form W-9. If you’re a foreign individual or entity, you’ll need to complete a W-8. This also applies to foreign students and teachers who live in the US and maintain residency in their home countries. Automatically deduct the 30% tax rate when making payments, preventing the need for inaccurate withholdings, error corrections, or last-minute adjustments.

Who needs to fill out form W-9?

Not doing so could lead to a tax withholding at the 30% rate, a backup withholding rate, or the ECI tax rate. Form W-8BEN (“Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting”) must be submitted by foreign persons who receive certain types of income in the United States. The form, sometimes referred to as a “certificate of foreign status,” establishes that the individual is both a foreign person and the owner of the business in question. Although the W-8 forms are issued by the IRS, they are submitted only to payers or withholding agents, not to the IRS. Failure to submit the form may result in a withholding at the full 30% rate that applies to foreign entities.

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Permanent residence address (street, apt. or suite no., or rural route) – Enter detailed business residence address. If you’re onboarding through the Deel platform, just complete the questions in the workflow and the sections will automatically fill in for you. The form must be signed and dated by the beneficial owner of the account. If you’ve identified an issue with your W-8, or perhaps have forgone completion altogether, you’re not totally out of luck—but you’ll need to act quickly. You may be subject to a 30% fine on your taxable amount, along with additional charges. The first thing you need to do is to get in contact with a tax relief services professional.

Forms & Instructions

Here’s the difference; the TIN can be a social security number, individual taxpayer identification number, and employer identification numbers. As a non-US entity, chances are there is no U.S. taxpayer identification number. In this case, the number local tax authorities use to identify the business should be filled in. The vendor must find this on their own foreign tax returns or paperwork. The Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting a.k.a. Form W-8BEN-E is used by a foreign person to establish beneficial ownership and foreign status.

A tax treaty exists between the U.S., and the nonresident’s country of origin, which states the income is not subject to withholding. 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. If your work is covered by a U.S. treaty, it would be taxed at the lowest rate under that treaty. This form must be completed with Wesleyan’s Foreign Tax Compliance Coordinator. Foreign individuals and entities that don’t reside in the U.S. don’t need to file a W-9 form.

Why Is a W-8BEN-E Required?

While foreign contractors or freelancers don’t need to fill out all five forms, they need to know which to fill out. The W-8 forms are for non-US tax residents to prove their foreign status so they don’t need to contribute as much federal income tax to the IRS. The motivation behind filing the W-8BEN-E is to document status for tax reporting purposes. It’s an IRS mandated form that collects the correct data, including the Nonresident Alien taxpayer information for businesses for the purpose of accurate reporting and collection. If the foreign entity comes from a country with a U.S. tax treaty, they can fill out and submit a W-8BEN-E form.

The goals of the W-8 forms are to help the IRS keep track of how much income is being sent to individuals and entities overseas, as well as to determine the correct tax withholding rate. To make things even more fun, there are five different W-8 forms, each of which can be used to manage tax requirements for entities that declare a foreign tax ID status. Foreign freelancers don’t need to fill out all five forms, however.

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A W-8IMY is used by an intermediary, a withholding foreign partnership, withholding foreign trust, or a flow through entity. Of course, if you’re working with overseas contractors, you’ll need additional information, especially when working with EU professionals. The US has different tax agreements with countries all over the world, so you’ll need to withhold specific amounts depending on where your independent contractor lives. The W-9 is used for anyone with a tax ID number and basically says, “Hey IRS/Treasury, this is my Tax ID number! ” Many banks are now requesting this document because of FATCA reporting requirements.

The W-8 forms are notoriously tricky for nonresidents to complete. The IRS also issues a Form W-8 BEN-E which is a different variation used when contracting with a foreign entity rather than a foreign individual. To find out more about how Horizons can manage your hiring and payment of global contractors, get in touch today. Form W-8 BEN-E is used by foreign entities to document their status for purposes of chapter 3 and chapter 4, as well as other code provisions.

The form also helps you claim a reduction or an exemption from the U.S. tax withholding if you reside in a country with which the United States has an income tax treaty and the income you received is subject to that treaty. This form is used to claim foreign status and can also be used to claim treaty benefits for royalty/passive income or scholarships/fellowships only. Typically, foreigners pay a 30% tax on income from US payers, but if the foreign worker’s home country has a tax treaty with the US, this form helps them claim a reduction or exemption from US withholdings. Once foreign workers fill out the W-8 BEN, it’s valid for the year they signed and the following three years.

What happens if my W-8BEN form expires?

This is a significant advantage, as the withholding tax rate is normally 30%. By filing an updated Form W-8BEN, you could benefit from a reduced tax rate of either 15% on dividends or 0% on interest. If you’re a foreigner earning an income from a U.S. company, you will most likely be asked to complete this form and submit it back to them, because of the compliance requirement from the Internal Revenue Service . Form W-8IMY is used by foreign withholding agents who are intermediaries accepting payment on behalf of an exempt payee, partnership or another flow-through business type, or foreign trust. Submitting Form W-8 could eliminate all withholding, or it could reduce the amount required to be withheld.

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W-8 forms are effectively the equivalent of W-9 forms, which are required of nonemployees who are U.S. taxpayers. If a worker does not fill out Form W-8 BEN, they are subject to a tax rate of 30%, even if they qualify for a lower rate. Without the form, they may not receive all of the money to which they are entitled. Form W-9 is an Internal Revenue Service form which is used to confirm a person’s taxpayer identification number . Investopedia requires writers to use primary sources to support their work.

public accounting important to note that ECI is not subject to the same 30% withholding rate. Instead, after subtracting relevant deductions, it is taxed at the graduated rate that US citizens and resident aliens are subject to. If the type of income/country of residence is covered by a US tax treaty, it would be taxed at the lowest rate under that treaty. It’s used by individuals who want to claim tax treaty benefits or foreign status to exempt them from tax withholding. The payee must have a valid Social Security number or individual taxpayer identification number with the U.S. government. So, after receiving a W-8 form from your non-US citizen, non-resident alien freelancers, paying companies, and withholding agents use W-8 forms to calculate how much tax to withhold.

On top of that, the pressure of what may happen if you get something wrong can be overwhelming and even paralyzing. The type of W-8 a freelancer or vendor should fill out depends on the type of income they receive. On the other hand, failing to fill out or submit the correct forms—whether by accident or intentionally—can cause major headaches or lead to tax penalties down the road. If you are a US-based company working with freelancers, this question is pertinent to your business. As you probably already know, staying on the IRS’s good side makes life much easier. If this happens, you can simply file a tax return in the US (Form 1040-NR) along with Form 8833 to outline that you are in fact applicable for a treaty.

W-8 Forms

Then, the IRS uses that information to determine whether the workers are eligible for a lower tax rate. The worker can claim the benefits of existing tax treaties by filling out the W-8BEN. W-8 forms are filled out by foreign individuals or entities that lack U.S. citizenship or residency, but have worked in the U.S. or earned income in the U.S. This usually applies to foreign-domiciled businesses and non-resident aliens. A W-8 is for non-resident, foreign individuals or contractors working for US-based companies and has five versions for each type of work, while there’s only one version of a W-9 and it’s for those who have an SSN or TIN. Though neither form is sent into the IRS, all companies must receive a W-8 or W-9 from their contractor so they can report the correct income and taxes.


Sign the form with your full legal name and add the date and signature. As an example, if you’re a contractor who is set up as a private limited company or partnership, you’ll want to complete a W-8BEN-E. Internal Revenue Service’s TIN and European Union’s VAT are tax ID numbers used for this exact purpose, that is, in the administration of tax laws and as such are a critical part of W-8 and W-9 forms.

country of residence

Submitting a Form W-8BEN can result in a reduced rate of withholding or even an exemption from the withholding tax if you’re a resident of a foreign country with whom the United States has an income tax treaty. The treaty means you won’t be double-taxed , so it’s a form worth completing as soon as possible. Typically, these are treaties that entered into force prior to December 31, 1986. The W-8 form specifically is used by foreign entities, both citizens and organizations, for the purpose of gaining exemption from filling for particular tax withholdings.

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