What Is a W-8BEN Form?

Its purpose is mainly to let brokers and mutual fund companies know that the person or company in question is not subject to the usual tax withholding from investment income. Entities from countries that have tax treaties with the US may enjoy lower tax withholding rates on types of income that are exempted from tax withholding or qualify for lower rates. Different countries that have tax treaties with the US may have different terms and enjoy different tax benefits. You can find a complete list of countries with tax treaties here. The W-8BEN is the classic W-8 form, used by foreign individuals to certify their non-US tax status and claim any relevant tax treaty benefits.

What Does Form W8 Relate To?

Consult your home tax returns to find the number that local tax authorities have assigned to your business. As an international business, you may seek to hire independent contractors who offer flexible working arrangements. An independent contractor is a professional who engages with a company to provide services according to the terms of a contract. Once the employee has completed the form, they should review it for accuracy and completeness before submitting it to their employer or entity allocating payment.

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The form establishes that the applicant is a foreign individual as well as the owner of the business in question. So, by filling this form, you can either claim an exemption/reduction in tax based on not deriving income from one of the sources above or due to your country of residence’s tax treaty with the US. Are you a foreign national or business earning an 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.

Hire International Contractors Without the Paperwork Headache

The W-8 form is an important document used to collect taxpayer information from overseas contractors and freelancers and to correctly classify their withholding tax status. US businesses must collect W-8 forms to avoid paying excessive withholding taxes and comply with IRS regulations. Withholding agents aren’t permitted by law to make payment to an individual or entity outside the U.S. without having one of these forms on file. Withholding agents are required to request Form W-8 from applicable payees. 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 Bookstime foreign trust. In order to receive a reduction or an exemption from tax withholding, the entity must be eligible under IRS code 115(2), 501(c), 892, 895, or 1443(b).

• The form applies to the same sources of income as the W8-BEN form.
• Barbara is a financial writer for Tipalti and other successful B2B businesses, including SaaS and financial companies.
• The W-8BEN form is used by individuals or entities that are not U.S. citizens or residents who wish to claim an exemption from U.S. taxes on the income they receive from a U.S. source.
• This form authenticates their status as non-US residents for taxation and is key in managing US source income for these entities—which includes income earned from sources like US property rentals or dividends from US companies.
• This form is used to report income earned by a non-resident alien for work done in the United States or for income received from U.S. sources.
• The W-8BEN is the classic W-8 form, used by foreign individuals to certify their non-US tax status and claim any relevant tax treaty benefits.

How to Complete the W-8 Tax Form

• Instead, after subtracting applicable deductions, it is taxed at the graduated rate that U.S. citizens and resident aliens pay.
• That would be the case if, for example, a foreign individual performed personal services in the United States during the year.
• Different countries that have tax treaties with the US may have different terms and enjoy different tax benefits.
• It also requires information about any other withholding agreements or treaties that might apply to the entity regarding U.S. taxes.

Here, you’ll need to certify with your signature under penalties of perjury that everything on the form is true and correct and that you aren’t a U.S. person. Insert the date of form completion and certification in a mm-dd-yyyy format. The guide below outlines the purpose of Form W-8BEN, who needs to fill it out, what does w8 mean and why it’s a crucial element in building a global workforce.

• It lets the organization or individual paying you know that you’re not a U.S. citizen or resident and therefore shouldn’t be subject to certain tax requirements.
• I previously showed you how to complete the W-8 BEN form which is for individuals and sole proprietorships.
• If receiving interest and you are a resident of Canada, the rate would be zero.
• The payee (employee), not the type of income, dictates whether a W-8 form must be withheld by the payer (employer).
• The United States has tax treaties with countries such as Canada, the United Kingdom, Ireland, Mexico and Australia.
• Without this form, the organization paying you may withhold a portion of your income in order to pay taxes, assuming you’re a U.S. citizen or resident of the United States.

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. If you are an international employer, whether a multinational or a global consulting firm, you need to understand the W-8BEN form. 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.

The language is complex and often refers to terms most of us have never heard before. On top of that, the pressure of what may happen if you get something wrong can be overwhelming and even paralyzing. It’s not much more complicated to file than the W8-BEN and can easily be done with the help of some of the tax software for businesses around today. In this article, you’ll find out what is a W8, how to file it, different types, the difference between a W8 and W9 form, and more. As a US business paying to a foreign organization, a W-8BEN-E is important to collect in order to maintain compliance with your own IRS obligations.

W-9 Automation: Rapidly Process Your W-9 Forms

• As the world becomes increasingly interconnected, it’s easier than ever to work remotely or even overseas internationally.
• Both forms are used to certify foreign tax status and claim applicable treaty benefits.
• The forms vary, but the key information requested includes the name of the individual or business, address, and TINs.
• As an international business, you may seek to hire independent contractors who offer flexible working arrangements.

A W-8BEN-E form is a form from the U.S. tax agency (IRS) intended to collect accurate tax information from entities that are not residents of the United States. With the form, you indicate that you are not a citizen of the United States. However, the main purpose of the W8 BEN form is to establish eligibility for a tax withholding exemption or rate reduction. Withholding agents can accept Form W-8 CARES Act by fax or email attachment, provided they’re sure the individual or entity that’s submitting and signing the form is authorized to do so.