W-8ECI Explained: Complete Guide and Instructions for Finance Teams

The purpose of a W-8ECI form is to allow an eligible foreign person to get an exemption from tax withholding on income effectively connected with conducting a trade or business in the United States. A foreign person submitting Form W-8ECI to a withholding agent or payer (not the IRS) must file an annual U.S. income tax return to report income connected with a U.S. trade or business. 

Do not rely on this W-8ECI guide alone as a source of tax advice. Refer to official IRS instructions on the IRS website and consult your attorney or CPA. 

What is the W-8ECI Form Used For? 

Form W-8ECI is an IRS form used by foreign persons to certify that certain U.S.-source income is effectively connected with a U.S. trade or business. The purpose of Form W-8ECI is to exempt eligible foreign persons with applicable types of gross income from 30% withholding of income tax or backup withholding.

The withholding exemption applies to income effectively connected (ECI) with a trade or business in the United States, which is included in their gross income.

According to IRS Form W-8ECI instructions, for foreign persons, the Form W-8ECI withholding exemption doesn’t apply to:

• Personal services income performed by an individual
• Income subject to withholding under section 1445, which is the disposition of U.S. real property interests
• Income subject to withholding under section 1446(a), which is a foreign partner’s share of effectively connected income.

For personal services income of non-resident alien individuals, IRS Form 8233 applies instead of Form W-8ECI. 

Foreign persons use the line 12 checkbox of Form W-8ECI to report that you are a dealer in securities claiming an exemption from withholding or transferor of an interest in a publicly traded partnership (PTP) where any gain from the transfer of the PTP interest is effectively connected with the conduct of a trade or business within the United States. Effective with transfers beginning on January 1, 2023, the Tax Cut and Jobs Act (TCJA) requires 10% withholding of the amount realized on the disposition (see What’s New in Instructions for Form W-8ECI). 

Access Form W-8ECI

You can complete and download an official, fillable Form W-8ECI as a PDF file directly from the IRS website. 

What is the Difference Between Effectively Connected Income (ECI) and FDAP Income Taxation for Non-Alien Residents?

The U.S. taxes its citizens and resident aliens on worldwide income when they file their tax returns. However, for nonresident aliens, U.S. taxation depends on whether income is classified as fixed or determinable, annual or periodical (FDAP) income or effectively connected income (ECI).

FDAP income is income that is not effectively connected with a trade or business and is generally taxed at a flat 30% rate (unless a lesser rate is available via an income tax treaty or other allowable reductions). The 30% tax on FDAP income is based on the gross amount and is not reduced by deductions and/or credits.

ECI, or trade or business income, is taxed at the normal graduated tax rates, and allowable deductions and/or credits are permitted.

The IRS differentiates ECI and FDAP income in its IRS FDAP overview document, which describes how each type of income is taxed differently for nonresident aliens.

What is the Difference between W-8BEN and W-8ECI?

Form W-8BEN is an IRS form requested by a payer from nonresident alien individuals with U.S. source income that establishes foreign person status, claims beneficial income ownership, and tax treaty benefits for certain types of income (excluding personal services income).

In contrast, Form W-8ECI is provided to requesters by foreign persons with income effectively connected to a trade or business in the U.S., to exempt them from 30% income tax withholding or backup withholding. 

Who Needs to Fill Out Form W-8ECI?

Foreign persons who receive income that is effectively connected with a U.S. trade or business (ECI) may need to complete Form W-8ECI to provide to the payer or withholding agent.

Form W-8ECI is not used by U.S. persons. U.S. individuals and domestic entities typically submit Form W-9 instead (employees use Form W-4).

The IRS also specifies situations where foreign persons should use a different W-8 form instead of W-8ECI, depending on the income type and the purpose of the certification. The table below summarizes common form substitutions based on IRS guidance.

Where Do You Submit a W-8ECI Form?

Submit a W-8ECI form to each withholding agent or payer that will make a payment to you (the payee) or credit your account, or if a partnership, will allocate income to your account. A withholding agent may request that you fill out and submit IRS Form W-8ECI to them. Don’t submit your W-8ECI tax form to the IRS.

How Often Do You Need to Submit a Form W-8ECI?

Submit a new Form W-8ECI whenever the information included on the form changes or becomes incorrect. Otherwise, the IRS Form W-8ECI will be valid for about three years. The W-8ECI form doesn’t expire until the last day of the calendar year, which is the third year after the date you sign the W-8ECI form.

For example, a Form W-8ECI signed on April 25, 2023 with no changes making it incorrect, remains valid until December 31, 2026. 

What is a Beneficial Owner?

The IRS defines beneficial owner in the W 8ECI instructions, as follows:

For payments other than those for which a reduced rate of withholding is claimed under an income tax treaty, the beneficial owner of income is generally the person who is required under U.S. tax principles to include the income in gross income on a tax return. A person is not a beneficial owner of income, however, to the extent that person is receiving the income as a nominee, agent, or custodian, or to the extent the person is a conduit whose participation in a transaction is disregarded. In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income.

Should a Beneficial Owner Use Form W-8ECI?

It depends on the beneficial owner’s purpose for completing the form. Instead of completing Form W-8ECI, a beneficial owner of the income solely claiming foreign status through a (certificate of foreign status of beneficial owner) or treaty benefits should use W-8BEN or W-8-BEN-E instead. 

Form W-8BEN is “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).” Form W-8BEN-E is the equivalent form for entities. 

How Do You Fill Out a W-8ECI Form?

After you know that you’re eligible to use a W-8ECI form by reading the top of the form and the IRS instructions relating to Form W-8ECI, fill out the identification information required in Part I and Certification in Part II, including a signature, printed name, and date. 

A sample Form W-8ECI (Rev. October 2021), which is current as of January 2026, follows to help you understand this IRS form. You can obtain an official Form W-8ECI from the IRS website. 

Part I – Identification of Beneficial Owner

Line 1 – Name of individual or organization that is the beneficial owner

Line 2 – Country of incorporation or organization or individual’s country of residence for tax purposes

Line 3 – Name of disregarded entity receiving the payments (if applicable)

To understand the term “disregarded entity,” see the IRS definition in the What is a Beneficial Owner section of this article. Information about a disregarded entity only belongs on optional line 3 or on line 9 to help the withholding agent paying you request additional information like your account number.

Line 4 – Type of entity (check the appropriate box):

Partnership	Simple trust	Complex trust	Tax-exempt organization
Foreign Government – Controlled Entity	Grantor trust	Central bank of issue
Foreign Government – Integral Part	International Organization	Corporation
Private foundation	Individual	Estate

Line 5 – Permanent residence address (street, apt. or suite no., or rural route). 

Your permanent residence address is the address in the country where you claim to be a resident for that country’s income tax…If you are an individual who does not have a tax residence in any country, your permanent residence is where you normally reside. If you are not an individual and you do not have a tax residence in any country, the permanent residence address is where you maintain your principal office.

City or town, state or province. (Include postal code where appropriate.) Country.

For lines 5 and 6, do not use a P.O. Box or in-care-of address, and include a postal code where appropriate.

Line 6 – Business address in the United States (street, apt. or suite no., or rural route). 

City or town, state, and ZIP code

Line 7 – U.S. taxpayer identification number (required—see instructions, and check the box) ◻ SSN or ITIN ◻ EIN

For line 7, SSN is a Social Security Number issued by the Social Security Administration. ITIN is an Individual Taxpayer Identification Number issued by the IRS and assigned to non-resident aliens, resident aliens, and their spouses and dependents if they can’t get a Social Security Number. EIN is an Employer Identification Number issued by the IRS to a business entity, estate, or trust. 

A U.S. taxpayer identification number (TIN) must be included in a withholding certificate if the beneficial owner is claiming effectively connected income (ECI) and also on their tax return. To apply for an ITIN, file Form W-7 with the IRS and expect to receive the ITIN in four to six weeks. 

Line 8a – Foreign tax identifying number

Line 8a is used to document as holding an account with an FFI (foreign financial institution) only.

Line 8b – Check box if FTIN is not legally required

Line 9 – Reference number(s) (see instructions)

On line 9, you or the withholding agent can include reference information like the name and account number to which this Form W-8ECI applies. 

Line 10 – Date of birth (MM-DD-YYYY) 

On line 10, include the date of birth for individuals documenting that they are an account holder at a U.S. office of a financial institution (including a U.S. branch of a Foreign Financial Institution (FFI). 

Line 11 – Specify each item of income that is, or is expected to be, received from the payer that is effectively connected with the conduct of a trade or business in the United States (attach statement if necessary).

You will generally have to provide Form W-8BEN, Form W-8BEN-E, Form W-8EXP, or Form W-8IMY for those items from U.S. sources that are not effectively connected with the conduct of a trade or business in the United States.

Line 12 – Check box for effectively connected gain on the transfer of an interest in a publicly traded partnership (PTP)

Part II – Certification

The signed certification of a foreign person in Part II of Form W-8ECI states that the form’s information is true, correct, and complete. The beneficial owner or an individual authorized to sign on behalf of the beneficial owner agrees to submit a new W-8ECI form within 30 days if the certification becomes incorrect. The signer agrees that the form will be submitted to the withholding agent. 

As part of the certification, the beneficial owner or authorized signer on behalf of the beneficial owner certifies under penalties of perjury that:

• I am the beneficial owner (or I am authorized to sign for the beneficial owner) of all the payments to which this form relates,
• The amounts for which this certification is provided are effectively connected with the conduct of a trade or business in the United States,
• The income for which this form was provided is includible in my gross income (or the beneficial owner’s gross income) for the taxable year, and
• The beneficial owner is not a U.S. person.

How Tipalti Simplifies W-8ECI Compliance for Controllers

Tipalti Mass Payments is a strong solution that simplifies the complexities of W-8ECI management and associated foreign payee payments for Controllers. Tipalti’s Mass Payments product streamlines the collection and validation of W-8 and W-9 forms. This add-on to your ERP increases efficiency and accuracy by automating tax compliance for global payouts. 

Automated Validation and Tax Reporting Support

Tipalti automates TIN matching, as a form of validation, by automatically matching taxpayer ID numbers and names with the IRS database. Accurate TIN reporting on timely 1099s is required to avoid IRS penalties assessed on each information return. 

Tipalti also offers AP automation software for accounts payable, with automated tax compliance functionality. 

These Tipalti finance automation products for payouts and accounts payable include 1099 and 1042-S tax preparation reports that simplify tax compliance. Tipalti natively integrates with partnered Zenwork Tax1099 e-Filing software. 

Zenwork Tax1099 enables your business to e-file its 1099-MISC and 1099-NEC information returns using 12 calendar months of Tipalti payment data. A Zenwork Tax1099 SaaS subscription has tiered pricing based on your company’s number of tax forms filed. Tax1099 also distributes copies to recipients. 

In addition to tax compliance features, Tipalti’s Mass Payments and AP automation products reduce foreign payee payment processing errors and compliance risks for businesses. 

Tipalti provides one central hub—suppliers can provide W8s and W9s and their preferred payment. I no longer have to chase down documents.

—Andrew Jenks, Senior Accounting Manager, Lucidworks

Key W-8ECI Compliance Considerations

Non-resident aliens use the W-8ECI form to get an exemption from United States tax withholding on U.S. source income effectively connected to a trade or business (called ECI). The foreign person completes the form, certifies its accuracy and completeness, and signs the form (or an authorized person signs on behalf of the beneficial owner). The foreign person with effectively connected income to a U.S. trade or business must submit a new Form W-8ECI within 30 days of their information and certificate becoming incorrect. 

The foreign person needs a U.S. taxpayer identification number (TIN) issued by the IRS to complete the W-8ECI form. Receiving a TIN may take four to six weeks from the application date. The beneficial owner also files a U.S. income tax return. 

Learn more about Tipalti Automated Tax Compliance for foreign suppliers.