What Is a W-8BEN & When Do You Need to Fill One Out?
What is a W-8BEN?
Officially known as a Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, IRS Form W-8BEN is used by foreign individuals who acquire various types of income from U.S. sources. The purpose of the form is to establish:
- That the individual in question is the beneficial owner of the income connected to Form W-8BEN.
- That the individual is a foreign person (technically a non-resident alien) and not a U.S. citizen.
- That the individual is eligible for a reduced rate of tax withholding, or is exempt entirely, due to an income tax treaty between his home country and the United States.
Only non-U.S. persons should use Form W-8BEN. U.S. persons file Forms W-9, W-4, and others.
What is the Difference Between Form W-8BEN and Form W-8BEN-E?
Foreign business entities should file Form W-8BEN-E (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) instead of W-8BEN, which is for individuals only. Foreign businesses are subject to the same tax rate (30%) that foreign individuals are subject to, and like individuals, they too may qualify for a reduced tax rate if their home country has a tax treaty with the U.S.
Why Does the IRS Require Form W-8BEN?
The Internal Revenue Service requires W-8BEN because foreign individuals are normally subject to a 30% tax withholding, but they may qualify for a reduced rate of taxation. W-8BEN helps to establish this eligibility, although other factors also play a role, such as type of income.
Which Countries Have Tax Treaties With the United States?
Many foreign governments have tax treaties with the U.S. Under these agreements, residents of eligible foreign countries (who are not necessarily citizens of those countries) may be eligible for reduced rates of taxation on U.S. sources of income. Some examples of countries that have tax agreements with the U.S. include:
- And many others
In order to establish a claim of tax treaty benefits under the Internal Revenue Code, earners of eligible income need to fill out Form W-8BEN.
Where Can I Download Form W-8BEN?
How Do I Fill Out Form W-8BEN?
After you’ve downloaded W-8BEN from the IRS’s website, it’s time to fill it out. Following the instructions presented here will prevent you from having to go back and correct mistakes.
- Line 1: Enter your name.
- Line 2: Enter your citizenship. If you’re not a resident of the country where you have citizenship, you should enter your country of residence (instead of your country of citizenship). If you’re a dual citizen, you should enter the country where you are both a resident and a citizen on the date you complete the form. If you hold U.S. citizenship (with or without citizenship with another country), you should not fill out Form W-8BEN.
- Line 3: Enter your mailing address. For the purposes of W-8BEN, this is your tax home, which is where you reside for income tax purposes. It should be a permanent residence address and not a P.O. Box or address of a financial institution. Be sure to include your postal code.
- Line 5: Enter your U.S. taxpayer identification number. This should be either a Social Security Number (SSN) or an individual taxpayer identification number (ITIN). If you don’t have either, you can skip to line 6.
- Line 6: Enter your foreign tax identifying number if you don’t have an SSN or ITIN.
- Line 8: Enter your date of birth. Make sure it’s in mm-dd-yyyy format.
- Line 9: Enter the foreign country under whose tax laws you claim tax benefits. This of course needs to be one of the countries with which the U.S. has a tax treaty.
- Line 10: Foreign individuals who are students and researchers should enter specific withholding rates. Other persons may need to complete this line if they claim benefits that require them to meet conditions not addressed on W-8BEN.
- Part III: Here, you’ll need to certify with your signature under penalties of perjury that everything on the form is true and correct.
How Do I File Form W-8BEN?
Do not send Form W-8BEN to the IRS, and do not file it with a tax return. Instead, you should submit the completed form to the party that requests it. Typically, this is the person or group from whom you received payment. The tax form should be completed before the first payment is made; otherwise, the withholding agent may have to withhold the full 30% that is normally withheld under U.S. tax law.
Form W-8BEN will remain valid for at least three calendar years. It expires on the third complete calendar year after it is signed. For example, if you sign a W-8BEN on July 28, 2020, it will expire on December 31, 2023.
Which W8 Form Should I Use?
In total, there are five W-8 forms. The other three are:
- Form W-8ECI. This one has a rather long name (Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States) and is designed for nonresident aliens who conduct a business or trade in the U.S.
- Form W-8EXP. As the name of this one suggests (Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting), only foreign governments or other groups use this form to claim a reduction in tax withholding.
- Form W-8IMY. The last form on our list is only used by intermediaries and flow-through entities.
Tax Savings Are Available to Those Who Persevere
Although filling out Form W-8BEN may be a tedious task, due to the numerous tax treaties the U.S. government has with other countries, it will be well worth the time spent in many cases.