What is a W-8 BEN form? A guide for US employers

If a change in circumstances makes any information on the Form W-8BEN you have submitted incorrect, you must notify the withholding agent, payer, or FFI with which you hold an account within 30 days of the change in circumstances and you must file a new Form W-8BEN or other appropriate form. The owner of a disregarded entity (including an individual), rather than the disregarded entity itself, must submit the appropriate Form W-8BEN for purposes of section 1446(a) or (f), or for chapter 3 or 4 purposes. These instructions have been updated to reference the use of this form by a foreign individual who is the seller of a life insurance contract or interest therein or who is a recipient of a reportable death benefit for purposes of reporting under section 6050Y. Failing to submit a W-8BEN can also cause payments to be delayed or withheld if the payer is uncertain of the appropriate tax treatment. It can also complicate claiming a tax refund for an overpayment, as the IRS requires proper documentation to substantiate a claim for reduced withholding. A French consulting firm has a U.S. branch office that actively engages in business operations within the U.S.

• If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, however, the payment must be treated as made to a U.S. person and the account treated as a U.S. account.
• The IRS can be quite picky about the exact format.Also, don’t stress if the form feels overwhelming at first – most of it is just basic personal information.
• Just wanted to update – I ended up trying taxr.ai after posting my skeptical comment.
• All NRAs earning beneficial income in the US must establish their country of residence.
• This website includes information about tax, financial, and legal topics.

Form W-8BEN and instructions

As a UK resident, pay particular attention to Part II of the form where it asks about tax treaty benefits. Making a mistake here could mean you still get the 30% withholding even after submitting the form. The substitute Form W-8BEN-E must contain all of the information required in Part I, lines 1 through Statement of Comprehensive Income 6, and lines 8 and 9 if a U.S. or an FTIN or a GIIN is required. 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. See Alternative Certifications Under an Applicable IGA, earlier, for circumstances in which the chapter 4 certifications may be replaced with alternative certifications.

• Many people seek professional assistance to accurately complete these forms.
• A PSE is a merchant acquiring entity or third-party settlement organization.
• 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.
• By completing and submitting this form, individuals can potentially reduce their tax withholding and avoid complications related to overpayment or delayed income.
• Then sign and date it, and return it to the US company that’s hiring you.
• A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would complete Form W-9.

What Happens If I Use the Wrong Form?

This form is used by individuals to confirm they are not US residents for tax purposes. It also helps them claim benefits under an income tax treaty between the US and their home country, which can reduce the amount of tax withheld on income like interest, dividends, and royalties. Businesses that are foreign entities should file Form W-8BEN-E (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting – Entities) 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 (permanent residence) country has a tax treaty with the U.S. When subject to withholding of U.S. taxes, the single owner of a disregarded entity, NRA-classified account holder of a foreign financial institution (FFI), and the non-U.S.

Purpose of Form W-8BEN

By submitting the correct W8 form, you can qualify for lower tax rates on certain income types under applicable tax treaties. As we’ve mentioned, for Indian residents and businesses Form W8BEN and Form W8BEN-E are what will be most relevant respectively. If you’re working with a U.S.-based employer or client, they may ask you to complete a W8 form to confirm your foreign status. Contrary to the intricacies of W-8 forms, W-9 forms are straightforward; they are used to provide a company’s federal Taxpayer Identification Number (TIN) to an entity that makes taxable payments to said company.

• This slightly different variation is used when contracting with a foreign entity rather than a foreign individual.
• Although the form may not technically be required, we usually recommend providing a completed form to the US payor as the risk is the US payor will withhold on the payment in which case the recipient could be forced to file a US tax return to claim back the over-withheld tax.
• If you are another type of entity, enter the country under whose laws you are created, organized, or governed.
• For ECTI allocable to a foreign partner in a PTP, a nominee is generally the withholding agent and must file Form 1042 and 1042-S.
• In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income.
• A foreign financial institution (FFI) may rely on a properly completed Form W-8BEN to establish your chapter 4 status as a foreign person.

Generally, a separate Form W-8BEN-E must be given to each withholding agent. W8 forms prove the foreign status of non-residents and non-citizens, so they can claim tax treaty benefits. Since the US has different tax treaties with each country worldwide, the amount of taxes will vary. A W-8 form is basically a tax document that non-US residents need to fill out when they earn money from US sources. The specific form you probably need is the W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting – Individuals).You can usually download the form from the IRS website or the US company might provide it directly. You’ll need to include your name, address, country of residence, and tax identification number (your National Insurance number in the UK).

Scenario 2: Former Resident Now Abroad

Such integration also means that contractors get paid whenever you run payroll. With Rippling, you can compliantly hire and pay your global workforce your global workforce and easily send the right tax forms to employees and contractors—both domestically and internationally—from the same system. The correct type of W8 depends on worker classification, location, whether the signee is the final recipient or an intermediary, and whether they’re an individual or an entity. Form W9 is intended for US citizens and residents, while W8 forms are for foreigners without citizenship or residency.

Typically, this is the person or group from whom you received payment, the withholding agent, or an FFI. 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. 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 how is sales tax calculated play a role, such as type of income. By filling out the W-8 BEN, the worker claims the benefits of any existing tax treaties. The employer can then use the corresponding rate for income tax withholding.