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Form W8: Instructions & Information about IRS Tax Form W8

This form is officially called ‘Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting’. It is used by intermediaries to certify that an individual or business received tax-withholding income on behalf of a foreigner or as a flow-through entity. The W-8BEN-E is used for businesses, unlike the W-8BEN, which is only for individuals. The W-8BEN-E is required, as foreign businesses are subject to the same withholding tax rate as individuals—30%. However, businesses, like individuals, may also qualify for a reduced tax rate.

• In such a case, the disregarded entity should complete Part I as if it were a beneficial owner and should not complete line 3.
• In providing the specific category of FFI described in Annex II, you should use the language from Annex II that best and most specifically describes your status.
• Individuals and entities to declare their specific tax status on their U.S.-sourced income.
• Form W-8BEN-E is also titled “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting,” but it is filed by foreign entities, not individuals.
• Article 20 of the United States-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States.

Certain entities that are disregarded for U.S. tax purposes may be treated as treaty residents for purposes of claiming treaty benefits under an applicable tax treaty or may be recognized as FFIs under an applicable IGA. A hybrid entity claiming treaty benefits on its own behalf is required to complete Form W-8BEN-E. See Hybrid Entity Making a Claim of Treaty Benefits under Special Instructions, later.

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The IRS released a new version of W-8BEN in February 2014 that required corporations to sign a W-8BEN-E form instead. Check the box to indicate that you are treated as a nonreporting IGA FFI. You must identify the IGA by entering the name of the jurisdiction that has the IGA treated as in effect with the United States, and indicate whether it is a Model 1 or Model 2 IGA. You must also provide the withholding agent with the specific category of FFI described in Annex II of the IGA. In providing the specific category of FFI described in Annex II, you should use the language from Annex II that best and most specifically describes your status.

Most W-8 forms are valid through the last calendar day of the third year. If Form W-8BEN was signed and filed on Sept. 6, 2021, it would be valid through Dec. 31, 2024. But it’s used when the w8 forms definition payee is an entity, such as a trust or corporation, rather than an individual. You should collect a Form W-9 from every new freelancer or vendor they enlist during the onboarding process.

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Form W-8ECI is used when the income derives from conducting a trade or business within the U.S. However, these tax forms are critical in order to properly fill in 1099 NEC and 1024-s tax forms that all companies working with freelancers are required to submit to the IRS. The title of this form is also ‘Certificate https://www.bookstime.com/ of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting’, and it does the same thing as the W-8BEN, except it is used by foreign entities and not individuals. The equivalent form that applies to non-US persons is W8-BEN (for individuals) and W8-BEN-E (for entities).

However, an account that is held by a single-member disregarded entity is treated as held by the entity’s single owner. Withholding agents aren’t obligated to provide payees who have submitted any Form W-8 with a Form 1099 at year’s end. But payments to individuals or entities outside the U.S. might require Form 1042-S instead.

Who Needs to Fill Out Form W-8BEN?

To the extent you have an account with an FFI, your account may be subject to reporting by the FFI under chapter 4. You must notify the withholding agent, payer, or FFI within 30 days of becoming a U.S. citizen or resident alien. 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 (ITIN) with the U.S. government.

As mentioned earlier, the W-8BEN is the equivalent of the W-9 used for US persons. Just because your US company is operating overseas, that does not mean that it is exempt from paying taxes. As you well know, all US citizens residing in the US and those who spend most of the year in the US are required to pay income tax. A non-citizen living outside of the US is classified as a Non-Resident Alien (NRA) and is taxed at a different rate. The second type of income is for fixed or determinable annual or periodic income, known as FDAP.

What is form W-8BEN E?

The W-8 BEN is the form for individuals to establish foreign status for taxation. For example, Gunther, the German who works for Apple in Singapore, will fill out a W-8 BEN. Some countries may have treaties with the US that allow their citizens and residents to pay a lower tax rate.