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W8 purpose Form: What You Should Know

Non-resident alien shareholders of foreign multinational corporations may file Form W-8BEN-E to record the foreign entity foreign source income.

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FAQ - W8 Form purpose

What is the purpose of a W8/W9 tax form?

Use Form W-9 to provide your correct TIN to the person who is required to file an information return with the IRS to report, for example,income paid to youreal estate transactionsmortgage interest you paidacquisition or abandonment of secured propertycancellation of debtcontributions you made to an IRAThere are a family of Form W8-Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).Form W-BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities).Form W-8ECI, Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States.Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting.Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting.

What is the purpose of W8-BEN certification?

US Income Tax WithholdingNon-US persons (whether individuals or entities, such as foreign corporations) are subject to US. tax at a flat 30% rate on certain kinds of income they receive from US sources. Sometimes an Income Tax Treaty negotiated with the US and another country can be used to reduce this tax rate.The tax is withheld at source by the payor of the income. This payor, also known as a u201cwithholding agentu201d, has responsibility for withholding the required tax and paying it over to the US Internal Revenue Service (IRS). In the event withholding is required and the withholding agent fails in its duties, the agent can be held personally liable for the tax. For this reason, payors are usually very careful to ensure they have undertaken all the necessary actions, part of which is to obtain a certification from the payee as to whether the payee is a US person or a foreign person.The 30% (or lower Treaty rate) withholding tax is required only for payments made to foreign payees, it is not required when the payee is a US person. Foreign persons complete one of the forms in the Form W-8 series (e.g., Form W-8 BEN). US persons do not complete a form in the W-8 series. Instead, they use Form W-9.When the payor of the income has the W-8BEN on file, the payor will be apprised that the payee is a non-US person and will undertake its withholding duties. If the payee is a US person with a completed Form W-9, the payor will know it does not have to withhold this 30% tax.US Source Income Subject to Withholding TaxListed below are some types of income that are subject to withholding when paid to non-US persons, if the payments are from US sources: Certain kinds of Interest (including certain original issue discount / OID); Dividends; Rents; Royalties; Premiums; Annuities; Compensation for, or in expectation of, services performed; Substitute payments in a securities lending transaction; or Other fixed or determinable annual or periodical gains, profits, or income.Certain types of US source income are not subject to foreign-person withholding. Some examples of such income are:u2024 Broker proceeds (e.g., sales of US stocks / securities)u2024 Short-term OID (183 days or less)u2024 Bank deposit interestu2024 Foreign source interest, dividends, rents, or royaltiesu2024 Proceeds from a wager placed by a nonresident alien individual in the games of blackjack, baccarat, craps, roulette, or big-6 wheel (a later blog post will cover US tax issues on gambling winnings of foreign persons)However, you may still be required to submit Form W-8BEN to claim an exception from US information reporting and so-called u201cbackup withholdingu201d for these types of US source income.Form W-8BENIf a non-US person (whether an individual or a foreign entity) will receive any of these certain types of income, he must provide the Form W-8BEN directly to the payor of the income (do not submit the Form to the IRS) to establish that he is not a US person and to claim that he is the beneficial owner of the income. Form W-8BEN must be signed and dated by the beneficial owner of the income, or, by an authorized representative as evidenced by a duly completed Power of Attorney (The IRS Form 2848, Power of Attorney, may be used for this purpose).How Long is the Form W-8BEN Valid?The Form W-8 BEN must be kept up-to-date. If it is not, the foreign person may find that the agent has wrongfully withheld tax on the income. It is quite time-consuming, costly and cumbersome to get wrongfully withheld amounts refunded from the IRS.Generally, a Form W-8BEN provided without a US u201cTaxpayer Identification Numberu201d (TIN) will remain in effect for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2024. remains valid through December 31, 2024. A Form W-8BEN with a US TIN will remain in effect until a change of circumstances makes any information on the form incorrect, provided that the withholding agent reports on Form 1042-S at least one payment annually to the beneficial owner.

How should a consulting & development company in a non-tax-treaty-country deal with the W8-BEN form when providing services for US companies?

The purpose of the W8-BEN is to to establish the foreign status of the recipient of the income and to confirm that the income is to flow to that recipient; otherwise the withholding agent is required to withhold at the 30% rate. The withholding agent - in this case, the US client - should not withhold on non-US source income payments to the foreign person once the W-8BEN is received, and income for services performed outside the United States by a nonresident alien is not considered to be US source income even if paid by a US payer. Publication 515 (2024), Withholding of Tax on Nonresident Aliens and Foreign Entities covers this:The place where the services are performed determines the source of the income, regardless of where the contract was made, the place of payment, or the residence of the payer.A US Tax ID Number is required on Form W-8BEN if the recipient is claiming tax treaty benefits or is a foreign partner submitting the form to a partnership that is conducting a trade or business in the US (and a couple of other of cases which are less common). Since neither of these applies in this case, it is not necessary to put a US Tax ID number on the form - note that line 6 on the W-8BEN states that the number is included if required per the instructions. Parts 2 and 3 of the form are left blank in this case.My experience is that there are US clients that don't know the rules on foreign source income, in which case you should point them to Pub 515.

What is the difference between IRS W-8BEN and W-8BEN-E forms?

Sure, I can address tax issues here. You would use the W-8 Ben for an individual situation. And, you would use the W-8 Ben E for a company situation.Though, the actual completion of the form center on how the US international tax provision taxes the foreign person or company on the income. So, we first apply the tax law based on the fact situation at hand. So, the form completion centers on tax law and treaty law.Then, and if the person or company home country has a specific tax treaty with the US, we would then apply the exact treaty provision for mitigating (reducing) the withholding required.Here, we need to understand how treaties work and apply the most recent treaty or possibly and updated protocol or competent authority position between the US and the home country when we complete the treaty section of the W8-Ben or Ben-E. The above represents the procedure I have used when dealing with this situation. As with all events dealing with the US tax law completing this form correctly and fully provides for the best outcome allowed by tax law and treaty law.I have completed the above based on the fact situation. If the income type or facts change above, the tax results may change for sure. www.rst.tax

What is the Right W-8 Tax Form for a Non US Citizen/Resident Who Wants to Be an Affiliate Marketer?

Unfortunately the answer is probably beyond what could be answered here, because your two primary choices are W8-BEN or W8-ECI which each have effectively opposite purposes.u00a0 The issue is services that are all performed from outside the US are generally considered not US source income which qualifies you to use W8 BEN; however, many affiliate marketing programs would be considered as generating US sourced income due to your relationship with the affiliate network which would require completing W8 ECI.u00a0 If the latter is the case, then the network will withhold US income tax from your payments and you will have to file a US non-resident return to report that income and pay US tax.u00a0 The good news is based on most of the non-resident clients I have, the withheld tax will more than cover your US tax obligation and you will get a refund of the over-withheld amount.

How can a foreigner invest in US stocks?

I answered this same question yesterday, Yes you can, and it is a good idea, many foreign investors use not only US markets, but US banks as well. It is easy to do, but there are precautions you should take. I specialized in international investors, less than 10% of the brokers in my firm could do so. The US broker is under restrictions you need to understand. You can probably find a broker in your country affiliated with a US firm, Merrill Lynch, UBS, TD Ameritrade, Morgan Stanley, Schwab and on and on. You can contact a US broker, check with friends whom you trust, that trade in the US. A US broker will know US markets better, than one overseas. Just as I traded in Hong Kong, but lacked local knowledge. Your US broker is restricted in soliciting foreign accounts. This is to protect your local investment firms. But you contact them, hence getting a referral. If you know someone in the US, have them get a broker to call you. You may need to send your broker an e-mail, u201ccall meu201d. Depending on your country, many places say the contact has to be intiated by the investor, not the broker. Make sure you can access confirms and statements on line. Do not use mail if you are in a place prone to ransom/kidnapping. Getting a statement from UBS in Mexico may identify you as someone with money.US markets are highly regulated, very open, and open to you. The opportunity is there. Unless you are in a short list of prohibited countries, such as Cuba, Iraq, etc.

How do I apply for a US bank account without a social security number?

Opening a bank account is important! In order to establish good credit, rent or buy a house, and to keep your savings safe, the use of a bank account is a necessity in the US. But if you are undocumented, opening a personal bank account could be intimidating or even impossible.The question that many have is whether you can open a bank account without a social security number. The answer is YES. As with some credit cards, what you need is an ITIN number, which is your tax identification number.Some banks allow you to open an account without an SSN, if you have a valid US visa, proof of address (electricity bill, for example), and a photo ID (your passport, for example).If you do not have a valid visa, do not despair! Some banks will still allow you to open an account without an SSN, but you will need to request a personal taxpayer identification number (ITIN) from the IRS (Internal Revenue Service).Documents required:Before going to the bank to open an account, be sure to bring the following. They will not ask for all, but it is best that you have them at hand.u2024 Passportu2024 Proof of address (a telephone or cable bill is sufficient)u2024 Municipal ID, if you live in the place that this document offers.u2024 A second photo ID such as a driving licenseu2024 ITIN numberIf you need further information on banking, IPO, ICO and other cryptocurrency issues, get in touch us at Empire Global Partners at help@empireglobal.partners or questions@empireglobal.partners, or visit us on the web at empireglobal.partnersDisclaimer: I am a legal research analyst at Empire Global Partners focused on Blockchain and Digital Asset matters. This information is not professional advice and should not be used for any decisions.

Can I do freelance work in my home country when I return in summer from college in the United States? Should I file with a W-8BEN or W-9 form?

If you are a US citizen or permanent resident, you are required to report income earned outside the country although thereu2019s a pretty large exclusion from tax for that income (around $100,000, I think). If you are neither a citizen nor a permanent resident, you are not required to report non-US income to the IRS.W-9 forms are not filed with the IRS; they are forms you fill out for a US employer, so as a freelancer working outside the US, thereu2019s no reason to prepare one.W-8BEN forms are used to certify foreign status to sources of US income to minimize tax withholding. Again, if you are working for yourself and outside the US, thereu2019s no reason to prepare that form either.The exception might be if your freelance work is for a US company and your checks are being cut from the US and/or direct deposited to a US bank account. In that case it could get complicated, since the rules in the US on who is an u201cemployeeu201d and who is an u201cindependent contractoru201d are complicated. The US company would be required to withhold income tax, FICA and Medicare if youu2019re an u201cemployeeu201d but not if youu2019re a true u201cindependent contractor.u201d If they withhold, then you may need to look into it further and possibly giving them a W-8BEN might help you.Disclaimer: This is not legal advice and itu2019s worth exactly what you paid me for it: zero.

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