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FAQ

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 “withholding agent”, 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:‡ Broker proceeds (e.g., sales of US stocks / securities)‡ Short-term OID (183 days or less)‡ Bank deposit interest‡ Foreign source interest, dividends, rents, or royalties‡ 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 “backup withholding” 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 prthe 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 “Taxpayer Identification Number” (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, 2021. remains valid through December 31, 2021. 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 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, “call me”. 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 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 (2021), 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 kind of documentation should an LLC obtain when paying a foreign remote freelancer? Is a personal invoice enough for bookkeeping purposes, as the freelancer does not have their own company?
As a US LLC, you have the obligation, at the end of the year, to report to the IRS any person or company that you paid (in most cases) more than $600 during the year. In addition, depending on the situation, you could be required to without up to 30% of the amount owned as tax.The first step is collecting a W9 (from a US freelancer) or a W8 (from a foreign freelancer). After that, you are able to pay them, deducting any withholding tax.At the end of the year, for each W9 worker you paid, you must send them a 1099 form (either by physical mail or electronically, the recipient must be given the choice). For W8 workers, you must send them a 1042 form. Your LLC must also file a record with the IRS that shows all the payments made to W9 and W8 workers/companies. The deadline for filing this for W9s is the last day of January. The deadline for filing this for W8s is the last day of March.If you have a lot of these kinds of workers, the can obviously get quite cumbersome. Payment Rails is a great software to help you automate this whole process of collecting and sending forms, including filing with the IRS (Full Disclosure: I work for Payment Rails).
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.  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.  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.  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.
As a French, single non-resident, U.S. alien owner of an LLC (categorized as disregarded entity ) in Wyoming and selling on Amazon US through FBA, what are my federal tax obligations?
Sure, I can address tax issues here. For tax purposes, a one member LLC represents a disregarded entity under Treasury Regulation Section 301.7701-3(b)(ii). So, the LLC’s tax results if any transfer to its 100% member for tax purposes. And, the business of the LLC then represents the business of non resident alien as noted in Section 875.A non resident pays tax on his/her effectively connected income from a United States Trade or Business (“USTB”) according to Section 871(b). While the internal revenue code and treasury regulations do not specifically define a USTB, the courts have looked at this issue extensively over the years ‡ selling to US customers on a regular and continuous basis represents a USTB.A LLC selling physical product originating from a non US location and shipped to a US customer location represents US source income (Section 861(a)(3)). And, US source income represents effectively connected income as noted in Section 864(c)(3).So, we see here the LLC and by definition the non resident person has a USTB with effectively connected income based on the above analysis. So, US tax law requires the individual file a 1040 NR return and pay tax on the LLC’s taxable income (Treasury Regulation Section 1.602-1(b)(1)(i). The return has a 15 June due date for the preceding years results (Section 6072(c)). Thought, the individual can use an extension for extending the return filing (Section 6081).Though, we now turn to the France US Tax Treaty to see if we can mitigate the above tax law results. As we apply tax law first then tax treaty law. The 1996 France US Tax Treaty provides a France resident does not get taxed on his/her business profit in the US unless he/she has permanent establishment in the US (Article 7 and 5). If the individual only uses outside services for facilitating shipments into the US such as Amazon AFB, the individual does not have a permanent establishment in the US.However, we would look a little further here. As generally, France may the LLC as the tax resident versus the France national person as the tax resident. If so, the France national cannot use the treaty. However, France and the US entered into an updated 2021 Protocol possibly addressing this issue as it adds language to Article 4 Paragraph 3. Specifically, France will honor the treaty here if the LLC results would represent results of the France National person. Here, the results have to flow through to the individual similar to SARL results in France for a one member entity.If taxpayer can use the treaty, the non resident still files a 1040 Non Resident return reporting $0 taxable income in the US supported by the specific treaty provision (Treasury Regulation Section 1.6012-2(b)).Regardless, the LLC still has certain annual information reporting requirements starting with the 2021 tax year forward. This Treasury report has special requirements for a one member LLC for transfers between the member and the LLC (Treasury Regulation Section 1.6038A-2(b)(3)(xi)). We file this report with a specific transmittal for meeting Treasury requirements here. And, Treasury has a minimum $25,000 fine for not complying (Section 6038A(d)).I have completed the above tax analysis based on primary tax law. If the situation changes in anyway, the tax results may change considerably. www.rst.tax
Is DeGiro a good online broker for long term investing?
Yes. Its good for Short and Long Term both. Although they don't prmuch research and analysis tools but you got trading view and yahoo finance for that. Degiro is for execution mainly, and its also for people in Europe.1. With Degiro, Is it possible to invest in Companies listed on NYSE, NASDAQ, LSE?Yes, you have access to these exchanges.2. Can I transfer & withdraw money from my Bank Account to Degiro Account?You can transfer money from your registered bank account and make withdrawals to the same bank account as well.3. What are the taxation regulations for non-europeans in trading in Europe?If you reside in France and will incur taxation according to the French regulation when reporting your taxes.Also, you will be required to fill a W8-BEN form so the tax deduction that applies to you will be sorted when trading in US stocks.You should contact a tax adviser for inquiries about taxation.4. If I buy U.S. Stocks, will the IRS be involved?The IRS do not get involved as you are not a U.S. person. We do not allow U.S. persons on our platform.5. How is your registration process for Non-Europeans living and trading in Europe?You will have to pra valid passport and make a transfer from your German bank account for verification purposes6. What kind of customer services can I expect if something goes wrong?You will be able to call and email DEGIRO for assistance.7. Can I continue to invest with my Degiro Account if I move to out of Europe?You can access your WebTrader from anywhere in the world as long as you still meet the EU IBAN and residency requirement.
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.‡ Passport‡ Proof of address (a telephone or cable bill is sufficient)‡ Municipal ID, if you live in the place that this document offers.‡ A second photo ID such as a driving license‡ 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.
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