Understanding W-8BEN and W-8BEN-E Forms

Objective: The W-8BEN and W-8BEN-E forms are used by foreign individuals and entities to certify their non-U.S. status for tax purposes. These forms are issued by the Internal Revenue Service (IRS) and help determine if the individual or entity is subject to U.S. tax withholding and reporting requirements. In this article, we will discuss the purpose of these forms, who should use them, and how to complete them.

W-8BEN: Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)

Purpose
The W-8BEN form is used by non-U.S. individuals who receive certain types of income from U.S. sources, such as interest, dividends, rents, royalties, or other fixed or determinable annual or periodic (FDAP) income. This form allows the individual to claim tax treaty benefits, if applicable, and helps the withholding agent determine the appropriate rate of withholding tax.

Who Should Use W-8BEN
Non-U.S. individuals who receive income from U.S. sources should complete the W-8BEN form. This includes:
• Nonresident aliens who receive FDAP income from U.S. sources
• Nonresident aliens claiming tax treaty benefits
• Nonresident aliens receiving income from a U.S. partnership

Requirements for W-8BEN
The W-8BEN form consists of three parts:
1. Part I: Identification of Beneficial Owner: Provide personal information, including name, country of citizenship, permanent residence address, mailing address (if different), and U.S. taxpayer identification number (if applicable).
2. Part II: Certification: Sign and date the form to certify that the information provided is accurate.

W-8BEN-E: Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)

Purpose
The W-8BEN-E form is used by foreign entities to certify their non-U.S. status and provide information about their FATCA (Foreign Account Tax Compliance Act) classification. This form helps the withholding agent determine the appropriate rate of withholding tax and whether the entity is subject to FATCA reporting requirements.

Who Should Use W-8BEN-E
Foreign entities that receive income from U.S. sources or have a financial account with a U.S. financial institution should complete the W-8BEN-E form. This includes:
• Foreign corporations, partnerships, and trusts receiving FDAP income from U.S. sources
• Foreign entities claiming tax treaty benefits
• Foreign financial institutions subject to FATCA reporting requirements

Requirements for W-8BEN-E
The W-8BEN-E form consists of several parts:
1. Part I: Identification of Beneficial Owner: Provide information about the entity, including name, country of incorporation or organization, permanent residence address, mailing address (if different), and U.S. taxpayer identification number (if applicable).
2. Part II: Certification: An authorized representative of the entity must sign and date the form to certify that the information provided is accurate.

How to Complete W-8 Forms

Step 1 - Add a New Tax Form

Select the Tax Forms tab on your dashboard and click on Add Form

Step 2 - Complete the W-8BEN/W-8BEN-E form

The form is segmented into three parts based on the requirements stated in this article. Complete the form by providing your identification and address information and then review and sign the document to certify it.

You can download a copy of the W-8 certification from the Tax Forms tab.

Conclusion
The W-8BEN and W-8BEN-E forms are essential for non-U.S. individuals and entities receiving income from U.S. sources. It is crucial to understand the purpose of these forms, who should use them, and how to complete them accurately to ensure compliance with U.S. tax laws and avoid unnecessary withholding taxes.