Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) is a tax form that non-US citizens and business entities use to verify their country of residence for tax purposes. If a foreign individual or business doesn't use Form W-8BEN, they risk a full tax withholding of 30% on their income.
Disclaimer: This article is for informational purposes only and is not intended as tax advice. IRS regulations can be subject to change, so check for updates on www.irs.gov. Consult an accountant or tax advisor for help with tax laws.
Staying compliant and in accordance with labor laws and regulations is crucial for any business, especially for ones working with foreign entities.
Foreign individuals who receive income from a US source are subject to a 30% tax withholding rate, depending on the type of income. Payments made as compensation for a provided service are the most common, but interest, dividends, rents, royalties, premiums, and annuities are all subject to tax withholding.
IRS Form W-8BEN is used to certify that a contracted person is a foreign individual is a non-US resident and performs work outside of the United States.
This form, sometimes referred to as a certificate of foreign status, establishes that the contracted individual is both a foreign person and the beneficial owner of the business in question.
As a foreign contractor or employee, you're expected to report your foreign income from the US on your taxes. Submitting a Form W-8BEN can result in a reduced rate of withholding or even an exemption from the withholding tax if you're a resident of a foreign country with whom the United States has an income tax treaty. The treaty means you won't be double-taxed (once by the US government, and once again by your home government), so it's a form worth completing as soon as possible.
Any business in the United States should collect Form W-8BEN from any non-US persons (foreign individuals) or businesses engaged in a contractual agreement. The completed form is collected by the withholding agent or payer, not the IRS.
You can obtain a W-8BEN template from the IRS website.
In October 2021, the IRS published a new version of the W-8BEN form, updated to comply with changes in US tax regulations. The same goes for the tax form used by foreign entities (W-8BEN-E). The instructions for completing these forms have also been updated.
What's changed in the W-8 forms? There are updates regarding:
In the updated instructions for filling out these forms, you'll find additional information about treaty benefits and electronic signatures.
Old forms may be used for up to six months past the new revision date, so the old 2017 revision can be accepted until the end of April 2022. Of course, it's best to adjust documentation to the new rules as soon as possible. Beginning May 2022, you must use the new 2021 version.
If you already submitted a W-8BEN or W-8BEN-E form, you don't need to submit a new one. Old W-8BEN forms remain valid until their original expiry date or until personal life changes make it inaccurate.
You can download the tax forms here:
Form W-8BEN-E is filed and submitted by a foreign entity, not an individual, that receives a US income.
Similar to a foreign person receiving income, the generated income by foreign entities is typically subject to a withholding tax of 30% by the payer or withholding agent in the United States. The form W-8BEN-E allows the foreign business to claim a reduction in these US taxes if its foreign government has a tax treaty with the United States.
Non-US businesses provide the Form W-8BEN-E for the same sources of income as an individual would with a Form W-8BEN. If foreign entities do not provide an accurate Form W-8BEN-E when required, they risk paying the full 30% tax rate.
As an example, if you're a contractor who is set up as a private limited company or partnership, you'll want to complete a W-8BEN-E.
Companies should collect a Form W-8BEN or W-8BEN-E from every foreign person (non-resident alien) that will receive income. Do not provide the W-8 to the IRS.
The W-8BEN is valid for three calendar years, ending on the last day of the third year. For example, if you hire someone in February 2022, the W-8BEN form will be valid until December 31, 2025. If a US taxpayer identification number (TIN) is provided, the form is valid indefinitely.
If the information on the W-8BEN becomes incorrect (for example, you've changed your name, moved to the US, or to a country that doesn't have a tax treaty), you need to provide a new W-8BEN or another appropriate form within 30 days.
Complete Part 1 with your personal information:
If you are a resident of a country with a tax treaty with the US, fill this section to claim your exemption from withholding tax.
Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Korea (South), Luxembourg, Malta, Mexico, Moldova, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan, Venezuela.
If your country of residence doesn't have a tax treaty with the US, leave this section empty. The full list of treaty countries can be found on the Internal Revenue Service's website.
To finalize the form, declare that you have examined the information on this form and to the best of your knowledge and belief it is true, correct, and complete, under penalties of perjury. Sign the form with your full legal name and add the date and signature.
Complete this part with basic entity information, such as:
Complete only if a disregarded entity with a GIIN (global intermediary identification number) or a branch of an FFI in a country other than the FFI's country of residence.
In this section, you should certify all the following if they apply to your business:
Add any special rates and conditions, if applicable to your case. If you are claiming the provisions, state the article and paragraph of the treaty identified on the lines above to claim a % rate of withholding and specify the type of income. Explain the additional conditions you meet to be eligible for the rate of withholding.
Payees that may be eligible for a tax reduction or even exclusion are typically foreign governments and foundations, and they need to fill out the Form W-8EXP.
In Part IV to Part XXIX, state all the applicable elements regarding foreign financial institutions that have a tax treaty with the United States.
To finalize the form, read and make the required declarations and certifications.