W8-BEN Form instruction: IRS Foreigners US tax withholding The W8-BEN is an Internal Revenue Service (IRS) mandated form to collect correct Non-Resident Alien (NRA) taxpayer for individuals for reporting purposes. A W-8BEN Form (you may see this as a W8 form online) is also used to document NRA status for tax reporting purposes. We will focus on when and what the W8 form is and how you should use it to prevent the 30% tax withholding. What are the basics of the IRS Foreigners US tax withholding? Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)) is a document certifying that an individual who is not a US citizen or resident alien is entitled to certain benefits under the Internal Revenue Code. The W-8BEN form is used to certify that a person’s country of residence for tax purposes is not the United States. Form W-8BEN is important for Non-Resident Aliens (NRAs) as they might be subject to a 30% tax withholding on their US-sourced income. This W-8 Form allows foreign persons to claim a reduced withholding tax rate because they are residents of a foreign country with which the US has an income tax treaty. If you are a foreigner earning an income from a US company, you will be asked to complete this form and submit it back to them as a compliance requirement from the IRS. Foreign persons or business entities use w-8 forms to claim exempt status from certain withholdings. There are five W-8 forms: W-8BEN, W-8BEN-E, W-8ECI, W-8EXP and W-8IMY. All W-8 forms are valid for the year they are signed and three full calendar years afterwards. Although the IRS issues the W-8 forms, they are submitted only to payers or withholding agents. Failure to submit the form may result in a withholding at the full 30% rate that applies to foreign entities. What is the W8 used for? Form W-8BEN is sometimes called a ‘certificate of foreign status‘ and establishes that an individual is a foreign person and the business owner in question. This is the main W8-BEN Form purpose. Who needs to fill out the withholding tax forms? Foreign individuals are ordinarily subject to a tax rate of 30% on specific types of income they receive from US payers, including: Interest Dividends Rents Royalties Premiums Annuities Compensation for services rendered The W-8BEN Form also helps individuals to claim a reduction or an exemption from US tax withholding if they reside in a country with which the United States has a tax treaty and the income received is subject to that treaty. If you’re an NRA receiving income from US sources, then W8-BEN must be utilised. Foreign persons must provide Form W-8BEN to the withholding agent or payer if they are the beneficial owner of the income subject to the tax withholding. The W-8BEN form must be submitted regardless of whether the individual claims a reduced withholding. Individuals must submit the W-8BEN form before receiving income or credits. What is W8 Vs W9? W-8 forms are filled out by foreign individuals and non-resident aliens who receive income from US sources. US workers fill out W-9 form with an SSN or ITIN. There is only one W-9 form, but five different types of W-8 Forms as highlighted above. Who is given this form? Form W-8BEN is sent by the company making payments to the individual. The form should be returned to the company or entity that sent the W-8BEN form, not the IRS. It is also not meant to be filed with a tax return. What are the benefits of filing W-8BEN? Suppose you certify that you are a resident of a foreign country. In that case, Form W-8BEN allows you to claim the tax treaty benefits through which the rate of withholding tax on US source income (dividends from US corporations or interest from US sources). This is a significant advantage, as the withholding tax rate is 30%. By filing an updated Form W-8BEN, you could benefit from a reduced tax rate of either 15% on dividends or 0% on interest. A completed W-8BEN form confirms that you are not a resident of the US, and that you own the income to which the form relates. It is also used to take advantage of a reduced withholding tax rate by being a resident of a country with a tax treaty in place with the US.