Your Foreign Account Tax Compliance Act (FATCA) status determines which parts of Form W8BEN E you will fill out later. If your U.S.-based business currently operates internationally or plans to do so, it`s important to understand the tax requirements that trigger payments to foreign companies, partnerships, and other businesses. Most payments received from a foreign party from a U.S. source are subject to a 30% withholding tax rate, while others may benefit from tax treaty benefits that eliminate or mitigate taxes. To help your business — and the IRS — determine the status of foreign corporations that receive income from U.S. sources, these companies must submit Form W-8BEN-E. Let`s take a look at what this form is, how it`s used, and best practices for getting information for tax sources. A Form W-8 is filed by businesses or individuals who are not U.S. citizens, but who have received income from U.S.-based businesses.
You must provide your U.S. client with the self-certification form to confirm that you are not a U.S. taxpayer and therefore exempt from paying U.S. tax. Foreigners must submit Form W-8BEN to the taxpayer or withheld payer if they are the beneficial owner of the withholding income. You must submit the form whether or not you are requesting a reduced holdback. For example, if you filed a Form W-8BEN on March 28, 2022, it will be valid until December 31, 2025. For non-U.S. individuals – You must complete Form W-8BEN. This includes freelancers, contractors, and consultants who perform tasks for U.S. companies.
Your U.S. client may not always ask you to provide Form W-8BEN-E. It is the customer`s responsibility to ask you to complete the form and provide it. The reason for this is that if the U.S. client is being audited, they may be asked why they did not withhold U.S. federal tax when dealing with a foreign company. In this part of the form, simply check box 39 to confirm: This section is the certificate attesting that the information provided in Form W-8BEN-E is correct. It must be signed by an agent or official of the beneficial owner. Complete Part III if the country of residence has a tax treaty application with the U.S.
government to determine which benefit provisions may apply. These include tax-exempt foreign organizations, publicly traded companies and subsidiaries, tax-exempt pension plans, etc. There are five types of IRS W-8 forms. These forms are used by foreign natural or legal persons. Forms are submitted to the payer or holding agency, not the IRS. Forms vary, but the most important information requested includes the name of the person or company, address, and TINs. The form is also abbreviated as a “Certificate of Foreign Status” and confirms that the applicant is a non-resident. UW only accepts current versions of Internal Revenue Service (IRS) or Wisconsin Department of Revenue forms. These can be found on the IRS Forms website and the Wisconsin Department of Revenue Forms website.
Technically, you don`t file W-8 forms with the IRS. Form W-8BEN (“Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting”) must be completed by foreign persons receiving certain types of income in the United States. The form, sometimes called a “foreign status certificate,” indicates that the person is both a foreign person and the owner of the business in question. If you do not provide your U.S. client with a W-8BEN-E form, 30% of your income will be subject to withholding tax regardless of whether your country has a tax treaty with the United States. In truth, there are some similarities between the two forms, for example, the layout and details requested on both forms are similar. The U.S. government offers all foreign companies a strong incentive to fill out a W-8BEN-E form and do it exactly. The form also helps you claim a reduction or exemption from U.S. withholding tax if you are a resident of a country with which the U.S. has a tax treaty and the income you earn is subject to that treaty. That it helps decide where to settle, fill out forms, tax differences between the UK and the US, insurance, tax management, business and tax strategies and other matters related to business concerning the US.