Let's Talk About: US Tax
What is Form W-8BEN and What is it Used For?
US Income Tax Withholding
Non-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 Tax
Listed 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-8BEN
If a non-US person (whether an individual or a foreign entity) will receive any of these certain types of income, he must provide the 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, 2008, remains valid through December 31, 2011. 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.
March 7th, 2013 at 14:49
Hi,
my wife, who is Spanish, is currently in the US. She’s staying at a residence in NYC and they’ve given her a W-8BEN. The thing is all of her revenue comes from a Spanish university, so we don’t really know why she has been given this form to fill out. Do you think it might be a mistake? What should she do?
March 7th, 2013 at 15:07
Hi Paul – we cannot give advice without a formal consultation.
March 24th, 2013 at 04:22
Good day, we are Canadians and own a home in California. we have not filled in a W-8Ben form before. the reason we have a bank account at the bank of america is for the purchase of gas, which we cannot buy on a credit card unless you have an American address. in this case do we fill in the form? we are both retired and have no income from the states except for perhaps $4.00 in interest. thank you for your help
March 24th, 2013 at 04:45
It sounds as if the W8-BEN is to advise the Bank that you are non-US persons — This is important as the bank should then not need to file a Form 1099INT with the IRS advising the amount of interest it paid to you. Your facts are not clear, but as you mention you have a home in CA, you need to be very careful with the number of days of your physical presence in the US so you dont become US “residents” based on the substantial presence test.
April 22nd, 2013 at 02:49
Hello,
For my websites I sometimes get help from overseas. I pay them by paypal. Now lets say I pay 10$ to a foreign person. He fills the form W8ben and sends it to me, and then I keep that. What else do I do? How do I withold tax and pay to IRS? And after I withold his tax, as he is from a country thatUS has tax treaty, can he claim this tax from IRS? How? And does he need to have TIN?
April 22nd, 2013 at 08:27
HI – thanks for your queries, which are quite detailed. We are happy to assist you on these by way of a formal consultation which can be arranged even if you are overseas. Just contact us directly if you would like to pursue things.
May 15th, 2013 at 00:30
Hello,
My mother is a beneficiary of money from USA to Greece. Our attorney in USA asked her to sign a W-8BEN form for the taxes.
In part II and No 10 the % of the taxes is not filed and I know that there is a flat 30% rate taxes of the income. I would like to ask you if there is a treaty between USA and Greece to reduce that %
Thank you in advance
May 15th, 2013 at 08:38
HI – We cannot give specific advice without a formal engagement. If you would like our firm to assist, please contact us directly. FYI — There is a tax treaty between Greece & the USA and can be accessed here http://www.irs.gov/Businesses/International-Businesses/Greece—-Tax-Treaty-Documents. Your facts are unclear and I think you need to investigate if in fact (and if so, why) withholding is being undertaken in the first place. Is the money an inheritance, for example? It could be no withholding will be done at all but the W8-BEN is needed to ensure this! Speak on this with the lawyer in greater detail. Should you need further help, we are happy to provide same by formal engagement. Sometimes US-based advisors are not fully familiar with foreign aspects of the US tax laws, so you need to feel fully confident with the advice you are given.
May 19th, 2013 at 12:48
Hi! I’m o photographer from overseas,and recently i’ve joined a website where you can earn money by selling your photos,now after i’ve signed in i saw that there is the tax center and the famous w8 ..so i was wondering..i get paid 25 cents per photo, all incomes by paypal,do i have to pay taxex or something like that..or just have to fill in the w8 form and send it to the website so they can pay to IRS ?thank you vey much !
May 19th, 2013 at 15:17
Hi Alex – We cannot give specific advice without a formal engagement. If you would like our firm to assist, please contact us directly. For your general information, you should inquire of the payor and investigate if in fact any withholding will take place in your particular case. It could be no withholding will be done at all but the W8-BEN is needed to ensure this! Your case is not clear in that one of the initial questions to be answered is whether you are selling photography services or selling actual tangible property (photos) and / or “intangible” property (such as intellectual property rights to use the photos). There are numerous factors to be examined before an appropriate answer could be given. Such is the world of US tax and that is why, as a general matter, advice cannot be given online!
June 27th, 2013 at 19:51
Hi, I’m a Green Card holder recently (2 months ago) arrived to US. I wanted to transfer some money from my Bank oversees, to my bank in US, but the foreign bank asked to fill W8-BEN or W9. The only income i have abroad is interest from my bank account and mutual funds (~tens of $/month).
1. What I should fill in my case.
2. Is self money transfer from oversees subject for taxation in US in case i filled W9?
actually I’m not sure about my status as I don’t know for haw long I’ll be in US.
Thank you in advance
June 28th, 2013 at 11:22
Hi – as a green card (GC) holder, you are treated as a US person for US tax purposes. It does not matter how long you think you may or may not remain in the US. As a GC holder you are taxable on your worldwide income just as a US citizen (this includes for example, interest, dividends, capital gains earned on your non-US financial accounts and non-US assets). Many GC card holders are very surprised to learn this. Suggest you read IRS Publication 519 http://www.irs.gov/pub/irs-pdf/p519.pdf If you need further assistance we are happy to arrange a formal consultation.
July 2nd, 2013 at 01:29
Hello,
I have been in the US almost 5 yeas as an international student (F-1 visa)from Ecuador. I recently joined the stock market. I would like to ask you if there is a treaty between USA and Ecuador to reduce that %?
July 2nd, 2013 at 08:00
All Income tax treaties w. the US are found here. None with Ecuador http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties—A-to-Z
July 2nd, 2013 at 12:04
Students with F visas are very generally exempt from treatment as US “residents”, but precise rules must be followed. You have a US tax issue due to having the visa for 5 years. Suggest you get appropriate US tax advice. We are happy to assist by formal consultation. This is not tax or legal advice. IRS Circular 230 Disclaimer:
To ensure compliance with requirements imposed by the IRS, this is to inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code; or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter addressed herein.
July 12th, 2013 at 22:28
My mother just opened a bank account as non-US resident. And she was required to fill it W-8BEN with TIN. Why does the bank needs TIN if for a nontaxable account? What are the bank going to do with TIN? Does it mean the bank will file 1099 to IRS no matter if you’re none resident or resident , just let IRS decide if she needs pay the tax or not??? Thank you for your help in advance!!!
July 19th, 2013 at 00:33
The bank needs the W8BEN on file as evidence that your mother is not a US person subject to US taxation. If she is a nonresident alien (NRA) then she will not pay tax on the bank deposit interest income. The W- BEN is required documentary evidence for the IRS.
August 3rd, 2013 at 08:14
i make money from Microsoft pubcenter there i have filled W8BEN.I live in india do i have to pay tax in india
August 3rd, 2013 at 08:53
I am assuming you are not a US Person. We deal only with US tax matters. You should consult with appropriate tax counsel in India.
September 22nd, 2013 at 20:17
Hi
I am looking to open a brokerage account in the us, I live in Sweden and there is a tax treaty between Sweden and US. I understand I should fill out the w8 form and send it to the broker.
Does this form have the effect that the broker withholds 30% in tax, which gets paid to the IRS. And I can then subtract that amount of the tax I pay in sweden? Or do I get that 30% and pay tax on the full amount here in sweden?
September 22nd, 2013 at 21:07
If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, withholding for certain items of income (such as dividend income), you should notify the payor of the income (the withholding agent) of your foreign status to claim the benefits of the treaty. Generally, you do this by filing Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding with the withholding agent. SEE PART II of the Form. The tax withheld by the agent is paid to the IRS. The tax will be withheld on dividends you receive but you should not be taxed at all on gains from your sale of US securities unless you have physical presence in the US in the year of the sale that is quite significant. You should check w. your tax advisor in Sweden as to the tax consequences there. If you need further help on the US side, we can work by formal consultation.
February 15th, 2014 at 03:17
It states I must provide the Form W-8BEN directly to the payer of the income.
We receive rent via our rental manager from our property in Florida.
Do i send the form to her?
I am an Australian citizen and receive tax free superannuation pension here.
February 15th, 2014 at 06:32
@ Phil You should be obtaining appropriate US tax advice on this matter. Depending on how the situation is handled by your tax professional, the rental income will be taxed by the US at 30% rate on a gross basis by withholding or you will be entitled to apply all relevant deductions and be taxed on a net basis at graduated rates. The latter method is invariably better in the majority of cases. If you need us to help you we are happy to assist by a formal engagement .
March 3rd, 2014 at 03:11
Hi,
I am a student from Saudi Arabia and have F-1 visa. I get a monthly allowance to help me pay my personal expenses. I got the W-8BEN form from my bank. I do not really know if I am required to fill out the form or not.
Thank you
March 3rd, 2014 at 08:35
HI Abdulrahman – Your tax status as a student w. an F-1 visa can get tricky. You want your days of US presence not to be counted for “residency” purposes for the US tax rules. If this is done properly, then you would fill out W-8 for the bank so that the bank knows you are a non-US person & so that the bank will send correct info to the IRS about your “resident” status. You can let us know if you want a formal consultation for guidance. We are happy to help you.
April 1st, 2014 at 20:08
Hi
I was studying in US with F1 VISA and currently I am graduated and back to Malaysia. Recently I have open a US brokerage account and deposit the amount by using my US bank account. However, the US bank has mailed me the Form W-8BEN to be filled up. I have made a call to the Banker and confirmed that my Social Security Number is documented in the system.
My question is that do I still have to Submit the W-8BEN form to confirm with the officer about my foreign status? Will there have any effect on my future VISA application if I am not submiting the form W-8BEN?
THANK YOU
May 31st, 2014 at 06:57
Hi,
I am a immigrant and have F-3 visa. I am going to a college now and I have a part-time job. I received the W-8BEN from the bank which hooked my student account. I do not know if I have to fill the form or not because I only have income from my part-time job.
June 1st, 2014 at 11:03
Hi Boon and Toan – both of you have questions involving an F student visa and Form W8-BEN. Students in the US need to file a special form to make sure their days of physical presence will not be counting thus, causing them to be treated as US tax subjects. You should obtain proper tax advice & make sure you have properly submitted the required Forms — this sounds more critical for Toan who is still currently in the US. I have a CPA colleague in NY who can assist you; if you let me know, I can send you his details. Form W8-BEN has nothing to do with the income you earn from part-time employment. You need a tax specialist to help you determine if you are to be treated as a US taxpayer based on your physical presence in the US and your student visa status. If you are treated as a US taxpayer, Form W8 BEN is not the right form for you to give the Bank. You would need Form W-9. Please read my other tax blog post re students in the USA http://blogs.angloinfo.com/us-tax/2013/09/09/foreign-teacher-student-trainee-or-government-employee-in-the-us-learn-what-to-do-to-prevent-us-taxation-on-your-worldwide-income/
August 14th, 2014 at 09:55
Hi, Virginia.
My question is: I have a checking account in the US, but I am not a US citizen or resident. Should I fill the form w8ben to keep money in this account? I do not receive any interest or dividends from this account.
What would happen if I do not fill the w8ben with my checking account?
Thanks,
Victor
August 15th, 2014 at 08:14
Hi Victor – you need to fill this form out just to keep all the regulators happy. I understand you don’t receive any interest on the account & thus, have no taxable income. Due to increased regulation under FATCA and reciprocal obligations of the US to report to other countries about such other countries’ citizens having accounts in the USA, the red tape has really increased. I do not know what will happen if you don’t complete the form; possible the bank will close your account. This area is undergoing a lot of change now and it is a moving target! You can read more here: http://blogs.angloinfo.com/us-tax/2014/08/07/us-banks-with-foreign-clients-update-on-reciprocal-fatca-reporting/
August 21st, 2014 at 03:28
Hi Virginia
I am Mexican and have an investment account in a US institution. Since the beginning (2003) I have been filling the W-8BEN form required for non resident alien individuals.
However the form expired, I made a transaction this week and the bank withheld taxes. When completing the transaction I was not made aware that the W8BEN form was expired and no notice was given to me about taxes for this transaction.
Can I get this money back? If so, what is the best way to go about it?
Thank you
August 21st, 2014 at 08:21
HI ANTONIO – sorry to hear of this issue. Yes, you can apply for a refund to the IRS, but it must be timely. I don’t handle preparation of returns, as I am an attorney, but I believe you need to complete Form 1040 NR. I have accountant colleagues who can prepare the necessary papers for you. If you want me to send their details, let me know.
November 17th, 2014 at 22:49
I am a FORMER US citizen (renounced), now Belgian. I am currently in the process of purchasing a house. Why am I asked to fill out his paper if I no longer have ties to the US? What can I be taxed on and why?
March 30th, 2015 at 23:46
Hi Virginia,
My bank in the UAE has asked me to fill out form Form W-8BEN. I was wondering what is the purpose of this firm and whether the bank submits this form to the IRS.
Thanks,
Mazen
March 31st, 2015 at 15:14
Hi Mazen – Thank you for your email and I am glad you are reading my tax blog. Please read this blog post that is more recent, re Form W8 BEN. http://blogs.angloinfo.com/us-tax/2015/03/09/3023/
April 24th, 2015 at 13:01
I’m an author registered as self employed in UK. My books are published by an American company and I’m paid royalties every 6 months. I presume I need to complete a W8-BEN. They say I can earn $600 dollars before they with-hold anything, but is it good practice to have the W8-BEN in place regardless.
Thanks
Melody