What is a W-8 BEN form? A guide for US employers (2024)

The IRS form W-8BEN is a U.S. tax form issued by the IRS, also known as the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).

It is aimed at non-U.S. citizens who may be eligible for reduced tax rates on certain types of income from U.S. companies, including:

• Money for services provided
• Interest
• Dividends
• Rent
• Annuities
• Royalties
• Substitute payments in a securities lending transaction

The form certifies that:

• The employee is not a U.S. resident or citizen
• They own the income referred to in the form
• They qualify for a reduced tax rate if their home country has a tax treaty with the U.S.

As the payer, you will usually need to supply this form to the nonresident person, and they should send it back to you completed. The form should be kept on file and updated every three years.

What is a W-8 BEN form used for?

W-8BEN form is used to establish that an individual is registered for tax outside the U.S.

It also determines any tax that should be withheld by the payer. If eligible, the foreign individual may be able to pay a reduced tax rate instead of the typical 30% charged on income after allowable deductions. This reduction is due to U.S. tax treaties with certain countries.

Individuals file the W-8BEN form with the payer of the income. Having the form on file alerts the payer how much tax they need to withhold when making payments, and whether or not the 30% threshold applies. It also means that the individual does not need to file a U.S. tax return which can save them time and hassle.

Types of W-8 BEN forms

The five types of W-8 BEN forms are used for different reasons. Understanding the uses as it applies to any of the types is essential to know when filing taxes. The types of W-8 BEN forms are;‍

W-8BEN

‍The Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting is for nonresident individuals who earn income from a U.S. entity.

W-8BEN-E

‍Also known as the new Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, this form is for nonresident businesses that earn income from a U.S. entity.

W-8ECI

‍Certificate of Foreign Person’s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States. This form is for non-U.S. residents who earn U.S. income from business or trade.

W-8EXP

‍Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding. This form is also used by foreign governments, organizations, central banks, or foundations to claim reductions or exemptions in tax on types of U.S. income.

W-8IMY

‍Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting. This form should be filed by foreign persons who receive income on behalf of another person or entity.

The W-8 forms are for nonresident aliens only. U.S. residents must fill out the W-9, W-4, or similar forms.

When do I request Form W-8 BEN from a contractor?

Employers must request Form W-9 BEN from contractors right before they are compensated for services provided. Also, the HR must ensure the contractors meet the required criteria before requesting for the form.

Who is responsible for providing the W-8 BEN form?

The employer is responsible for providing the W-8 BEN form. Also, the employer requests for the form before compensating the contractor.

What is the difference between a W-8 and W-8 BEN?

The W-8 BEN form is the form given to individuals to declare foreign status for the purpose of taxation. The W-8 form on the other hand, is a combination of five forms that foreign organizations and individuals use to claim exemptions.

What happens if employers and workers don't submit a W-8 BEN form?

If an employee does not submit a W-8 BEN form, the worker is subject to a tax rate of 30%. Without the W-8 BEN form, they may not receive the moeny they are entitled to.

For employers, in the absence of a W-8 BEN form, 30% must be deducted for the employee's income tax. This means that the employer is compensating the employee illegally and may be subjected to tax penalties.

How can I compliantly pay international contractors and employees?

If you are looking to work with contractors abroad, you may be confused about which tax forms you need and worried about staying compliant. Growing global teams with workers in multiple countries can quickly get confusing and take away necessary time from other areas of the business. It also means you have the added legal responsibilities of managing the proper tax forms.

Skuad’s global employment and payroll platform enables you to hire and onboard contractors and employees in over 160 countries compliantly. With Skuad you do not have to worry about legal risks and fines as Skuad ensures your organization is fully compliant with country-specific laws and regulations. Skuad can help you establish compliance as part of your corporate identity without the hassles.

To know more about Skuad, talk to Skuad experts today.

FAQs

What does a W-8BEN form do?

The W-8BEN form is mandated by the Internal Revenue Service (IRS) mandated to collect correct Non-resident Alien (NRA) taxpayer information for individuals for reporting purposes and to document their status for tax reporting purposes.

Do you pay tax on W-8BEN?

If your W-8BEN form expires and you do not file another, any U.S. source income you receive will be subject to a withholding tax rate of 30%.

How do I get my W-8BEN tax form?

Visit IRS for instructions and the latest information. Give this form to the withholding agent or payer.

What happens if I don’t submit W-8BEN?

Failure to provide a Form W-8BEN when requested may lead to withholding at a 30% rate (foreign-person withholding) or the backup withholding rate.

How often do you need to complete a W-8BEN form?

Your W-8BEN needs to be renewed every three years.