What is Form W-8BEN-E and Why Do You Need It?
If you are a foreign entity that receives payments from a U.S. source, you may need to fill out Form W-8BEN-E to certify your status for U.S. tax withholding and reporting purposes. This form can help you claim tax treaty benefits, avoid unnecessary withholding, and comply with the Foreign Account Tax Compliance Act (FATCA).
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In this article, we will explain what Form W-8BEN-E is, who needs to fill it out, what are the benefits of doing so, and how to complete it correctly. We will also provide you with a link to download the latest version of the form and some tips on how to fill it out.
What is Form W-8BEN-E?
Form W-8BEN-E is an IRS form that is used by foreign entities to document their status for purposes of chapter 3 and chapter 4 of the U.S. Internal Revenue Code, as well as other code provisions. Chapter 3 covers withholding of tax on nonresident aliens and foreign entities, while chapter 4 covers withholding and reporting under FATCA.
Form W-8BEN-E is also known as Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities). It is used to prove that the entity is a foreign entity and to claim tax exemption or reduced withholding on certain types of U.S.-sourced income, such as interest, dividends, royalties, rents, etc.
Form W-8BEN-E also classifies the type of entity based on its operations and transactions rather than its form, which can be designed to enable tax avoidance or evasion. For example, a foreign entity may be classified as a corporation, a partnership, a trust, a disregarded entity, a foreign government, an international organization, etc., depending on its activities and characteristics.
Who needs to fill out Form W-8BEN-E?
You must give Form W-8BEN-E to the withholding agent or payer if you are a foreign entity receiving a withholdable payment from a withholding agent, receiving a payment subject to chapter 3 withholding, or if you are an entity that is maintaining an account with a U.S. financial institution. You must also give Form W-8BEN-E to the U.S. financial institution if you are a foreign entity that is a beneficial owner of an account maintained by the institution, or if you are an entity that is a payee of a payment made by the institution. You do not need to fill out Form W-8BEN-E if you are a U.S. person, a foreign individual (you should use Form W-8BEN instead), or a foreign entity that is not receiving any U.S.-sourced income or maintaining any U.S. accounts. What are the benefits of Form W-8BEN-E?
By filling out Form W-8BEN-E, you can benefit from the following advantages:
You can claim tax treaty benefits that may reduce or eliminate the withholding tax on certain types of income, such as interest, dividends, royalties, rents, etc. You can also claim exemption from withholding tax on income that is effectively connected with your conduct of a trade or business in the United States.
You can avoid backup withholding, which is a 24% withholding tax that applies to payments made to payees that fail to provide a correct taxpayer identification number (TIN) or certification of foreign status.
You can comply with FATCA, which is a law that requires foreign financial institutions and other foreign entities to report certain information about their U.S. account holders and owners to the IRS or face a 30% withholding tax on their U.S.-sourced income.
How to fill out Form W-8BEN-E?
Form W-8BEN-E consists of 29 parts, but you only need to complete the parts that are relevant to your situation and status. The form is divided into four main sections: Part I (Identification of Beneficial Owner), Part II (Claim of Tax Treaty Benefits), Part III (Certification of Hybrid Entity Claiming Treaty Benefits), and Part IV - Part XXIX (Certification for Specific Chapter 4 Statuses). The last part is Part XXIX (Certification Under Penalties of Perjury).
Here is a brief overview of each part and what you need to fill out:
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Part I: Identification of Beneficial Owner
This part requires you to provide basic information about yourself as the beneficial owner of the income or the account. A beneficial owner is the person or entity that has the right to receive the income or control the account, regardless of who actually receives the payment or holds the account. You need to fill out the following fields:
Name of organization that is the beneficial owner
Enter your full legal name as it appears on your official documents.
Country of incorporation or organization
Enter the country where you are incorporated or organized under its laws.
Name of disregarded entity receiving the payment (if applicable)
If you are a disregarded entity for U.S. tax purposes, enter the name of the entity that is receiving the payment on your behalf. A disregarded entity is an entity that is not treated as separate from its owner for U.S. tax purposes, such as a single-member LLC.
Chapter 3 Status (entity type)
Select the appropriate box that describes your entity type for chapter 3 purposes. This determines how you are taxed and withheld on your U.S.-sourced income. The options are:
Corporation
Disregarded entity
Partnership
Simple trust
Grantor trust
Complex trust
Estate
Government
International organization
Central bank of issue
Tax-exempt organization
Private foundation
If none of the above, specify your entity type under your country's laws
Chapter 4 Status (FATCA status)
Select the appropriate box that describes your status for chapter 4 purposes. This determines how you are classified and reported under FATCA. The options are:
Nonparticipating FFI (foreign financial institution)
Participating FFI
Deemed-compliant FFI
Sponsored FFI
Certified deemed-compliant FFI
Owner-documented FFI
Restricted distributor
Nonfinancial foreign entity (NFFE)
Excepted NFFE
Active NFFEPassive NFFE
Direct reporting NFFE
Sponsored direct reporting NFFE
Excepted inter-affiliate FFI
Territory financial institution
If none of the above, specify your status under FATCA regulations
Part II: Claim of Tax Treaty Benefits (for chapter 3 purposes only)
This part allows you to claim tax treaty benefits that may reduce or eliminate the withholding tax on your U.S.-sourced income. You can only claim tax treaty benefits if you are a resident of a country that has a tax treaty with the United States and you meet the requirements of the treaty. You need to fill out the following fields:
Identify the applicable tax treaty and the article number
Enter the name of the country where you are a resident for tax purposes and the article number of the treaty that applies to your income. You can find the list of U.S. tax treaties and their articles on the IRS website. For example, if you are a resident of Canada and you receive interest income from a U.S. source, you can enter "Canada" and "Article XI" in this field.
Specify the type of income and the rate of withholding applicable under the treaty
Enter the type of income that you receive from the U.S. source and the rate of withholding that applies to it under the treaty. You can find the withholding rates for different types of income on the IRS website. For example, if you are a resident of Canada and you receive interest income from a U.S. source, you can enter "Interest" and "0%" in this field.
Explain any additional conditions or limitations on the claim of treaty benefits
If there are any additional conditions or limitations on your claim of treaty benefits, such as a limitation on benefits provision, a special withholding rate, or a beneficial ownership requirement, explain them in this field. You can find more information on these conditions or limitations on the IRS website. For example, if you are a resident of Canada and you receive interest income from a U.S. source, you can enter "I am a qualified resident of Canada under Article XXIX-A of the treaty" in this field.
Part III: Certification of Hybrid Entity Claiming Treaty Benefits (if applicable)
This part is only for entities that are treated as hybrid entities for tax purposes. A hybrid entity is an entity that is treated differently for tax purposes by different countries, such as a dual resident entity or a fiscally transparent entity. If you are a hybrid entity that is claiming treaty benefits under a provision that allows such claims, you need to fill out this part. You need to fill out the following fields:
Identify the hybrid entity type and the country where it is treated as a resident for tax purposes
Enter the type of hybrid entity that you are and the country where you are treated as a resident for tax purposes. For example, if you are a dual resident entity that is treated as a resident of both Canada and Bermuda for tax purposes, you can enter "Dual resident entity" and "Canada" in this field.
Provide a statement that the hybrid entity meets all the requirements for claiming treaty benefits under the relevant provision
Provide a statement that explains how you meet all the requirements for claiming treaty benefits under the relevant provision of the treaty. You can find more information on these requirements on the IRS website. For example, if you are a dual resident entity that is treated as a resident of both Canada and Bermuda for tax purposes, and you are claiming treaty benefits under Article IV(6) of the U.S.-Canada treaty, you can enter "I meet all the requirements for claiming treaty benefits under Article IV(6) of the U.S.-Canada treaty" in this field.
Part IV: Sponsored FFI That Has Not Obtained a GIIN (if applicable)
This part is only for foreign financial institutions (FFIs) that are sponsored by another FFI or an entity that is not an FFI, and have not obtained their own global intermediary identification number (GIIN). A GIIN is a unique identification number assigned by the IRS to FFIs that register and agree to comply with FATCA. If you are a sponsored FFI that has not obtained a GIIN, you need to fill out this part. You need to fill out the following fields:
Name, address, and GIIN of sponsoring entity
Enter the name, address, and GIIN of the entity that is sponsoring you and has agreed to report and withhold on your behalf under FATCA. For example, if you are a sponsored FFI that is sponsored by ABC Bank, a participating FFI, you can enter "ABC Bank", its address, and its GIIN in this field.
Certification that the sponsored FFI meets all the requirements for being a sponsored FFI
Provide a certification that you meet all the requirements for being a sponsored FFI under FATCA regulations. You can find more information on these requirements on the IRS website. For example, if you are a sponsored FFI that is sponsored by ABC Bank, a participating FFI, you can enter "I certify that I meet all the requirements for being a sponsored FFI under FATCA regulations" in this field.
Part V - Part XXVIII: Certification for Specific Chapter 4 Statuses (if applicable)
These parts are only for entities that have a specific chapter 4 status that requires additional information or certification. Chapter 4 statuses are classifications based on the FATCA regulations that determine how an entity is treated and reported under FATCA. If you have a specific chapter 4 status that corresponds to one of these parts, you need to fill out the relevant part. You need to select and complete the part that matches the chapter 4 status that you claimed in Part I, line 5. The parts are:
Part V: Certified Deemed-Compliant Nonregistering Local Bank
Part VI: Certified Deemed-Compliant FFI with Only Low-Value Accounts
Part VII: Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
Part VIII: Certified Deemed-Compliant Limited Life Debt Investment Entity
Part IX: Certified Deemed-Compliant Investment Advisors and Investment Managers
Part X: Owner-Documented FFI
Part XI: Restricted Distributor
Part XII: Nonreporting IGA FFI
Part XIII: Foreign Government, Government of a U.S. Possession, or Foreign Central Bank of Issue
Part XIV: International Organization
Part XV: Exempt Retirement Plans
Part XVI: Entity Wholly Owned by Exempt Beneficial Owners
Part XVII: Territory Financial Institution
Part XVIII: Excepted Nonfinancial Group Entity
Part XIX: Excepted Nonfinancial Start-Up Company
Part XX: Excepted Nonfinancial Entity in Liquidation or Bankruptcy
Part XXI: 501(c) Organization
Part XXII: Non-Profit Organization
Part XXIII: Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
Part XXIV: Excepted Territory NFFE
Part XXV: Active NFFE
Part XXVI: Passive NFFE
Part XXVII: Excepted Inter-Affiliate FFI
Part XXVIII: Direct Reporting NFFE or Sponsored Direct Reporting NFFE
In each part, you need to provide any additional information or certification required by the part. You can find more information on these parts and their requirements on the IRS website.
Part XXIX: Certification Under Penalties of Perjury
This is the final part of the form where you need to certify that all the information and statements that you provided on the form are true, correct, and complete. You also need to certify that you are authorized to sign the form on behalf of the beneficial owner. You need to fill out the following fields:
Signature of authorized person and date
Sign your name and enter the date in this field. The signature must be handwritten or electronically generated. A stamped or typed signature is not acceptable.
Print name and capacity in which acting
Print your name and indicate your capacity in which you are acting on behalf of the beneficial owner. For example, if you are an officer of a corporation that is the beneficial owner, you can enter "John Smith, President" in this field.
You have now completed Form W -8BEN-E and you are ready to submit it to the withholding agent or payer. You can download the latest version of the form from the IRS website. Here are some tips on how to fill out the form correctly and avoid common errors:
Use the most current version of the form. Do not use expired or obsolete versions.
Fill out the form in English and use U.S. dollars for any amounts.
Use a separate form for each beneficial owner and each type of income.
Provide all the required information and certifications. Do not leave any fields blank or incomplete.
Make sure that the information and certifications are consistent and accurate. Do not provide contradictory or false statements.
Review the form carefully before signing it. Make sure that there are no errors or omissions.
Keep a copy of the form for your records. You may need to update or renew the form periodically.
By following these tips, you can ensure that your Form W-8BEN-E is valid and effective for claiming tax treaty benefits, avoiding unnecessary withholding, and complying with FATCA.
Conclusion
Form W-8BEN-E is an important document that foreign entities need to fill out if they receive payments from a U.S. source or maintain an account with a U.S. financial institution. It is used to certify their status for U.S. tax withholding and reporting purposes, as well as to claim tax treaty benefits that may reduce or eliminate the withholding tax on certain types of income. Form W-8BEN-E also classifies the type of entity based on its operations and transactions rather than its form, which can be designed to enable tax avoidance or evasion.
To fill out Form W-8BEN-E correctly, you need to provide basic information about yourself as the beneficial owner of the income or the account, claim tax treaty benefits if applicable, certify your status for chapter 4 purposes (FATCA), and sign the form under penalties of perjury. You also need to complete any additional parts that correspond to your specific chapter 4 status. You can download the latest version of the form from the IRS website and follow the instructions and tips provided in this article.
We hope that this article has helped you understand what Form W-8BEN-E is, why you need it, and how to fill it out. If you have any questions or comments, please feel free to contact us.
FAQs
What is the difference between Form W-8BEN and Form W-8BEN-E?
Form W-8BEN is for foreign individuals, while Form W-8BEN-E is for foreign entities. They have different purposes and requirements, so make sure that you use the correct form for your situation.
How long is Form W-8BEN-E valid?
Form W-8BEN-E is generally valid for three years from the date of signature, unless there is a change in circumstances that affects your status or eligibility for tax treaty benefits. You should update or renew your form as soon as possible if there is a change in circumstances.
Where do I send Form W-8BEN-E?
You do not send Form W-8BEN-E to the IRS. You give it to the withholding agent or payer who is making the payment to you, or to the U.S. financial institution that is maintaining your account. They will use it to determine how much tax to withhold and report on your income or account.
What if I do not fill out Form W-8BEN-E?
If you do not fill out Form W-8BEN-E, you may be subject to a 30% withholding tax on your U.S.-sourced income, regardless of whether you are eligible for tax treaty benefits or not. You may also be subject to backup withholding, which is a 24% withholding tax that applies to payments made to payees that fail to provide a correct TIN or certification of foreign status. You may also be non-compliant with FATCA, which may result in penalties or sanctions.
Can I fill out Form W-8BEN-E online?
You can fill out Form W-8BEN-E online using a software program or a service provider that offers electronic forms. However, you still need to print and sign the form manually or electronically before giving it to the withholding agent or payer, or to the U.S. financial institution. You also need to make sure that the online form is up-to-date and accurate. 44f88ac181
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