What Is a W-8BEN Form?

She uses this extensive experience to answer your questions about payroll. You must check the box to certify that you have the legal capacity to sign for the entity identified on line 1. Parts IX – XXVII of this form address the FATCA Status of the entity.

• Based on your country of origin, the W-8BEN determines how much tax you owe the IRS.
• Form W-8IMY is used for any person acting as an intermediary.
• Much like the W-8BEN, this form will allow the business to receive a tax treaty deduction if applicable.
• Note that if the filer is a passive NFFE (Non-financial foreign entity), it must complete Part XXVI as well as Part XXX if it has substantial US owners.

In truth, there are a few similarities between the two forms, for example the layout and details requested on both of these forms are similar. Using another browser protects your account and provides a better and improved experience. The guide below outlines the purpose of a W-8BEN Form, who needs to fill it out, and why it’s a crucial element in your global workforce toolbox.

Taxes

The Internal Revenue Service, America’s tax authority publishes all of its forms and instructions at , including the W-8BEN form and Instructions for Form W-8BEN. That the individual is a foreign person (technically a non-resident alien) and not a U.S. citizen. But tax forms are just part of what you need to know to stay compliant when hiring globally. Whether https://www.bookstime.com/ you want to hire one international contractor or grow an entire international team, Remote is here to help. Contact us today with any questions you may have on global employment or global contractor management. EORs have expertise in the countries in which they operate and are able to dedicate their full attention to the country where your workers live.

However, these tax forms are critical in order to properly fill in 1099 NEC and 1024-s tax forms that all companies working with freelancers are required to submit to the IRS. The full name of Form W-9 is ‘Request for Taxpayer Identification Number and Certification’. Businesses use the form to collect information from the independent contractors, freelancers, and vendors they work with who are US citizens who are required to pay taxes to the IRS.

W-8 Form

If you’re contracting with a foreign entity, use Form W-8BEN-E. If you’re partnering with a foreign individual, use Form W-8BEN. The specific W-8 form used by the supplier depends on the status of the foreign entity itself.

Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. The W-8BEN form for individuals is the “driver” or determining document for all non-US persons. It gives the US holder the necessary information to determine your tax status for US taxes. Consult experts in international payroll or taxation to make sure you’re covered legally in terms of compliance. Hiring and paying internationally has never been easier or more attractive for U.S.-based companies.

Canada Tax 101: What Is a W-8BEN Form?

Much like the W-8BEN, this form will allow the business to receive a tax treaty deduction if applicable. In section two, you will be asked about your tax treaty benefits with your home country. While paying an international workforce can be complicated, working with a global partner streamlines the process. Velocity Global’s full suite of solutions, cloud-based technology, and personalized expertise connects employers with talent worldwide. Engage, manage, and pay your distributed workforce with Velocity Global’s Global Work Platform, including Multi-Country Payroll, global Employer of Record, Contractor Payments, and more. Individuals and entities making U.S.-based income, W-9 forms apply to companies, contractors, and similar entities operating under U.S. law. These forms are considered informational form submissions and don’t expire like W-8 forms.

Not only that, but they can assist in onboarding workers to take the burden off of your HR department. Learn more about what to look for in an employer of record in our on-page guide. One option is to establish a local legal entity in the country where you will be hiring workers. If establishing a legal entity doesn’t make sense for your situation, you can work with an EOR, which will allow you to hire and onboard international employees in days instead of months. People residing in the US, those who hold a US Green Card, and those who spend the majority of the year in the US are subject to income tax.

Where To Get a W-8 Form

Our expert-backed global employment platform will help with international payroll services and tax compliance assistance in more than 185 countries worldwide. Leverage our AI-driven technology to streamline the required form collection process for all international employees. The beneficial owner is the name given to individuals required under U.S. tax law to pay taxes on their gross income.

We strongly recommend confirming this choice with your tax advisor before finalizing your decision. A W-8 form allows non-US individuals and businesses to confirm they are not US taxpayers. A partnership or corporation must declare their status via IRS forms such as the W-8BEN-E.

Form W-8BEN Explained

The law states that foreign individuals or entities who have worked or earned income in the US must pay a 30% tax on some types of income earned. The US has a number of Income Tax treaties with foreign countries that allow reductions on taxed amounts. By filling out the W-8 form, foreign individuals or entities are declaring who they are, where they are from, and the various types of income they’ve earned in order to determine how they will be taxed. If you’re a non-resident alien or foreign business who earned money in the US, read on to learn all about your W-8. Withholding agents can be individuals, trusts, corporations, or other types of business. They’re obligated to collect Form W-8 from any payee they have reason to believe is a foreign person or entity to exempt them from tax withholding. Otherwise, they must withhold taxes from payments made to them at a rate of 30%.

• Foreign entities do not have to submit or file the form with the IRS.
• Most of us in America will never need to see or use a W 8 form, but for certain foreigners, it can save them hassle and money.
• Barbara has an MBA degree from The University of Texas and an active CPA license.
• Whether you want to hire one international contractor or grow an entire international team, Remote is here to help.
• You can claim a reduction, credit, or exemption if your entity is in a tax treaty country.

The second type of income is for fixed or determinable annual or periodic income, known as FDAP. This includes passive income such as interest, dividends, rent, or royalties. If you’re a non-US citizen and a non-US resident (known as a non-resident alien) who has earned money in the US, taxes can be that much more difficult. Form W-8BEN is mandatory for all foreign customers who hold an account with BB Americas Bank. Each account holder what is a w8 form must provide to the Bank an individual completed, dated and signed Form W-8BEN. It is the sole responsibility of the account holder listed in the account to complete Form W-8BEN correctly. When it comes to expanding your global workforce, staying compliant with international labor laws and tax requirements is a top priority. A W-8BEN Form helps you adhere to tax regulations and correctly pay your foreign employees and contractors.

What To Do If You Don’t Receive Form W-8

If a contractor fails to submit the form, they will be subject to the full 30% tax rate that ordinarily applies to foreign entities. If you’re responsible for paying or withholding income tax based on the Form W-8BEN or W-8BEN-E, request a proposalfrom Globalization Partners.

Specific qualifications within tax treaties are also subject to change — stay informed about the laws in your country of residence and adjust your finances and tax forms accordingly. Individuals, known as U.S. withholding agents, are responsible for withholding tax from the income they pay at that income’s source before paying the individual. Failure to do so on the withholder’s part could result in late payments or additional fines. If your tax is eligible for withholding for multiple withholding agents, it only needs to be withheld once.

What are Form W-8 BEN and Form W-8 BEN-E?

In other words, they must pay the taxes that the payee didn’t. 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 form W-8BEN, not the IRS.

Current guidelines limit users to a total of no more than 10 requests per second, regardless of the number of machines used to submit requests. By using this site, you are agreeing to security monitoring and auditing. In short, the W-8BEN form determines your status as a foreign individual. Based on your country of origin, the W-8BEN determines how much tax you owe the IRS. But you will pay tax on that income in your country of origin.

Tax Tips

Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information. A tax professional can help determine each of your valid tax statuses, depending on your country and company structure. Because entity income is typically more complex than individually-sourced income, your best option is to work with a professional familiar with your entity’s financial situation and countries of operation.

Form W-8BEN will remain valid for at least three calendar years. A Form W-8BEN expires on the third complete calendar year after it is signed. For example, if you sign a W-8BEN on July 28, 2021, it will expire on December 31, 2025. You need to file a new W-8BEN sooner for changes in circumstances causing information on a submitted W-8 BEN to be incorrect. The payee needs to file the Form W-8BEN before the first payment to prevent withholding of the full 30% of U.S. income tax. Working with international employees also means your company is responsible for withholding all relevant taxes required by each country’s tax laws.