Form W-8BEN/W-8BEN-E and W-9

Why and when to file Form W-8BEN

Purpose

The W-8BEN form is a Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individual). This form is required to be completed and submitted when receiving payments as a non-U.S. person from U.S. sources.  Generally, 30% tax is withheld from certain U.S. sourced gross income paid to non-US persons (i.e. foreign payees).  The withholding tax does not apply to U.S. persons. Hence, U.S. persons do not complete W-8BEN. Instead, they use Form W-9, Request for Taxpayer Identification Number and Certification.

Examples of U.S. Sourced Income on which non-resident tax is withheld:

• Dividends
• Interest
• Royalties
• Rent
• Premiums
• Annuities

However, certain types of U.S. sourced income are not subject to the withholding tax, such as deposit interest.

The submission of the W-8BEN to the payer (withholding agent) indicates the income recipient’s non-US status as well as that the individual is the beneficial owner of the U.S. sourced income to be paid. Upon receiving the W-8BEN form, the payor knows to withhold tax and remit to IRS. If the Form W-9 is submitted, the payor becomes aware of the recipient’s U.S status and hence, does not withhold the 30% tax.

The W-8BEN may also allow for a reduced withholding rate if the country of residence has a tax treaty with the U.S.

If the payment is being made to more than one person (ex. spouses), each person is required to submit the W-8BEN form.

Time Period the W-8BEN Remains Valid

The W-8BEN form is valid for three years after the year in which it is signed, unless there is a change in circumstance which results in any of the information reported on the form incorrect. For instance, a W-8BEN signed in February 2015 is valid until December 31, 2018, unless there is a change in circumstances.

In case of a change in circumstance, the withholding must be notified of the change within 30 days.

Form W-8BEN– Available on the IRS website

The Form W-8BEN can be accessed on the IRS website at http://www.irs.gov/pub/irs-pdf/fw8ben.pdf. Detailed instructions regarding the form can be found at http://www.irs.gov/instructions/iw8ben/.

W-8BEN-E – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)

If the income recipient is not an individuals, Form W-8BEN-E should be used.

Form W-8BEN-E– Available on the IRS website

The Form W-8BEN-E can be accessed on the IRS website at http://www.irs.gov/pub/irs-pdf/fw8bene.pdf. Detailed instructions regarding the form can be found at http://www.irs.gov/pub/irs-pdf/iw8bene.pdf.

FORM W-9 – Request for Taxpayer Identification and Number

Purpose

Form W-9 is the Request for Taxpayer Identification and Number. This form is required to be submitted by U.S. persons being paid income to provide their taxpayer identification number to the payor. U.S. persons include U.S. resident for tax purposes, U.S. Citizen or an individual holding a U.S. green card.

For U.S. persons, the Taxpayer Identification Number can be the Social Security Number (SSN) or the Individual Taxpayer Identification Number (ITIN).

As indicated above, upon submitting the W-9 Form, the person’s U.S. status is established, and hence, no tax is required to be withheld by the payer.

The payer does not need to submit the form to the IRS. The completed and signed form should be kept for records and can be required to create W-2 and 1099 forms in the future for the payee.

Spouses – W-9 Form

If income from a payer is paid to both spouses, only one W-9 form is required on behalf of both spouses.

Time Period the W-9 Remains Valid

Unlike the W8-BEN, Form W-9 remains valid indefinitely, unless there is a significant change in circumstance. Similar to the W8-BEN, any change in circumstance must be notified to the payor within 30 days of the change.

Form W-9 – Available on the IRS website

Form W-9 can be accessed on the IRS website at http://www.irs.gov/pub/irs-pdf/fw9.pdf. Detailed instructions regarding the form can be found at http://www.irs.gov/instructions/iw9/ar02.html. 

Other Form(s)

Form W-7, Application for IRS Individual Taxpayer Identification Number, should be used by individuals who are not eligible for the Social Security Number.

Form W-7 can be accessed on the IRS website at http://www.irs.gov/pub/irs-pdf/fw7.pdf. Detailed instructions regarding the form can be found at http://www.irs.gov/pub/irs-pdf/iw7.pdf. 

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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