W-8 Form
Published on September 26, 2024
by Aya Takriti, EA
Aya Takriti, an IRS Enrolled Agent with 10 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East.
Table of Contents
Why do I need to submit a W-8 form?
If you are a foreign individual receiving US-sourced income, submitting a W-8 Form benefits you by possibly reducing your tax withholding and establishing your foreign status for tax purposes.
Depending on your home country’s tax treaty with the US, you might be able to be exempt from US taxes because your income is already taxed in your country of residence.
Why are the W-8 forms necessary for foreign individuals and entities?
Here are the benefits of using W-8 forms:
- Certification of Foreign Status: The forms confirm that the income recipient is not a US citizen or resident, ensuring they are treated as a foreign person for tax purposes.
- Claim Tax Benefits: These allow individuals or entities to claim reduced tax rates or exemptions under tax treaties they are entitled to, helping them avoid overpaying taxes.
- Ensure Correct Tax Withholding: The form certifies that the right amount of tax is withheld from your US income. Without it, a higher tax rate of 30% may be applied.
- Avoiding Penalties: Failure to submit the form may result in potential penalties for not following the US tax regulations.
These forms help the IRS identify foreign individuals or entities that qualify for reduced tax or exemptions based on international tax treaties.
It’s important to note that the W-8 form has different versions for various entities and types of income.
What are the different types of W-8 forms?
There are five distinct types of W-8 forms that ensure the correct tax reduction based on foreign status and income type:
- W-8BEN: For individuals to claim their entitled tax treaty benefits for income, such as dividends, interest, or royalties
- W-8BEN-E: For foreign businesses or entities, such as a foreign company claiming income from US clients.
- W-8ECI: For individuals or entities receiving income connected with a trade or business in the US, such as a foreign individual operating a business in the US.
- W-8IMY: For foreign intermediaries (agent, nominee, or custodian) to report income on behalf of other foreign individuals or entities, such as a foreign bank that receives interest payments from a US company on behalf of its clients.
- W-8EXP: For foreign governments, international organizations, and tax-exempt entities.
I want to know more about US taxes abroad
How do I fill out the W-8 Form?
- Choose the correct W-8 form: Based on your situation, choose the appropriate form (e.g., W-8BEN for individuals, W-8BEN-E for entities).
- Provide personal or entity details: (Lines 1-4)
- Enter your full legal name or business name.
- Provide your country of citizenship or incorporation. If you are a dual citizen, enter the country where you are both a citizen and a resident when you complete this form.
- Enter your permanent address; your permanent residence address is where you live and are a citizen for income tax purposes.
- Enter your mailing address only if it differs from the address you show in your permanent address.
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN):
- You can provide your SSN if you have one. If you do not have an SSN and are not eligible, you can get an individual taxpayer identification number (ITIN).
- If applicable, you can also provide your foreign tax identification number (FTIN).
- Claim tax treaty benefits (if applicable): Check if your country has a tax treaty with the US and see what benefits you qualify for, like lower tax rates on dividends, interest, or royalties.
- Certification of foreign status: The form must be signed and dated by the beneficial owner confirming that you are a foreign person/entity and meet the requirements for reduced tax withholding or a foreign status.
- Submit the form: Give the completed form to the withholding agent or company paying you, not the IRS.
What mistakes should I avoid when filling out a W-8 form?
Creating mistakes might make your W-8 form invalid. To avoid rejection, here’s what you can take into consideration:
- Providing a US address on your permanent address
- Incorrect Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN)
- Incorrect Foreign Tax Identification Number (FTIN)
- Not claiming tax treaty benefits properly
- Leaving fields blank on applicable sections
- Using the wrong form
- Forgetting to sign
- Failing to renew the form
If any information on the W-8 forms becomes incorrect, you must submit a new form within 30 days to prevent further issues.
Where do I submit my W-8 form?
You can submit your W-8 form directly to the withholding agent paying you US-sourced income.
Do not send the form to the IRS unless instructed; the agent uses it to determine the correct amount of tax to withhold from your payments.
What is a withholding agent?
A withholding agent is any person or entity responsible for handling income subject to a US tax return and withholding.
This includes US companies, banks, partnerships, or individuals who pay foreign persons or entities income.
When do I need to submit a W-8 Form?
Initially, You should submit your W-8 form before you start receiving income from the US. Without the form, the payer may apply a higher withholding tax rate, usually 30%.
How long is my W-8 Form valid?
W-8 form is valid for 3 years from the date you sign it unless you want to update your information.
Once the three years are over, you need to re-submit the form if you continue to claim income from the US and want to maintain your reduced tax rate. Make sure to resubmit before expiration to avoid withholding issues.
What happens if I don’t submit a W-8 form?
Failing to submit a W-8 form could result in higher taxes and delays in receiving payments.
US payers are required to withhold a default 30% tax on your income even if you qualify for a lower rate. Remember that this applies to types of payments such as interest, rents, royalties, dividends, annuities, premiums, and substitute payments, to name a few.
