Form W-8BEN and W-8BEN-E – what are they and what is the difference between them?
(Updated for 2023)
The W-8 forms are notoriously tricky for nonresidents to complete.
However, it’s important to have a good understanding of these documents – especially if you intend to earn income while in the US.
So, with that in mind, we have gathered everything you need to know about form W-8BEN into this handy guide.
So what is the purpose of a W-8BEN? Let’s take a look…
Overview:
What are W-8 forms and what is a W-8 form used for?
The W-8 forms are IRS forms used to collect nonresident taxpayer information and for nonresidents to avail of tax treaties.
Due to the fact that the typical rate of nonresident tax is 30%, the W-8 forms can be a useful way of reducing your tax payments if your home country has a tax treaty with the US.
Essentially, if you fail to complete a W-8 form, you can expect to be taxed at a rate of 30%, even if your home country has a tax treaty with the US!
Who needs to complete W-8 forms?
Nonresident aliens who have worked in the US, or have received income from US sources, should complete W-8 forms.
The same goes for foreign businesses in the US.
There are five W-8 forms: W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY.
Countries which have tax treaties with the US
The US has more than 65 open tax treaties with countries around the world.
Whether you’ll be able to claim a tax treaty benefit will depend on a number of factors, including:
- The visa you’re on
- Type of income you received
- What you are being compensated for
- The type of organization that is paying you
You can find out more about tax treaties here.
When and where to submit W-8 forms
Technically, you do not file W-8 forms with the IRS.
Form W-8BEN will be sent by the organization that is making payments to you.
It should then be returned to the company that sent it to you, not the IRS. You won’t need to file it with a tax return.
What is the difference between W-8 and W9 forms?
There is a very simple answer when you are considering whether you should file W9 or W-8BEN.
The W-8 forms are for nonresidents only. That means international students also need to file a W-8BEN where necessary.
The W-9 forms are for residents of the US.
Unsure if you are a resident for tax purposes? You should take the Substantial Presence Test to find out.
What is a W-8BEN form?
Form W-8BEN should be filed with withholding agents, payers, and FFIs (foreign financial institutions) by nonresidents who might be subject to withholding of US taxes at a 30% tax rate on payment amounts received from sources within the US.
Form W-8BEN is officially known as the “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)”.
If you are a nonresident receiving income (except personal services income) in the US, you should fill it out.
The form is also known as “certificate of foreign status” for short and it reaffirms that the filer is a nonresident.
By filing a W-8BEN, you can claim US tax reduction if your usual country of residence has an income tax treaty and any income (except personal service income, you should use form 8233) you received is relevant to the treaty.
This type of income includes:
- Taxable scholarship
- Prizes/awards
- Interest
- Dividends
- Rents
- Royalties
- Premiums
- Annuities
How to fill out W-8BEN
Below, you can see a copy of a W-8BEN.
When filling out the form, you will be asked for some straight-forward information such as your name, country of citizenship, and mailing address.
In section two, you will be asked about your tax treaty benefits with your home country.
You should always check to see if you have any applicable benefits rather than assuming that you do.
You will then be required to sign the form promising that all information is correct.
How long is a W-8BEN valid?
That depends.
Provided none of your details on the form change, your W-8BEN should be valid for up to three calendar years after the completion date.
For example, if you completed a W-8BEN form on 28 March 2022, it will be valid until 31 December 2025.
When not to use Form W-8BEN
Residents in the US should not file form W-8BEN.
Instead, residents should file form W-9.
Also, you shouldn’t complete form W-8BEN to outline personal service income.
Should I file Form 8823 or a W-8BEN?
Many nonresidents get confused about whether they should file Form 8233 or W-8BEN.
Which form you need to file depends on your income type.
Form W-8BEN should be completed for any income that isn’t deemed personal services income while an 8233 is completed to outline personal services income.
Another difference between the W-8BEN form and Form 8233 is that the withholding agent should submit form 8233 to the IRS.
What is a W-8BEN-E form?
This is also officially known as “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting”.
Any entity that wants to claim treaty benefits should complete Form W-8BEN-E.
Difference Between Form W-8BEN and Form W-8BEN-E
One key difference between this form and form W-8BEN is that the form is for ‘entities’, entities here meaning any type of business or other type of institution that has more than one owner. They may be corporations, partnerships, exempt entities, foundations – public and private, international organizations and even foreign governments..
Money received by foreign businesses is also taxed at a 30% rate in the US. Much like the W-8BEN, this form will allow the business to receive a tax treaty deduction if applicable.
Foreign businesses will have to complete this if they earned the same income as listed above.
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.
However, the key difference between the two is that W-8BEN applies to income from individuals or single owner entities like independent contractors and sole proprietors and the W-8BEN-E is for income from entities.
In other words, W-8BEN is only for individuals, while entities are required to fill out W-8BEN-E.
How to fill out W-8BEN-E
As you can see here, the layout and required information for a W-8BEN-E is vastly longer and the information is different.
Initially, it will tell you a list of people that should not use this form, and the relevant forms they should use.
In section one, it will ask questions about the beneficial owner, such as the name of the organization and the country of origin.
In total, there are 29 sections, the vast majority of which are short.
You can prepare your W-8 forms with Sprintax!
What happens if the company files incorrectly on my behalf?
This is a relatively common occurrence, so you shouldn’t panic if it happens.
If this happens, you can simply file a tax return in the US (Form 1040-NR) along with Form 8833 to outline that you are in fact applicable for a treaty.
You should receive a tax refund on any overpayments you may have made shortly after this.
You can also choose to file Form 1040-NR with a tax expert such as Sprintax Returns!
When you use our service, you can finally rest assured you’ll be 100% tax compliant.
Who can help me with my tax affairs?
Sprintax Forms can help you!
We can offer you:
- Online generation of forms, such as W-8BEN, W4, 8823, and more!
- We’ll easily determine your tax residency status thus ensure you are paying the right amount of tax
- Our software will apply every tax treaty benefit you’re due
Our service was created in order to make tax prep easy and ensure our users are fully compliant with the IRS tax rules.
