Forms W8 are a series of IRS tax forms that foreign individuals and businesses must file. A W8BEN is one of them. This tax form must be filed by foreign individuals and businesses to withholding agents or payers.

The purpose of this tax form to establish the individual is both a foreign person and the beneficial owner of the business. Due to this, Form W8BEN is also known as a certificate of foreign status. The full title of W8BEN is Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting.

Same as Americans, foreign individuals are subject to income tax. Ordinarily, foreign individuals are subject to a 30% tax rate for the following income types earned from U.S. payers.

  • Annuities
  • Compensation for services rendered
  • Dividends
  • Interest
  • Premiums
  • Rents
  • Royalties

Purpose of Form W8BEN

The purpose of Form W8BEN is to report the income earned as well as to claim an exemption or reduction from U.S. income tax withholding. Form W8BEN must be submitted whether the foreign individual is claiming an exemption from U.S. tax withholding or reduction.

If there is a failure to file and submit Form W8BEN, the foreign individual will be subject to paying the 30% withholding rate. This can also result in backup withholding rate which is 26% of the income earned.

As for when to file Form W8BEN, it must be filed prior to receiving income or credits from the payer.

Once a Form W8BEN is filed, it will be valid for the tax year signed and for the next three calendar years. If you file Form W8BEN on October 1, 2023, it will be valid until December 31 of 2024.

That said, Form W8BEN shouldn’t trouble you much but it definitely should be filed with a tax professional. It may look like a simple tax form at first glance but a tax preparer’s overview will save you from potential errors.

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