The W-8BEN-E form is an IRS (Internal Revenue Service) form used by foreign organizations doing business in the U.S. Only partnerships and organizations need to file the W-8BEN-E form. According to the University of Washington, the form is used to validate that a vendor is a foreign organization. Also, it should be filled out before the vendor can be paid.
What Is the W-8BEN-E Form?
The form W-8BEN-E is from the tax collection agency from the United States. All foreign organizations that are receiving wages from an American corporation must fill out the W-8BEN-E form.
The form W-8BEN-E is practiced to verify that the company providing the assistance is indeed a foreign entity. It is a new form that appeared thanks to FATCA (The Foreign Account Tax Compliance Act).
The Foreign Account Tax Compliance Act came into place in 2010 so that the Internal Revenue Service could learn more about the United States citizens who are earning income or financing through non-U.S. sources, international, according to Thomson Reuters. It focuses on cross-border tax docility that extends to foreign actualities doing business with the United States clients.
Requirements For Different Vendors
The form W-8BEN-E is quite lengthy. It has thirty parts. All the fields present in the form are not compulsory to be filled by a foreign vendor to get paid by a United States organization. The requirements of different vendors vary.
For instance, the University of Washington requires foreign vendors to fill out:
- Part XXIX
- Part I
- Part II
Individuals and sole proprietors must not fill out the form W-8BEN-E. Instead of that, they need to submit the form W-8BEN to receive payment from U.S. organizations.
What Is the W-8BEN-E Used For?
The form W-8BEN-E is used for reporting to the Internal Revenue Service (IRS) data about a non-U.S. organization earning from U.S. companies.
The Form W-8BEN-E Asks For Information Such As:
- Name of the company
- Where the company is located
- Organization status
- The claim of tax treaty benefits
- The U.S. or foreign Taxpayer Identification Number (TIN)
The company status refers to whether the organization is a foreign government, nonprofit company, publicly-traded company, or something else.
Tax treaty benefits on income can only be claimed if there is a tax treaty between the United States and the country where the company is a tax resident. The U.S. has tax treaties with nations such as the United Kingdom, Canada, Ireland, Australia, and Mexico.
According to the IRS, if a tax treaty is not in place, non-United States entities have to pay 30% tax on their United States earnings. If you do not submit a form W-8BEN-E to the U.S. client, 30% of the income is subject to withholding, despite whether the country has a tax treaty with the U.S. or not.
Final Words
Tax compliance can devolve into a range of escalating stresses if corporations let it. This thing especially holds for W-8BEN-E form and compliance.
To know more about the W-8BEN-E form, join the Compliance Prime webinar.
