Form W-8BEN is a tax document used to certify that the country of residence for tax purposes is not the United States. It is required because Canada and the United States have entered into an intergovernmental agreement under which Canadian financial institutions must provide this information.
The completed W-8BEN form confirms:
1) That you are not a resident of the United States;
2) That you own the income to which the form relates;
3) It is also used to take advantage of a reduced rate of withholding tax by virtue of being a resident of a country which has a tax treaty with the United States.
Why do I have to complete the W-8BEN form?
Non-U.S. persons must pay U.S. tax on certain kinds of income they receive from U.S. sources. Typically, the income is taxed at a flat rate of 30%. The only way for this tax to be alleviated is if an income tax treaty exists between the U.S. and another country and that treaty authorizes a lower rate of tax.
You might be wondering how the United States collects this tax. For example, the non-U.S. person might decide not to pay it, thus thumbing his nose at the government. In that case, does the U.S. government dispatch secret service agents to all four corners of the globe to track down the tax evader, who may owe only a small amount of tax? Of course not. The U.S. knows all too well that it would be a waste of time and resources to take on the role of a bounty hunter. Read More
Earlier, we posted “IRS Revised Form W-8BEN For Individuals – What Form Do You Use For Entities?” Where we discussed that the Internal Revenue Service (IRS) had released revised IRS Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (Individuals)).
The IRS Instructions for Form W-8BEN provided that Form W-8BEN IRS Form W-8BEN is now used exclusively by individuals and Entities should use IRS Form W-8BEN-E which was still in draft form.
We advised that taxpayers should use the old W-8BEN for entities, until the new one (coming out soon) for entities, W-8BEN-E comes out. Well the new Form W-8BEN-E has Read More
The following FATCA Forms and Instructions for 2014 are now available on the IRS.GOV Forms and Publications Website:
• Form 1042
• Form 8966
• Form W-8BEN
• Instructions to Form W-8BEN
• Form W-8ECI Read More