How to Fill Out and File Form W-8BEN-E?

Form W-8BEN-E, also known as ‘Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding’ is an IRS form that is used by foreign companies pursuing business in the United States. This form needs to be filed by foreign entities. Businesses that are operating outside the U.S. can claim tax exemption on U.S. sourced income.

What is the difference between a W-8BEN and a W-8BEN-E Form?

There is a lot of difference between a W-8BEN and a W-8BEN-E form. W-8BEN is meant only for foreign individuals or sole proprietors, while Form W-8BEN-E is for non-U.S. entities including companies and organizations.

The W-8BEN tax form is required when an individual or a sole proprietor qualifies as a foreign person is likely to pay a tax rate of 30% on domestic income incurred by a foreign entity.
The W-8BEN tax form helps to claim that an individual or sole proprietor is an NRA.
The W-8BEN-E form is a bit longer than the W-8BEN form. It is meant for foreign entities including companies and organizations instead of individuals or sole proprietors.

Who needs to fill out W-8BEN-E?

A foreign company that gets payment from a U.S.-based business needs to fill out the W-8BEN-E form and then remit it to the Internal Revenue Service.

How to fill out a W-8BEN-E?

A foreign entity that is engaged with an American business needs to fill out a W-8BEN-E form. This form is available at www.irs.gov and needs to be completed online or by hand. There are 30 different parts of the W-8BEN-E form with multiple pages. You can even hire a U.S. tax advisor for tax advice if you face any difficulty while filling the form. Mostly, you only need to fill in 4 parts, based on the entity type.

Let’s take a look at the instructions to fill out form W-8BEN-E:

Part I – Identification of Beneficial Owner

1. Name of the Organization

You need to enter the name of the foreign entity.

2. Country of Incorporation

You need to mention the country of residence that is the place where the business is registered.

3. Name of a Disregarded Entity

You need to fill this when a third party is receiving payment. When no direct payment is made to the foreign entity and payment is made through foreign or U.S. sources, like an accounting institution, then you should not skip this section.

*In case there is a third party involved, then Part ii has to be filled out as well. In this section, you have to describe the Disregarded Entity or Branch Receiving Payment. This includes:

Chapter 4 status
Address (no P.O. box)
GIIN (if any)

4. Chapter 3 Status

“Corporation” is the most commonly checked box. Most of the foreign entities that are running business fall under “Corporation” or “Partnership” status. Other options include:

Foreign government
Estate
Simple trust (grantor and complex too)
Central Bank of Issue
Tax-exempt organization
Private foundation
International organization

In case you find out nothing seems to fit, you should check “Corporation” in case the business is solely owned, or “Partnership” in case it is owned by several people.

5. Chapter 4 Status (FATCA Status)

The most commonly used option here is Active NFFE. This implies that the business is an Active Non-Financial Foreign Entity. If none of the other options go well, you should choose Active NFFE.

The status of your FATCA (Foreign Account Tax Compliance Act) will help to determine the parts of the W8BEN-E form that you are required to fill out later.

In case the company is not a Foreign Financial Institution (FFI); be it a bank, insurance, or investment fund, then all the options related to FFI can be ignored.

6. Permanent Residence Address

This refers to the address of the foreign company.

7. Mailing Address

You can skip this section if the mailing address is same as the permanent residence address.

The chances of having a U.S. taxpayer identification number are very low if you are a non-U.S. entity. In such cases, you are required to fill in the number local tax authorities use in order to identify the business. This number will be available on the foreign tax returns or paperwork of the vendor.

Part III – Claim of Tax Treaty Benefits

In this section, all you need to do is to check the relevant boxes and fill in the country of origin.

14a – you need to check the box and mention the country
14b – you need to check the box only

Part XXV – Active NFFE

In this section, you are required to check box 39 in order to certify that:

The entity mentioned in Part I is a foreign entity and is not a bank or financial institution
Less than 50% of the gross income for the previous calendar year is passive income
Less than 50% of assets held are assets that yield or are held for the production of passive income
Remember that Part XXIX is related to Passive NFFE and differs entirely from Part XXV.

Part XXX – Certification

The signature is the most important part of the document. Here, you need to mention the first name, last name, and date (in which the form was signed).

How long is Form W-8BEN-E valid for?

This form is valid for three years. The form begins on the date the W-8 BEN-E is signed and ends three consecutive years from that date. The form expires on the last day of the third calendar year.

Remember that in case the data is found to be inaccurate in any circumstance, then the entire document will be considered invalid.

What will happen if you don’t fill out the form W-8BEN-E?

If a foreign company doesn’t submit the document, then it will have to pay the full 30% tax rate. As outlined in section 3406, it can lead to a different backup withholding rate.

Key Takeaways

Form W-8BEN-E, also known as ‘Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding’ is an IRS form that is used by foreign companies pursuing business in the United States
There is a difference between Form W-8BEN and Form W-8BEN-E. W-8BEN is meant only for foreign individuals or sole proprietors, while Form W-8BEN-E is for non-U.S. entities including companies and organizations
A foreign company that gets payment from a U.S. based business need to fill out the W-8BEN-E form and then remit it to the Internal Revenue Service
There are 30 different parts of W-8BEN-E form with multiple pages that require to be filled carefully
Part 1 refers to the Identification of the beneficial owner, part 2 needs to be filed when there is an involvement of a third-party.
Part 3 is related to the claim of tax treaty benefits
Part XXX refers to the certification