What is a W-8BEN-E and why has my customer asked me to complete it?
Form W-8BEN-E is a document that aids identification of foreign payees. The form is held on file by the US payor in case the IRS audits them. You're probably wondering why the IRS would do this?
Well, all US payors of income are required (by the IRS) to identify non US payees and to ensure the correct amount of tax is withheld at source. Normally this is a flat 30% withholding, however it can be reduced to nil in some cases using the US/UK tax treaty.
Why do they have to identify me as a foreign payee?
If the correct amount of tax (either 30%, nil or any figure in between) is not withheld, the payor (i.e your customer) is the one the IRS will go after for the tax. The IRS cannot chase a foreign payee for the tax if they have no US assets/offices/presence in the US. Therefore the tax liability moves up the chain to the payor and they then, for obvious reasons, need and want to ensure they hold the correct amount of tax upfront from any gross payments. Form W-8BEN-E is this form.
Once I send them the completed form - is that it? I can get paid?
Normally yes. However some payors may also request that you obtain a Employer US taxpayer number for your entity - called an EIN. This is obtained by filing an SS-4 application with the EIN unit. All payments are reported to the IRS and in many cases an EIN is required to do this (but not always). You will need to check with your customer.
Can I use the same W-8BEN-E for all my US customers?
In most cases yes. However if things have changed within your business, you may need to revise the form before sending to the new client or even the existing client (e.g. you open a US base or a new owner of the business is a US person).
So will my customer hold 30% tax? I work remotely and have no US presence/office/distribution sites or US sales people.
If you are 100% remote, then no, they won't withhold tax if the treaty with your country of residence eliminates it. There are some instances where a treaty may reduce it - so you may pay a reduced amount to the 30%.
The W-8BEN-E looks complicated - can you help?
Yes! Just Breve can assist with most US tax forms. Get in touch today by phone or email and we'll happily provide details - fixed fee.
t: 0208 1444632