Know about US Federal Tax declaration Form W-8BEN-E and who needs to file it

written by ADMIN | February 9, 2023

Form W-8BEN-E?

    1. It is a tax form used by foreign entities to claim exemption from withholding tax on certain types of income received from U.S. sources. 
    2. This form is designed for entities that are not considered residents of the United States for tax purposes, and it certifies their non-resident status to the withholding agent.

 

  • Who Should File Form W-8BEN?
    1. Foreign entities that are not considered residents of the United States for tax purposes, and receive income from U.S. sources such as interest, dividends, royalties, and certain types of services, must file Form W-8BEN-E.
    2. Examples of foreign entities that may need to file Form W-8BEN-E include foreign corporations/ companies, partnerships, trusts, and estates. The form is also used by foreign tax-exempt organizations and entities that are tax residents of a country with which the United States has a tax treaty.

 

  • When to File Form W-8BEN?
    1. The form must be completed and submitted to the withholding agent prior to receiving income from U.S. sources, in order to claim an exemption from withholding tax.
    2. It is important to submit the form to the withholding agent as soon as possible, as the withholding agent is responsible for withholding U.S. tax on the income if a valid Form W-8BEN-E is not in place.

 

  • What Information is Required on Form W-8BEN-E?
    1. Entity’s name: The full legal name of the foreign entity must be provided.
    2. Entity’s address: The foreign entity’s mailing address must be provided.
    3. Identification number: The entity must provide its taxpayer identification number, such as an Employer Identification Number (EIN) or a foreign tax identification number (TIN).
    4. Certification of status: The entity must certify its non-resident status and eligibility for an exemption from U.S. withholding tax based on factors such as tax residency in a country with a U.S. tax treaty, trade or business in the U.S., or tax-exempt status under U.S. law.
    5. Signature and date: The form must be signed and dated by an authorized person, such as an officer or authorized representative of the entity.

 

  •  Penalties for Failure to File Form W-8BEN
    1. A foreign entity that fails to file Form W-8BEN-E prior to receiving income from U.S. sources may be subject to penalties imposed by the Internal Revenue Service (IRS). The withholding agent is responsible for withholding U.S. tax on the income if a valid Form W-8BEN-E is not in place and may also be subject to penalties for failing to withhold tax as required by law.

 

In general, the penalties for failure to file Form W-8BEN-E or failure to withhold tax can include fines, interest charges, and additional taxes. The exact penalties will depend on the specific circumstances and the amount of tax owed. In some cases, the IRS may also initiate legal action to recover the owed taxes, interest, and penalties.

 

It is important to comply with the requirements for filing Form W-8BEN-E and withholding tax, in order to avoid potential penalties and legal consequences. The instructions for Form W-8BEN-E and other related tax forms and publications are available on the IRS website at www.irs.gov.

 

Conclusion

In conclusion, Form W-8BEN-E is an important form used by foreign entities to claim an exemption from U.S. withholding tax on certain types of income received from U.S. sources. The form certifies the entity’s non-resident status and eligibility for an exemption based on factors such as tax residency in a country with a U.S. tax treaty, trade or business in the U.S., or tax-exempt status under U.S. law.

 

Key differences between Form W-8BEN and W-8BEN-E

  • Purpose: Form W-8BEN is used by foreign individuals to claim an exemption from U.S. withholding tax, while Form W-8BEN-E is used by foreign entities such as corporations, partnerships, and trusts.
  • Certification of status: Form W-8BEN requires the individual to certify their foreign status and tax residency, while Form W-8BEN-E requires the entity to certify its non-resident status and eligibility for an exemption based on factors such as tax residency in a country with a U.S. tax treaty, trade or business in the U.S., or tax-exempt status under U.S. law.
  • Identification number: Form W-8BEN requires the individual to provide their foreign taxpayer identification number, while Form W-8BEN-E requires the entity to provide its taxpayer identification number, such as an Employer Identification Number (EIN) or a foreign tax identification number (TIN).

 

Bonus Takeaway

Validity period

Form W-8BEN and W-8BEN-E are generally valid for three years from the date of signature, unless there is a change in circumstances that would affect the individual’s eligibility for an exemption from withholding tax or the entity’s eligibility for an exemption from withholding tax.

To read about Form W-8BEN CLICK HERE: Know about Federal Tax declaration Form W-8BEN and who needs to file it – Taxontips

 

In relation to Indians who are providing services in USA, you must be required to file such Forms by your USA vendor.

If you need any assistance in filing this form or any other service related to us tax, accounting, and compliance please contact us @ services@ustaxconsultant.com

 

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