Guide To IRS Forms W8 And W9
If you or your business receives income from a US payer, there is a good chance you will be asked to file a W8 or W9 form. In this guide, I explain why and how to fill the form.
Simon @ FS / Ketchikan, Alaska
Overview
The US has one of the world’s most comprehensive withholding tax regime, with nearly all types of US connected income (ECI) subject to it. In case you are unfamiliar with the term, withholding tax refers to a tax that is withheld at the source, collected and remitted directly by the payer (for example, if you sell books via Amazon’s platform to US customers, Amazon will withhold US taxes owed and pays you the net amount). The primary benefit of withholding tax is that it eliminates the need to file a US tax return to report US connected income (the income is received net of US tax). It is also easier for the IRS to enforce compliance as the liability lies with the US payer, under US jurisdiction.
In order to determine the tax residency status of a beneficiary, form W8 or W9 is filed. W8 for non-tax residents, including US disregarded entities owned and operated by non-tax residents, W9 for tax residents.
W8 is also used to determine the correct withholding tax rate, as it may vary depending on the existence of a tax treaty.
Keep in mind that W8 and W9 are not filed with the IRS, they are used only to determine the tax residency status of a beneficiary, with a specific payer. You will thus need to file one with each payer, and new ones if your or your company’s circumstances change.
Individuals
The correct form to file for US tax resident individuals is W9. US tax resident individual refers to US citizens and green card holders regardless of where they live. It also refers to foreign nationals living in the US on non-immigrant visas, even tourists, provided they meet the Substantial Presence Test.
Fill 1, tick the Individual box in 3, enter your address in 5 and 6, enter your SSN in Part I, sign and date in Part II.
The correct form to file for non-US tax residents is W8. More specifically, for individuals it is W-8BEN.
If you are not claiming tax treaty benefits, simply fill 1, 2, 3, 4 (if applicable), 5 (if you have an SSN or ITIN, otherwise leave blank), 6a or 6b (whichever applies), 8, tick the certification box at the bottom, sign and date. Leave all boxes not listed above blank.
If you are claiming tax treaty benefits, on the other hand, you will also need to fill in Part II. Enter your country of tax residence in 9. In 10, you will need to enter the number of the paragraph relevant to the benefits you are claiming, the rate you are claiming, the type of income you are claiming it on and a short explanation as to why you are entitled to the benefit. For example, United Kingdom – 12 – 0% – Royalties – Tax resident of the United Kingdom. You can find all tax treaties signed by the US here.
Legal entities
The correct form to file for US tax resident legal entities is W9, the same form as for US tax resident individuals.
Enter the legal name for your business in 1, fill 2 if applicable, for example if you have a DBA, tick the correct box in 3, enter your business address in 5 and 6, enter the EIN for your business in Part I, sign and date in Part II.
The correct form to file for non-US tax residents is W8. More specifically, for legal entities it is W-8BEN-E.
Enter the legal name for your business in 1, the country of registration in 2, tick the correct box in 4, tick Active NFFE in 5 if the business is an active business or Passive NFFE if the business is a holding company, enter your business address in 6 and 7 (if applicable), enter the EIN for your business in 8 if it has one, enter the tax ID for your business in 9b or tick 9c (whichever applies), tick the box in Part XXV if you ticked Active NFFE earlier, tick the box in Part XXVI if you ticked Passive NFFE earlier as well as the correct box for the question at the bottom, sign and date in Part XXX.
If you are claiming tax treaty benefits, fill in Part III using the instructions provided in the Individuals section of this guide.
US LLC (disregarded)
A US LLC, with a single owner, will usually be treated as a disregarded entity for tax purposes. As the name implies, such an entity does not exist for tax purposes and as a result, its owner must file using their own details. If the owner is a natural person, this means W9 (US tax resident) or W-8BEN (US non-tax resident). If the owner is a legal entity, this means W9 (US tax resident) or W-8BEN-E (US non-tax resident). In any cases, do not use the US LLC details.
UK LLP / BC LLP / ON LP
A foreign partnership, and this includes the UK LLP, BC LLP and ON LP, will usually file W-8BEN-E when asked to document their tax residency status or when claiming tax treaty benefits.
If the foreign partnership receives income liable to US withholding tax, however, it will have to file W-8IMY, and each partners will have to file their own forms as applicable. A withholding statement will have to be attached to the W-8IMY. You can download an example here.
