Before knowing why to file the 8BEN tax form, it is better we understand what the 8BEN form is and what its purpose is. The first thing and most important information about this IRS form are that it is not for any tax resident or citizen of the USA. It is exclusively by nonresident aliens to report information to withhold agents or FFIs if they are the beneficial owner of an amount from U.S. sources. U.S. persons have different forms for the same purpose, like W-9, W-4, and others.
Non-resident alien (NRA) is a person who is not a U.S. citizen and does not meet the green card test nor the substantial presence test. They are also subject to withholding of taxes on income obtained from U.S. sources.
What is the purpose of W 8Ben tax form?
The main purpose of W-8BEN is the identification of a nonresident alien for treaty benefits that the US has signed with many countries. Through this form, the IRS and the US-based payer or agent of the payer will know the following three important facts about the payee (non-resident alien)
- That the individual in question is a nonresident alien.
- He/she claimed to be the beneficial owner of the income mentioned in Form W-8BEN.
- That an individual is a foreign person (technically a non-resident alien) and not a U.S. citizen.That the individual is eligible for a reduced rate of tax withholding or is exempt entirely due to an income tax treaty between his home country and the United States.
Who should fill W 8BEN tax form?
As written earlier, the 8BEN is for nonresident alien individuals. The IRS rules that any payment to Non-resident alien individuals should be subjected to 30% tax withholding on U.S-source income unless he/she submits Form W-8BEN before receiving their first payment. Therefore, the following persons must file the 8BEN form before receiving payments from a US-based entity if they do not want withholding of tax @ 30% or want exemption as per the Double Taxation Avoidance Agreement signed by the US with other countries.
- Anyone who is a nonresident alien and subject to withholding of U.S. taxes,
- The single owner of a disregarded entity,
- The NRA-classified account holder of a foreign financial institution (FFI),
- The non-U.S. transferor of an interest in a partnership for a connected gain
In fact , as a general rule , if you are nonresidentaliegn , be ready for filling W *BEN and handhover the same to the payer based in USA . This will help you in getting the payment without any tax withholding. For example , say you invested in shares listed on NYSE or NASDAQ. When you get dividend , you will need to submit a *BEN form to payer company . This will ensure that your company determined your identification and the kind of tax treaty that will apply to you.
Similaraly, when you share shares and stock, even though thre is no capital gains tax for a non us person or nonresident align, your payer will require 8BEN form , so that they can pass on sales amount without any tax deduction.
Where can I get the 8BEN tax form & 8BEN instructions?
What is difference between W-8BEN and Form 8233?
If you are confused about whether you should submit form w 8ben or form 8233 , don’t worry. Just remeber , 8BEN is to be filed for any income that is not earned from personal services. Salary , wages comes within the scope of personal services. For income earned by a nonresident alient from personal services,like salary wages , the payee must submit Form 8233 to save himslef or herslf from tax withholding .
Form 8233 is named as Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.
While filing form 8BEN , the nonresidentalien is not required mandatory quoting ITIN .However , for submission of Form 8233 ITIN ( or SSN )of the nonresidentalien payee is a mandatory requirement.If you’ve hired an NRA who would like to claim a tax treaty exemption, they must fill out Form 8233. NRA employees must provide a Taxpayer Identification Number (TIN) on the form.