Non-U.S. citizens who work and earn income in the U.S. are required to withhold 30% of their eligible income for taxes unless their country of origin has an income tax treaty with the U.S. Some foreign citizens can receive an exemption or reduction in their withholding rates by completing Form W-8BEN as an individual or Form W-8BEN-E if you run a business entity.
In this article, we’ll cover everything you need to know about Form W-8 and how to file it with your withholding agent or financial institution.
W-8BEN vs. W-8BEN-E: Key differences
Form W-BEN is a tax form issued to non-U.S. citizens to verify their U.S. income. If your country of origin has an income tax treaty with America, you can claim your tax treaty benefits on Part II of the form.
Form W-8BEN-E is issued to foreign businesses to verify income earned in the U.S. Form W-BEN-E is more complex than the form for individuals since it requests specific financial information about your business, such as your business’s FATCA status and information about sponsoring entities. Tax treaty benefits can be claimed on Part III of Form W-8BEN-E.
Both forms will be sent to you or your business, and they’re kept on file with the withholding agent or financial institution that requested them for three years after they are completed.
What is Form W-8?
Form W-8 is issued by the IRS to foreign individuals and businesses to verify the country of origin and confirm income earned in the U.S. It’s important to note that once a W-8 is completed, it stays with the withholding agent, payer, or foreign financial institution that requested the form. When you complete Form W-8, there’s no need to fill it out every year, since it stays on file with the requester for three years.
If you’re required to fill out Form W-8, you will receive either a reduced withholding rate or a withholding exemption on your U.S. income. Failure to submit the form results in withholding at the full 30% rate, which applies to foreign individuals and entities.
About Form W-8BEN
Unless the United States has negotiated a tax treaty with your native country, a 30% income tax is applied to all non-U.S. citizens who receive income from certain sources. This income is captured on Form W-8BEN. Those sources include:
- Rental income
- Royalties
- Dividends
- Interest, including certain original issue discounts
- Compensation for services expected or performed
- Premiums
- Substitute payments in securities lending transactions
- Annuities
Other types of income sources also exempt from this 30% tax include:
- Bank deposit interest
- Broker proceeds like the sale of U.S. securities or stocks
- Short-term original issue discount of under 184 days
- Royalties, interest, rent, or dividends sourced from a foreign payer
- Proceeds from wagers in blackjack, big six wheel, baccarat, craps, or roulette.
About Form W-8BEN-E
Your business will receive Form W-8BEN-E completed by the foreign entity outlining your income. This form has four main functions – it verifies your business’s foreign status and asserts your beneficial owner status. The form also allows you to claim a withholding reduction or exemption for your business.
Who can file Form W-8?
Foreign individuals or entities that lack U.S. citizenship or residency but work or have earned income in the U.S. must fill out Form W-8. For example, if you’re a non–resident who earns interest from U.S.-issued securities, you will need to file a W-8BEN. If you’re a foreign business owner with income from entities based in the U.S., you’ll complete Form W-8BEN-E.
How to file Form W-8
Form W-8 is requested by the payers or withholding agents and kept on file with them – not filed with the IRS. The tax form requested depends on whether the filer is an individual or a business.
Once Form W-8 is filed, it is effective for the year in which it is signed and three calendar years afterward. So, a W-8BEN signed on Feb. 7, 2024, would be valid through Dec. 31, 2027.
