W-8BEN vs W-8BEN-E: What is the Difference?

non american citizen working and paying taxes in the united states

The information in this article is up to date through tax year 2019 (taxes filed in 2020).

Non-US citizens who work and earn income in the U.S. are required to withhold a certain amount of their eligible income for tax purposes. If this applies to you, then you’ve probably filled out IRS form W-8BEN or W-8BEN-E. Although both of these forms are titled Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, the first applies to income from individuals and the second, income from entities.

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-US citizens who receive income from certain sources. This income is then 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

There are also other types of income sources that are exempt from this 30% tax. These include:

  • Bank deposit interest
  • Broker proceeds like the sale of US securities or stocks
  • Short term original issue discount of under 184 days
  • Royalties, Interest, rents or dividends sourced from a foreign payor
  • Proceeds from wagers in blackjack, big 6 wheel, baccarat, craps or roulette.

Form W-8BEN-E

Form W-8BEN-E is a form that you will receive already completed by the foreign entity, outlining your income. This form has four main functions: to establish non-US status for the company; claim beneficial owner status; claim exemption from, or reduction in, US tax withholding under Chapter 3; and identify the entity’s category under Chapter 4 of the Foreign Account Tax Compliance Act.

This article is intended to provide general information to the public and does not provide personalized tax, investment, legal, or business advice. You should seek the assistance of a professional for advice on taxes, investments, and any other financial, legal, or business matter pertinent to your individual situation.

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