What is an IRS Form, W8BEN?

What is a W8BEN?

The W8BEN, or Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) is a form which, when completed, is provided to the US income provider (Not the IRS!) in order to prevent 30% of your earnings being withheld and remitted to the IRS.

The W8BEN claims the treaty rate between Canada and the US which means you cannot be taxed by both countries on the same income, and by completing this form, you are certifying the following information to the IRS;

  • I am the individual that is the beneficial owner (or am authorized to sign for the individual that is the beneficial owner) of all the income to which this form relates or am using this form to document myself as an individual that is an owner or account holder of a foreign financial institution,
  • The person named on line 1 of this form is not a U.S. person
  • The income to which this form relates is:
    • (a) not effectively connected with the conduct of a trade or business in the United States,
    • (b) effectively connected but is not subject to tax under an applicable income tax treaty, or
    • (c) the partner’s share of a partnership’s effectively connected income,
  • The person named on line 1 of this form is a resident of the treaty country (in this case, Canada) listed on line 9 of the form (if any) within the meaning of the income tax treaty between the United States and that country, and
  • For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions. Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which I am the beneficial owner or any withholding agent that can disburse or make payments of the income of which I am the beneficial owner.
  • I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect (changes).

In a nutshell, you’re telling the IRS, you are NOT a US person, that you do not work in the US and that you will report your income to the CRA.

Otherwise, they keep 30% of it.

 

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New Draft FATCA Forms: W8BEN, W8BEN-E and FFI Agreement details

The much anticipated new FATCA compliant W-8BEN forms have been released in draft version by the IRS:

http://www.irs.gov/pub/irs-utl/formw8benindividualexecirculation2.pdf.   The form W-8BEN, the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (Individual) and http://www.irs.gov/pub/irs-utl/formw8benentityexeccirculation2.pdf, The Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding (Entities).

With a new W9 and W-8IMY on the way and these forms still in draft form in it’s consultation stage, the IRS asks that the existing forms be used and not the new ones yet. 

The new withholding certificates effectively divide the information reporting requirements between two classes of payees: nonresident alien individuals and all foreign entities other than individuals.

New W-8BEN will simplify the declarations required to be made by foreign individuals. It will only require basic identifying information, declarations with respect to treaty status (as relevant), and a general certification as to foreign status.

New W-8BEN-E will require each foreign entity to make two distinct declarations:
The foreign entity’s status for purposes of the US outbound withholding tax regime (e.g., the 30 percent withholding tax generally imposed on US-source dividends paid to non-US persons unless reduced by an applicable income tax treaty). This will be the same as the declaration required in the current IRS Form W-8BEN, as last revised in 2006.
The FATCA-related declaration, which will require an entity to provide substantial detail by declaring its overall status for FATCA purposes from among twenty-four different categories (all described in detail in the Proposed Regulations).

In addition, new W-8BEN-E will require a foreign entity to provide its Foreign Financial Institution Employer Identification Number and FATCA ID, as applicable (both are discussed in the Proposed Regulations).

To learn more about the withholding of tax on nonresident aliens and foreign entities, see IRS Publication 515 (2012).

FFI Agreement details:

http://www.irs.gov/businesses/small/international/article/0,,id=258313,00.html

Details on the FATCA Registration Process for Foreign Financial Institutions (FFIs)*

 
In building an online system for foreign financial institutions (FFIs) to register as participating FFIs, the IRS has developed a flexible system that has the ability for the FFI  to create accounts, chose login and passwords, create challenge questions and maintain the account once formed. The automated system aims to make the registration process as quick and easy as possible, facilitates communication electronically and provides e-mail alerts to keep the registration process moving forward.

Key Points:

  • FFIs will register and enter an agreement (a certification, if a Registering Deemed-Compliant FFI) through an online registration system.
  • Each FFI must select a FATCA Responsible Officer (RO).
    • This individual will be identified in the FATCA registration system.
    • In a typical case, the RO will be the individual who will sign the FFI agreement.
  • The RO may select Points of Contact (POCs) to help complete all aspects of the registration process except signing.
    • Up to five POCs may be selected.
    • There must be at least one in-house POC (may be the RO).
    • It is anticipated POCs may include certain third-party individuals, both local and US (e.g., service provider).
  • It is anticipated that there will be power of attorney procedures allowing the RO to delegate full FATCA registration duties (including signing) to another in-house individual.
    • This in-house individual with the power of attorney from the RO will be identified in the registration system as the FFI’s Authorized Third Party (ATP).
  • If it proves unworkable for the Responsible Officer (RO) or another in-house individual to register the FFI, it is anticipated there will be power of attorney procedures allowing the RO to delegate full FATCA registration duties (including signing) to certain U.S.-licensed tax professionals that are subject to our regulatory jurisdiction.
    • The U.S.-licensed tax professional with the power of attorney from the RO l will be identified in the registration system as the FFI’s Authorized Third Party (ATP).
  • FATCA registration is a user maintained account – it can be edited or modified by the user.
  • The person signing the FFI agreement (or certification) must make an affirmative statement during the registration process that he or she has the authority to act for the FFI.
  • Positive ID verification will be required for the individual who signs the agreement/certification on behalf of the FFI.
  • Person who signs the agreement/certification will be issued a FATCA Individual identification Number (FIIN) following ID verification.
    • If this individual already has an SSN or ITIN, he/she may choose to use it to obtain his/her FIIN electronically through the registration system If this individual does not have an SSN or ITIN, or does not want to provide his/her SSN or ITIN electronically to obtain a FIIN, he/she must obtain his/her FIIN by filing a short paper form along with a copy of specified ID documentation.
    • The FIIN is the only identification number necessary for the individual to complete the registration process.
  • IRS will closely monitor the account creation and FATCA registration process