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Form W-8IMY is the “Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting.” The purpose of the form is to certify that a person or business received withholdable payments on behalf of a foreigner or as a flow-through entity. The form is intended for intermediaries and should not be used by beneficial owners in a business. As with other W-8 forms, Form W-8EXP must be sent to the payer or withholding agent before income is paid to you. Not doing so could lead to a tax withholding at the 30% rate, a backup withholding rate, or the ECI tax rate. The rate of withholding may be a special rate negotiated for the treaty country.

The title of this form is also ‘Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting’, and it does the same thing as the W-8BEN, except it is used by foreign entities and not individuals. However, foreigners whose sole U.S. income is based on the trading of securities or commodities through a U.S.-based broker are not considered to be engaged in a trade or business with the United States. Form W-8BEN-E is also titled “Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting,” but it is filed by foreign entities, not individuals.

What is a W-8BEN-E form for?

As an international business, you may seek to hire independent contractors who offer flexible working arrangements. An independent contractor is a professional who engages with a company to provide services according to the terms of a contract. Having a written agreement for your independent contractor is essential, and one of the reasons you want one, in addition to the factors cited above, is that you want to be prepared if you receive questions from the IRS or have to undergo a tax audit. You should separate international contractor payment from local contractor payment and payroll.

If the beneficial owner provides the separate statement after it has provided the Form W-8BEN, it must indicate that the statement relates to the applicable form. Certain entities that are disregarded for U.S. tax purposes may be recognized for purposes of claiming treaty benefits under an applicable tax treaty (see the definition of Hybrid entity,later). A hybrid entity claiming treaty benefits is required to complete Form W-8BEN-E.

How Does an IRS Form W-8 Work?

Since they share similar codes, many people find it hard to differentiate between W9 vs W8 forms as well as to understand which one they need to file. Their names might be close, but these forms don’t have the same purpose. It’s not much more complicated to file than the W8-BEN and can easily be done with the help of some of the tax software for businesses around today.

Instead, you should submit the completed form to the party that requests it. Typically, this is the person or group from whom you received payment. The tax form should be completed before the first payment is made; otherwise, the withholding agent may have to withhold the full 30% that is normally withheld under U.S. tax law. The Internal Revenue Service requires W-8BEN because foreign individuals are normally subject to a 30% tax withholding, but they may qualify for a reduced rate of taxation. W-8BEN helps to establish this eligibility, although other factors also play a role, such as type of income. Income from transactions with a broker or a barter exchange is subject to reporting rules and backup withholding unless Form W-8BEN-E or a substitute form is filed to notify the broker or barter exchange that you are an exempt foreign person.

Properly report foreign non-resident alien supplier payments

If you’re a non-resident alien or foreign business who earned money in the US, read on to learn all about your W-8. At a minimum for Harvard University, foreign entities must complete Parts I, III (if the benefit of an eligible tax treaty is being claimed), and XXX. If any required field is not complete as indicated below, the W-8BEN-E is considered invalid and will be rejected. If you are an excepted nonfinancial start-up company you must check the box to certify that you meet all of the requirements for this status.

In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income. If you are a hybrid entity making a claim for treaty benefits as a resident on your own behalf, you may do so as permitted under an applicable tax treaty. You should complete this Form w8 forms definition W-8BEN-E to claim treaty benefits in the manner described in the instructions for Part III and complete Part I to the extent indicated below. Note that you should not complete line 5 indicating your chapter 4 status unless you are a disregarded entity that is treated as the payee for chapter 4 purposes.