If you trade with a customer in the US, you may be asked to complete a W8 form before your customer will arrange payment of your invoice. This article looks at the W8 form in more detail and considers how a micro business would fill the W8 form in.
What is a W8 Form?
Essentially, the W8 form is a self-certification form that you can provide your customer to declare that you as an entity (an individual or an incorporated business) are not US taxpayers and are not subject to US tax. This allows your customer to pay the full value of your invoice/s and not withhold tax.
The full and very official name of the W8 form is a certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (individuals ) / (Entities)
What types of form might I see?
A W8-BEN is issued to an individual – usually contractors, consultants or investors in US companies.
A W8-BEN-E is issued to an entity – a limited company who has delivered services to a US company.
Since the majority of our clients have to complete the W8-BEN-E so this is the form we will look at in detail today
How do I complete the W8?
Q1 and Q2 asks for your basic company details, your registered company name and the country of incorporation. Hopefully, these are quite straightforward!
Q3 asks for the ‘name of disregarded entity receiving the payment (if applicable, see instructions)’. This is not relevant to you so you can ignore that field.
The IRS says that “an LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes,…unless it…affirmatively elects to be treated as a corporation..” So the IRS treats a sole director/shareholder LLC as a sole trader for tax purposes. In the UK, the company pays the tax not the individual so I don’t believe that is relevant for a UK business completing this form.
Q4 asks you to define the type of entity that is receiving the payment. This will be ‘Corporation ‘if you are trading as a UK limited company.
Q5 asks you to define the FATCA (Foreign Account Tax Compliance Act) status of the entity receiving the payment. Most UK SME’s will be an Active NFFE (Non-Financial Foreign Entity) – basically a trading entity, not a bank, investment or publicly traded entity.
Q6 asks for your permanent residence – we usually put the registered office address here.
Q7 asks for your mailing address, this is where the business can be found – we usually put the trading address here IF it is different to the residence address.
Q8 and 9 ask for and EIN (Employer Identification Number) or a FTIN (Tax Idenfiication Number
Foreign entities that are not individuals (i.e., foreign corporations, etc.) and that are required to have a federal Employer Identification Number (EIN) in order to claim an exemption from withholding because of a tax treaty (claimed on Form W-8BEN), need to submit Form SS-4 Application for Employer Identification Number to the Internal Revenue Service in order to apply for such an EIN. Follow the instructions carefully when you complete this form!
Getting an EIN can be a bit tricky.
- You will need to complete the form, have it signed by a director and send to the IRS in the US.
- It is possible to get the EIN number over the phone – you would have to call the IRS and fax the form to the agent that you are talking to on the phone. Each IRS Agent is a member of a team with its own dedicated fax line. Once the form has been reviewed and accepted by the IRS Agent – they will provide the EIN, which will allow you to complete the W8-BEN-E.
- IRS International Applicants Phone Number: 001-267-941-1099
Q10 can be ignored
Part II Disregarded Entity or Branch Receiving Payment
Part II can be ignored. We have already established that you are a corporation not a disregarded entity.
Part III Claim of Tax Treaty Benefits
Part III asks you to claim for tax treaty benefits. You are claiming a 0% withholding tax to be applied to the payment being made to you by your supplier. Each country has entered into a tax treaty with the US. Typically you will need to identify which Article in the treaty you are claiming 0% tax to be applied.
You can find the USA-UK Treaty here.
The most common Articles we find our clients use for theie WB-BEN-E forms are:
- Article 7 – Business Profits
- Article 12 – Royalties
Parts IV to XXIX
You can ignore each of these sections – they do not need to be completed.
Part XXX Certification
Needs to be signed off the by a director of the business or an authorised individual as named in section 1. For a small business, this would usually be the director.
Once signed – you would keep the W8-BEN-E on file, and send a copy of the signed form to a US customer who askes for it prior to making payment.