REVIEWING FORM W-8BEN, Certificate of Foreign Status of

As of August 8, 2014
REVIEWING FORM W-8BEN, Certificate of Foreign Status of Beneficial Owner for
United States Tax Withholding and Reporting (Individuals) (Rev. February 2014)
These notes address the new version of Form W-8BEN released in 2014.
IRS regulations require payers to perform ongoing due diligence on the tax certifications that
they receive from payees, and regulations list the requisites for this task. Each form must be
reviewed for sufficiency and then compared on an ongoing basis to other information that a
payer has about the payee. The following checklist for reviewing Form W-8BEN should help you
in this process.
General Checklist for Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for
United States Tax Withholding and Reporting (Individuals):
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A non-resident alien (NRA) must indicate his or her surname on line 1 (the name line).
The NRA’s name needs to equate to your master file or other file records as the beneficial
owner of the paymentfor tax withholding and reporting purposes even if you are instructed to cut
a check a “doing business as” (DBA) name. DBAs may be included on line 7 (reference
number) and used for informational purposes. You need to compare the name entered on the
W-8BEN to what is currently in your master file to assure it is the same. Take care that all tax
records for this payee carry the same name as indicated on the W-8BEN. Where the name
varies, you will need to explore your records and contracts, and contact the payee to resolve.
Similarly, a foreign individual who is a single owner of a disregarded entity is to provide his or
her surname and information on the W-8BEN. The disregarded entity’s name, like a DBA,
should be entered on line 7 of the form for information-only purposes. If the owner of a foreign
disregarded entity is a U.S. individual (resident or citizen), a W-9 is required and not a W-8 form.
In addition to instructions for the W-8BEN, see instructions to both the W-9 and the W-8BEN-E
for further information.
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Make sure you have received the right form for the business relationship. If the NRA is
performing services in the U.S., and wants to reduce withholding by claiming tax treaty benefits,
a Form 8233 must be provided. If the NRA is acting as an agent or intermediary, then a
W-8IMY is required. New Instructions for the Requester of Forms W–8BEN,W–8BEN–E,
W–8ECI,W–8EXP, and W–8IMY (Rev. July 2014) now say: “Request Form W-8BEN from any
foreign individual to whom you are making a payment subject to chapter 3 withholding or a
[FATCA] withholdable payment if he or she is the beneficial owner of the income, whether or not
he or she is claiming a reduced rate of, or exemption from, withholding (including under an
applicable income tax treaty)… Also request Form W-8BEN when an individual payee may
claim an exception from domestic information reporting on Form 1099 (including section
6050W) and backup withholding under section 3406 as a foreign person for certain types of
income, including broker proceeds, short-term original issue discount, bank deposit interest,
foreign source interest, dividends, rents, or royalties.”
© 2014 COKALA Tax Information Reporting Solutions, LLC ● phone 734.629.5155
As of August 8, 2014
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Form W-8BEN now carries a box for entering country of citizenship, and instructions say
do not abbreviate. If the country is abbreviated, you must have other documentary evidence on
file that supports country of citizenship. However, if the payee is a United States citizen or a
resident alien, the W-8BEN should not be completed even if the payee holds dual citizenship in
another jurisdiction. Instead, they are to provide Form W-9.
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Individual’s foreign tax ID (on line 6) issued by the payee’s jurisdiction of tax residence is
required under the instructions to the W-8BEN if the account is a financial account held at a
U.S. office of a financial institution. Under these instructions, for financial accounts, the only
exceptions from providing a foreign tax ID are when the payee has not been issued a foreign tax
ID, or the jurisdiction does not issue tax IDs. Instructions to line 6 do allow payees that have not
provided a foreign tax ID on line 6 to provide their date of birth in line 8.
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Date of birth (on line 8). W-8BEN instructions to line 8 say, independently of instructions
to line 6, that a date of birth is required if the form is provided to support a financial account held
at a U.S. office of a financial institution. Payees are to use the following format to input date of
birth: MM-DD-YYYY. For example, if born on April 15, 1956, 04-15-1956 should be entered.
To clarify the confusion in instructions to lines 6 and 8, new Instructions for the Requester of
Forms W–8BEN,W–8BEN–E, W–8ECI,W–8EXP, and W–8IMY (Rev. July 2014) now say: “If a
foreign TIN is not provided for the payee in this case, you may not treat the Form W-8BEN as
valid if you know that the payee has a foreign TIN that it has not provided, unless you have a
record of the TIN in your account files that you are able to report on Form 1042-S. In any other
case in which the foreign TIN is not provided, you must obtain the individual payee’s date of
birth on line 8 in order to treat the Form W-8BEN as valid unless you otherwise have the
individual payee’s date of birth in your account files for the payee that you are able to report on
a Form 1042-S. Note that a future revision to Form W-8BEN may require you to obtain both a
foreign TIN and date of birth for a payee described in this paragraph.”
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A permanent address in the country in which resident is required on line 3. “In-care-of”
or “hold mail” addresses are not permanent addresses. Missing a permanent address in a
foreign country is a fatal flaw to relying on any W-8 form.
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For payees claiming treaty benefits, their address should be in the same country as
entered in the treaty claim portion of the form. This is the address that you should
use to complete the Form 1042-S.
An address in the United States (50 U.S. states and DC) is disallowed in line 3 or in
line 4 (mailing address). See commentary on “red flags and curing” as to actions
that are necessary to rebut a reason to doubt the validity of the form where a U.S.
address or conflicting treaty address is entered.
© 2014 COKALA Tax Information Reporting Solutions, LLC ● phone 734.629.5155
As of August 8, 2014
•
Mailing address may be blank if the mailing address is also the permanent address, but
where a separate address is entered and treaty benefits are claimed the address should be in
the same country through which the benefits are claimed in the treaty section of the form. U.S.
addresses are also disallowed in this line. See commentary on “red flags and curing” as to
actions that are necessary to rebut a reason to doubt the validity of the form where a U.S.
address or conflicting treaty address is entered.
•
Signature is necessary. If the signature is absent, then the form is invalid for all
purposes and the payee is presumed a noncertified person subject to the presumption
standards. The signature must be an original and made by the beneficial owner, but under Reg.
§ 1.1441-1T(e)(4)(iv)(C) the payer may now rely on forms electronically transmitted by fax or by
being scanned and imbedded in an email or attached to an email, unless the withholding agent
knows that the person transmitting the form or documentary evidence is not authorized to do so.
(This new rule covers “electronic transmittal” of W-8 forms. The older rule permitting an
“electronic W-8” created in an electronic system for which the IRS has issued a Memorandum of
Understanding also remains in effect.)
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Form W-8BEN may be signed by an individual authorized to sign for beneficial owner if
the individual holds a valid power of attorney (IRS Form 2848, Power of Attorney and
Declaration of Representative). Form 2848 is required to be filed with the IRS and a copy
should be attached to the executed Form W-8. If the signer of Form W-8BEN is not the
individual listed as the beneficial owner in Part I, the capacity in which acting must also be
disclosed in the line provided.
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Be alert for any other type of “agent” signing a Form W-8BEN. If there is an “agent” but
no Form 2848, consider whether the designated payee is acting as a foreign intermediary in
which case a W-8IMY could be needed and if not, you should ask for a new form signed by the
beneficial owner. If the payee is unable to sign because he or she is a minor, the return may be
signed by a parent or guardian. A court-appointed representative can also sign on behalf of a
mentally incompetent individual [Reg.§ 1.6012-3(b)(3)].
Review of Claims under an Income Tax Treaty:
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A U.S. TIN or (starting on March 6, 2014) a foreign tax ID is necessary if treaty benefits
are requested for all but a certain select group of payments. Whether the U.S. TIN supplied is
an ITIN or SSN makes no difference for individuals if claims are not related to personal services
where Form 8233 is required. Earnings on actively traded securities; that is, publicly traded
stocks and debt obligations, do not require U.S.TINs on W-8BENs to effect treaty claims. Also
exempt from the U.S.TIN requirement are dividends from any redeemable security issued by an
investment company registered under the Investment Company Act of 1940 (mutual fund);
dividends, interest, or royalties from units of beneficial interest in a unit investment trust that is
(or was upon issuance) publicly offered and registered with the SEC under the Securities Act of
© 2014 COKALA Tax Information Reporting Solutions, LLC ● phone 734.629.5155
As of August 8, 2014
1933; and payments on loans of any of the above securities, including publicly traded stock or
debt. But note that foreign tax IDs are required in general for accounts held in a U.S. office of a
financial institution. See above.
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Part II, lines 9 and 10, must be completed according to the IRS Instructions. The W8BEN may not be used for a treaty claim relating to personal services where a Form 8233 is
required.
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The treaty claim must be reviewed and confirmed that the treaty rate claimed is correct
and treaty terms are satisfied to the best of a payer’s knowledge. Payers are considered to
know details that are public knowledge and that include the terms of the specific treaty. Payers
are also considered to know the facts and circumstances of their payments, such as the type of
payment and its source, and any specific corporate knowledge of the payee.
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A disclosure in line 10 of Form W-8BEN needs to speak to the unique qualifications not
otherwise covered elsewhere on the W-8BEN as outlined in the particular article being claimed
in the treaty. Instructions to Form W-8BEN say, “Line 10 must be used only if you are claiming
treaty benefits that require that you meet conditions not covered by the representations you
make on line 9 and Part III. For example, persons claiming treaty benefits on royalties must
complete this line if the treaty contains different withholding rates for different types of royalties.
However, this line should always be completed by foreign students and researchers claiming
treaty benefits.” Instructions to Form W-8BEN-E (for entities) released much later include other
events where line 10 is required, including when persons are claiming treaty benefits under an
“other income” treaty article.
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IRS Publication 515, available in Forms and Publications on the IRS website, has tables
at the end of the publication that review the different income tax treaties by income type.
Publication 515 is revised every year usually early in the Spring, but treaties could come into
play midyear missing the publication date so you will also need to keep abreast of any changes
that occur throughout the year. Pub. 515 for TY 2014 has not yet been released.
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The country of citizenship should be the same as the treaty country; otherwise you will
have reason to doubt the treaty claim and it must be cured.
Points on W-8BEN from “Instructions for the Requester of Forms
W–8BEN, W–8BEN–E, W–8ECI, W–8EXP, and W–8IMY” (Rev. July
2014), released July 18, 2014
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Due diligence requirements. Payers are responsible for ensuring that all information
relating to the type of income for which Form W-8 is submitted is complete and appears to
be accurate and, for an entity providing the form, includes a chapter 4 status when required.
© 2014 COKALA Tax Information Reporting Solutions, LLC ● phone 734.629.5155
As of August 8, 2014
In general, you may rely on the information and certifications provided on the form (including
the status of the beneficial owner as an individual, corporation, etc.) unless you have actual
knowledge or reason to know that the information is unreliable or incorrect. You are
considered to have reason to know that the information is unreliable or incorrect if you have
knowledge of relevant facts or statements contained in the withholding certificate or other
documentation that would cause a reasonably prudent person in your position to question
the claims made. For example, if you have information in your records that contradicts
information provided on the form, you may not rely on the form. If you know or have reason
to know that any information is unreliable or incorrect, you must obtain a new Form W-8 or
other appropriate documentation. See Cokala’s paper on “red flags” to look for, curing
requirements and a checklist for reviewing W-8 forms.
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Request a new Form W-8: The instructions clarify when forms are to be requested,
including:
─ Before the expiration of the validity period of an existing Form W-8;
─ If the existing form does not support a claim of reduced rate for a type of income that the
submitter of the form has not previously received or is incomplete with respect to any
claim made on the form; or
─ If you know or have reason to know of a change in circumstances that makes any
information on the current form unreliable or incorrect for purposes of chapter 3 or 4 (to
the extent applicable based on the claims made on the form).
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Instructions also cover the content requirements of a substitute W-8BEN.
© 2014 COKALA Tax Information Reporting Solutions, LLC ● phone 734.629.5155