Stuart Lipo

March 12, 2018|6 Minutes

Validating W-8 Forms: Cultivating an Eye for Detail


We are often asked what constitutes a consequential or an inconsequential error when validating a W-8 form.

Some errors are obviously consequential, such as failing to sign the form, completing the wrong form and providing US indicia. In these cases the answer is clear cut: reject the form as unreliable. But how should you classify more minor issues, such as completing the date in the wrong format (e.g. DD/MM/YY rather than MM/DD/YY), or failing to complete Line 5 on a W-8BEN-E to declare a Chapter 4 FATCA status?

There is no handy list of issues that should automatically cause you to reject a form and issues that you can tolerate or cure. As with so many things, our mantra of “it depends…” kicks in, and both financial institutions and independent reviewers have to make a judgement call. This may be influenced by the purpose for which the W-8 is being collected, or by the firm’s commercial attitude towards risk.

Let’s start with the former:

If the W-8 is being used purely to establish Chapter 3 status, you can accept a W-8BEN-E form where Line 5 has been omitted, provided that you are collecting Chapter 4 status separately to fulfil your obligations under FATCA. However, if Line 5 is completed, but does not match the FATCA status you have on record, you may choose to reject the form, or at the very least seek clarification from your client to cure the discrepancy. The argument would be that, if they cannot get their own Chapter 4 status correct, what else might not be correct on the form? Knowing the purpose of the form will determine if an error is a reason to reject the form or not, within your business model.

What if the error is apparently even more trivial? Incorrect date format is the classic example that comes up time and time again for our clients. Is this really a reason to reject a form? We usually apply a common sense approach to this…

The W-8 form allows you to grant treaty rates to the beneficial owner only when you have a valid form on hand on the pay date. This is why the date format is so important. If the date is written in a format that leaves you in no doubt about the date in question (e. g. “10th May 2018”) then you can be confident that you are applying the treaty rates from the correct date. Likewise, if the date given is impossible in American format (e.g. 28/10/18), you can also be confident what date was probably intended, even if the form has technically been completed inaccurately according to the instructions. You may choose to accept this as is, or date stamp it on receipt in the correct format as part of a documented cure process.

However, if your client wrote 10/05/18 and you granted treaty benefits from 10th May 2018, a reviewer further down the line might determine that you were under withholding between 10th May and 5th October. This would be a material fail if picked up during your Periodic Review.

Some firms choose to adopt the approach of date stamping W8 forms on receipt and treating the form as valid from the date of receipt as a blanket policy to remove doubt on this issue. Others may reject the form outright if it is obvious that the date format is wrong when they receive and validate the form. Both are viable options, and which one you choose is a purely commercial decision. The important thing is that you document your approach in your compliance manual and apply it consistently.

The same principle applies to many of the minor issues you might see on a W-8 form, and this example highlights the importance of clear internal policies and procedures for the validation of forms. As a rule of thumb, you might consider the following two questions when formulating your approach:

  • Could this error change the tax rate that is applied and lead to under withholding?
    • If yes, fail the form
  • Could an independent reviewer in three years time interpret the form in a different way that might lead to an accusation of under withholding?
    • If yes, either fail the form or look for a way to cure it that will remove any doubt

Getting the documentation right is absolutely key to compliance under the Ql regime: get the documentation right and everything else gets much easier. Whilst some issues may seem trivial, paying attention to the small details and developing clear procedures to tackle them will be time extremely well spent.

Stuart Lipo

Stuart joined TConsult in 2015 and has risen to the role of senior consultant, taking the lead on complex cases for clients with Qualified Intermediary, FATCA and CRS compliance issues. Stuart co-authored G.A.T.C.A – A Practical Guide to Global Anti-Tax Evasion Frameworks and delivers regular interactive training sessions both internally and externally.

Prior to joining TConsult, Stuart worked in a variety of roles within the financial industry, including team leader, paraplanner, administration, client relations for independent financial advisor companies.