Ross McGill
Your W-8 Questions Answered
In our last blog about W-8 forms, we talked a bit about what they are and what they’re used for. We got a lot of questions about W-8 forms off the back of that post, so today I thought it would be a good idea to gather some of them together and answer them. I promise I’ll do my best to not answer each one with ‘it depends’!
If you need an update on the basics of a W-8, click here to read the last article. Otherwise, let’s get into it.
Who Needs to Complete W-8 Forms?
Any non-US investor trying to open an account with a broker or a custodian bank will almost certainly be asked to provide a W-8 (or a W-9 if they’re American). The institution will ask you to fill one in or collect the information they need from their website (called a substitute W-8).
Which Countries Have Double Tax Treaties with The US?
This is a tricky one because double-tax treaties are changing all the time. However, I can tell you that at the time of writing, there are approximately 65 countries that have a tax treaty with the US. Get ready for a long list, because that includes:
- Armenia
- Australia
- Austria
- Azerbaijan
- Bangladesh
- Barbados
- Belarus
- Bulgaria
- Canada
- Chile
- China
- Cyprus
- Czech Republic
- Denmark
- Egypt
- Estonia
- Finland
- France
- Georgia
- Germany
- Greece
- Iceland
- India
- Indonesia
- Ireland
- Israel
- Italy
- Jamaica
- Japan
- Kazakhstan
- Korea
- Kyrgyzstan
- Latvia
- Lithuania
- Luxembourg
- Malta
- Mexico
- Moldova
- Morocco
- Netherlands
- New Zealand
- Norway
- Pakistan
- Philippines
- Poland
- Portugal
- Romania
- Russia
- Slovak Republic
- Slovenia
- South Africa
- Spain
- Sri Lanka
- Sweden
- Switzerland
- Tajikistan
- Thailand
- Trinidad
- Tunisia
- Turkey
- Turkmenistan
- Ukraine
- Venezuela
- United Kingdom
- Uzbekistan
When And Where to Submit Your W-8
No one submits their W-8 or W-8BENEs directly to the IRS. Instead, you send them back to the institution that requested it. They will then be used by the institution to decide whether to let you open an account, how to treat and tax US investment income paid to your account and whether your account is reportable under US anti-tax evasion regulations.
What’s The Difference Between W-8 And W-9 Forms?
Just to add in another issue, there’s also a W-9 form. Thankfully, it’s easy to differentiate the two.
W-8 forms are for non-residents of the US only. That includes international students, who will need to file a W-8BEN where necessary.
W-9 forms are for citizens and residents of the US. So if you’re a US resident for tax purposes, then you’ll need to provide a W-9.
How Long is a W-8BEN Valid For?
It does depend (sorry).
Provided none of the details on the form change, your W-8BEN will be valid for three calendar years from the end of the year in which you sign it. So, if you completed the form on the 28th of March 2024, it will be valid until the 31st of December 2027.
There is another quirk of the system, but it shouldn’t affect you. Your financial institution is collecting these W-8s to document your tax status under two different “chapters” of the US Internal Revenue Code – Chapter 3 and Chapter 4. The quirk is that if your financial institution is only collecting the W-8 solely to document your Chapter 4 status, then the form is valid indefinitely or until you have a change in circumstances. The three-year validity rule only applies if you’re expecting to receive US investment income into your account, so the financial institution needs to know your Chapter 3 status too.
What’s The Difference Between a W-8BEN and a W-8BENE?
There are a few differences between the W-8BEN and the W-8BENE. The main one is that the W-8BENE is the form for ‘entities’, meaning any type of business or other type of institution that has more than one owner. That could be a corporation, certain types of partnership or trust, exempt entity, public and private foundations, international organisations and even foreign governments.
The default US tax rate for income received by foreign businesses is 30%, but this form will allow the business to receive a tax treaty reduction if it’s applicable and if it’s properly claimed on the form. In particular, the entity has to make a certification on the form to show that it meets what is called the limitation on benefits test.
The W-8BEN on the other hand, applies to income paid to individuals. So while the outcome is similar, the forms are aimed at different categories of people and types of account holders.
We went over these differences in more detail here.
What Happens If I Fill in the Form Incorrectly?
There are estimated to be around 900 million W-8s in circulation and about 30% are completed incorrectly in Europe. That failure rate rises to about 70% in Asia. That’s because it’s an American tax form, it’s not simple and it’s not written in plain English. Differences in language, culture and levels of understanding can affect whether you understand what you’re signing.
The big thing to recognise is that the form is signed under penalty of perjury. This means that if you fill the form in incorrectly, whether that’s deliberate or accidental, and your financial institution taxes your US income at the wrong rate, you’re the one on the hook for liability, not them.
In the end, most financial institutions are very conservative. If there is any doubt, they will tax at the maximum rate of 30%. That means that you may be over-taxed through no fault of your own. In such cases, if your financial institution is a qualified intermediary (QI), then you can ask them for a refund because their contractual agreement with the IRS obligates them to do so. If they are not a QI, then you can, in theory, file a claim directly to the IRS for a refund. The process is not simple or quick and you’ll need to ask your financial institution for a form 1042-S to prove that they over-taxed you. Then, if you’re an individual, you can file a claim on a form 1040-NR together with your 1042-S (and other supporting evidence). If you’re filing a reclaim request for an entity that was over-taxed, the form will be an 1120-F.
Who Can Help Me?
Us! At TConsult we have over 20 years’ experience in the financial services industry, particularly dealing with US withholding tax and all that comes with it. Our subject matter experts have detailed knowledge of the governments and financial institutions in over twenty-seven countries, making us perfectly placed to handle your W-8 questions and support you through the process.
We created an online platform for W-8 forms to be used by financial institutions. So, if you work for a financial institution that provides access to the US securities markets, you should get a demonstration of our Investor Self-Declaration (ISD) system. This collects all the required information for a substitute of all the W-8 forms or W-9 and makes sure that you don’t make any mistakes.
If you would like to know more, or if you’re a financial institution struggling with compliance, or you have questions about a W-8, W-8BEN or W-8BENE, just get in touch with one of our experts today.
Articles
Gain deeper insight with articles that give our considered opinion and predictions of where the industry will go next.
The Misuse of the W-8BEN-E
November 22, 2024By now you should be familiar with a form W-8BEN-E. You might have even filled one out in the past. […]Read more
W-8BEN-E的誤用
November 22, 2024現在您應該熟悉W-8BEN-E表單了。您甚至可能曾經填寫過此表單。但在與金融機構合作時,我們發現了一些問題。非合格中介機構(或稱NQIs)有可能誤用W-8BEN-E,他們使用(或被鼓勵使用)BEN-E規避美國稅務法規,並在不揭露的情況下獲得租稅協定優惠,從而使他們能夠逃避申報義務。這似乎不太對 – 是吧? 論點… 當我們與正在做這件事的機構討論時(因為有一些!),我們總是聽到相同的論點。事情像這樣: 「我們在我們的司法管轄區組織和成立,而我們的司法管轄區剛好與美國有雙重租稅協定。我們也碰巧是經紀商,我們取得客戶資產的所有權,並以「經紀商名義(street name)」與我們的交易對手持有這些資產。所以,我們應該使用的自我聲明表單是 W-8BEN-E。這也代表我們可以提出租稅協定優惠,並將這些優惠轉給我們的客戶,而無需向IRS做任何申報。 或者,如果您想要一個真正的恐慌,我們也聽過:「……我們的交易對手告訴我們,如果我們想讓生活輕鬆點,就應該向他們出示W-8BEN-E」。 現在情況很糟!在這種情況下,交易對手不會為客戶製作收款人副本1042-S,因為它是與其他直接實體客戶匯集在一起的。這對他們來說很容易。金融機構本身仍受惠於協定稅率,但不做任何申報,因為IRS不知道金融機構是收款人。 表面上看,這些都是規避美國預扣稅法規的完美方法,而且我們已經看到這種情況發生過好幾次了。問題是,這兩個論點都是錯誤的。 出了什麼問題? 這個論點分為三個層面,讓我們一次解決一個層面。 首先,所有的金融機構都是在某地註冊成立的。重要的不是您是什麼,而是您如何行事。如果您代表您的客戶買賣美國證券,或者如果您以保管人的身分提供保管服務,那麼根據定義,您就是一個中介機構。是的,即使您是一家公司。您取得這些資產的所有權並以經紀商名義持有這些資產,並不表示您是這些資產所得的最終受益人(beneficial owner)。若要瞭解更多相關資訊,請查看我的部落格文章所有權與最終受益所有權。 其次,如果您在知情的情況下代表您的客戶向其他金融機構出示W-8BEN-E,則接收機構受法規約束: 驗證W-8是正確的表單,並且填寫、簽名和日期都正確; 根據KYC檢查表單,並且; – 檢查是否沒有其他「理由知道」表單無效 […]Read more
The Multiple Withholding Agent Rule, and What It Means for You
November 15, 2024Recently we came across a rather interesting situation. We were approached by a non-qualified intermediary (or NQI) who claimed […]Read more
Exposure Maps – What They Are and Why You Need One
November 8, 2024As a financial institution you face a lot of challenges. Keeping up with the regulations demanded by the IRS, along […]Read more
Announcement from the Chairman
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QI身分 – 真的值得嗎?
October 24, 2024對於金融機構來說,這是一個老問題。您應該成為QI,還是維持NQI? 這是一個不容輕率做出的決定,但我們經常看到的情況是,公司的交易對手告訴他們必須成為QI才能開展業務 – 這並不是一個理想的情況!因此,在您開始踏上成為QI這條路之前,請務必瞭解成為QI的意義、它將如何影響您的公司,以及您需要投入多少資源才能達成目標是重要的。繼我們關於QI申報的非集合式和去集合式的文章之後,我們希望為可能考慮成為QI的金融機構提供一些見解。 QI vs NQIs 在您了解自己應該繼續當NQI還是躍進成為QI之前,您首先需要瞭解兩者的差異。 QI或合格中介機構(Qualified Intermediary)是與IRS簽訂QI協議的非美國金融機構。QI協議長達205頁,所以讀起來有點吃力,但核心訊息是QI必須同時遵守美國稅務法規以及我提到的那份205頁合約的條款。如果他們的客戶申請了美國預扣稅,他們也可以利用其QI身分來給予美國預扣稅的減稅率。他們可以在不向任何人(包括交易對手和IRS)透露客戶身分的情況下做到這一切。 NQI是代表客戶接收美國來源所得,但未簽訂QI協議的任何中介機構。其整體責任與QI相同,差別在於履行責任的方式。如果NQI想要享有雙重課稅協定的優惠,就必須向QI揭露客戶資訊。NQI的客戶也必須個別向IRS報告,而不是集合在一起。 為什麼要考慮成為 QI? 商譽:2009年,美國政府明確表示,任何提供進入美國證券市場的非美國金融公司,如果沒有QI資格,將被視為「協助逃稅」。如果您的機構代表他人接收源自美國的所得,那麼您就是中介機構(根據美國的定義)。這表示對您來說考慮QI身分是毫無疑問的。事實上,大多數公司都不與NQI進行業務往來,或在進行業務往來時對NQI施加重大限制。因此,選擇QI身分通常最符合您的利益,尤其是如果您的客戶居住在與美國有雙重課稅協定的司法管轄區。 資料隱私權:當您的金融機構開始接收美國來源所得時,您就自動受到美國國內收入法(IRC)的規範 – 特別是您可能受到該法下列章節的規範: 第1章 […]Read more
QI Status – Is It Really Worth It?
October 24, 2024It’s an age-old question for financial institutions. Should you become a QI, or stay an NQI? This is a decision […]Read more
Operational Issues for QIs and NQIs
October 18, 2024The IRS has just published the very first list of qualified intermediaries and there are some interesting implications for clients […]Read more
非集合式與去集合式 – 有什麼差別,又有什麼問題?
October 17, 2024對於合格中機構(或稱QIs)而言,集合式是美國稅制的一項重要功能,他們應該好好利用。您可以看到,它賦予合格中介機構獨特的能力,將客戶的美國資產匯集在一起,以達到預扣稅和申報的目的。但在某些情況下,他們可能需要將客戶的資產去集合(de-pool),這可能會產生各種問題和技術困難。這就是為什麼您必須知道集合和去集合之間的差別,以及如何運作。 什麼是集合式? 集合式預扣稅通常是指QI可以使用一個或多個綜合帳戶,將多個客戶的資產混合在一起。這可讓交易對手更容易申請預扣稅,而不需要知道相關客戶是誰。以申報為目的的集合僅適用於QI,而NQI只能使用集合方式持有資產以達到預扣稅的目的,但不能用於申報。 集合的意義何在? 集合的好處是,使用此方法時,QI不需要像NQI那樣,為每位直接客戶製作1042-S表單的收款人副本。但即使是QI,在向IRS申報時,也有某些類型的客戶不能與其他客戶匯集在一起。您不能集合式申報的主要客戶類別是任何提交W-8IMY的客戶。 舉例來說,如果您有100位客戶,其中有80位客戶給您W-8BEN或W-8BEN-E,那麼您在依據所得類型和稅率進行申報時,就可以將這些客戶集合在一起。這80位客戶會一併申報,不會向IRS或其他任何人透露個別身分。其餘20位給您的是W-8IMY。這表示您不能以任何方式將他們匯集在一起,而且您必須以單獨的1042-S向IRS申報每一個人。它們被歸類為「非集合(non-pooled)」,因此IRS知道您在每個案件中支付給誰。 很好,所以問題出在哪裡? 上面的例子非常簡單直接,但我們都知道,在稅務世界裡,事情並非簡單直接。因此,讓我們來看另一種情境。 您仍然有100位客戶,但他們都是直接的個人或實體。是的,您可以像以前一樣把他們集合起來預扣,也可以把他們集合起來報告,所以IRS應該不曾發現您的客戶是誰。但如果您對其中任何一位客戶課徵30%的稅額,而他們認為自己應該獲得退稅,您就會遇到問題。如果您不願意或不能夠使用任何QI退稅程序,那麼客戶可以而且可能會向您提出正式請求,要求收到特定給他們的1042-S收款人副本。問題是,您已經將該客戶的所得和預扣稅納入了向IRS提交的集合報告中。也可能發生如果您收到附有協定申請的W-8,但您沒有足夠的驗證流程,結果您以30%課稅卻誤以為這是正確的稅率。 這給您帶來一個問題。根據您簽署的QI協議,第8.02(P)條規定您必須滿足客戶對收款人副本的請求。為此,您需要取得原始申報文件並從集合式報告中取出總所得和預扣稅,以便為您的客戶建立僅包含他們的總額收款人副本。也稱為去集合化。但一旦您完成此操作,就會出現另一個問題 – 您原來的集合式1042-S報告現在不準確了,因為它之前全部都是集合式。因此,要解決此問題,您必須透過FIRE入口網站向IRS申報另一份1042-S提交文件和修訂後的1042-S。這將顯示更新後的集合值(已減去收款人副本的金額),加上根據客戶請求產生的去集合式1042-S。這些表格的總和仍必須與您交易對手支付的總金額相符。現在您已向IRS提交了修訂後的提交資料,您可以向您的客戶發出收款人副本。 還不止這些… 雖然這一切已經夠煩人,但這還不是故事的結局! 您的客戶現在使用您建立的收款人1042-S作為超額預扣稅的證據,直接向IRS 提出請求。這可以透過個人的1040-NR表單和實體的1120-F表單輕鬆完成。只要能連接各線索點,國稅局就會支付請求。 […]Read more
Non-Pooling and De-Pooling – What’s The Difference, And What’s The Problem?
October 17, 2024For qualified intermediaries (or QIs), pooling is an important feature of the US tax system that they should be taking […]Read more
Ross is the founder and chairman of TConsult. He has spent over 26 years working in the withholding tax landscape with companies developing tax reclaim software and operating outsource tax reclamation services.
Ross not only sees the big picture but is also incredibly detail oriented. He can make even the most complex issues simple to understand. He has authored 10 books (including two second editions) on various aspects of tax, technology, and regulation in financial services, making him one of the leading authorities in the world of tax.