A W-8 form is used by nonresident aliens to inform US organizations and individuals that they are not US citizens, exempting them from certain tax laws. There are four different types of W-8 forms, and the appropriate one must be requested before making payments to foreign persons. US companies are responsible for ensuring that the form is completed accurately, and failure to do so can result in penalties.
A W-8 form is a tax form that tells organizations and individuals doing business within the United States that the person they are doing business with is not a US citizen. The form exempts the resident alien from certain United States tax laws. Four different forms fall under the heading of a W-8 form. Each is used under particular circumstances.
To be eligible to use the W-8 form, a person must be a nonresident alien. The Internal Revenue Service (IRS) has published several criteria for determining if someone is a nonresident alien. To meet this criteria, the person must not have or have had a green card or immigrant visa in the last year. You also must not have spent more than 30 days in the United States in the past year or more than 182 in the past three years.
There are four different types of W-8 forms. Form W-8BEN is the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. This is the most widely used W-8 form. Any person should be asked to become the owner of the paid income.
The W-8ECI is used by people who claim that the income is related to a trade or business within the United States. This means that although the person receiving the money is foreign, the business itself is not. This form is often used in connection with US branches of foreign companies.
A W-8EXP should be used only for persons claiming certain exemptions or reductions withholding under United States tax law. The W-8IMY is for intermediaries with foreign partnerships. These are people who receive money on behalf of a foreign country.
The appropriate Form W-8 must be requested before making payments to anyone who is not a citizen or resident of the United States. It is the responsibility of the US company to request the form. It is also the responsibility of US companies to ensure that the appropriate Form W-8 is completed completely and accurately. If the form is not filled out correctly, the US company may be held liable.
Under sections 1441 and 1442 of the US tax law, US companies are required to withhold 30 percent of any payment to a foreign person to pay applicable taxes unless a W-8 has been filed . Failure to request a form before payment is made can result in the US company being required to pay 30 percent tax on any monies paid and suffer IRS tax law non-compliance penalties.
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