If you’re a Canadian or Kiwi business and you work with customers in the US it probably won’t be long until someone asks you to complete a version of form W-8. In fact, they all should ask you to complete it, but many don’t know of it’s existence.
The form is part of the wide-reaching U.S. FACTA requirements designed to help detect money-laundering and terrorism financing, but also imposes steep withholding taxes on non-US businesses. But don’t sweat it – these probably don’t apply to you – if you do things correctly.
To be exempt from this onerous withholding you need to be:
- A non-financial entity (such as a bank)
- An active business (at least 50% of your revenue comes from non-passive sources – passive includes investing, renting, etc.)
- Be incorporated in a country that has a tax treaty with the U.S. (Canada and NZ both do), or (for individuals) reside in such a country
- And have a permanent establishment there (and not in the U.S.).
- No a US Citizen or Permanent Resident (for individuals) or incoproated in the US (for corporations).
Filling out the form only takes a few minutes.
Corporations need to fill out form W-8BEN-E and individuals (sole proprietors) should use W-8BEN.
Here’s what you need to put on the various fields of form W-8BEN-E:
- Part I, Question 1: Enter your corporation’s name
- Part I, Question 2: Enter the country of incorporation (e.g., “Canada”)
- Part I, Question 4: Check “Corporation” (NZ Look Through Companies should check “Disregarded entity”)
- Part I, Question 5: Check “Active NFFE. Complete Part XXV”
- Part I, Question 6: Enter corporation’s address
- Part I, Question 9b: Enter 9 digit CRA business number or NZ IRD number
- Part III, Question 14a: Check the box and enter “Canada” or “New Zealand” (as appropriate)
- Part III, Question 14b: Check the first box beside “The beneficial owner derives…” and also “Company with an item of income that meets active trade or business test”.
- Part XXV, Question 39: Check to certify that the corporation is an active NFFE.
- Part XXX: Sign, print name & date form.
You may also need to file a US income tax return along with form 8333 to declare the treaty benefits as non-taxable.
If you’re not incorporated (i.e., a Sole Proprietor/Sole Trader/Individual) then you should be completing form W-8BEN:
- Part I, questions 1-4: Enter your residential address
- Part I, question 6: Enter your Social Insurance Number (Canada) or IRD Number (NZ)
- Part II, question 9: Enter Canada/New Zealand
- Part II, question 10:
- If you are self-employed and performing your services OUTSIDE the US, enter “VII.1/XIV”, “0%” and “independent business profits from self employment performed outside the United States” into the fields
- If you are receiving royalties from the sale of intellectual property, enter “XII.1” and “10%”
- For interest enter “XI” and 10%
- Part III: Sign, print name & date form.
As always, your unique circumstances may be different and you should get professional advice.
