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 form W-8BEN-E. 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:

  1. a non-financial entity (such as a bank)
  2. an active business (at least 50% of your revenue comes from non-passive sources – passive includes investing, renting, etc.)
  3. be incorporated in a country that has a tax treaty with the U.S. (Canada and NZ both do)
  4. and have a permanent establishment there.

Filling out the form only takes a few minutes.

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) then you should be completing form W-8BEN which has similar fields.

As always, your unique circumstances may be different and you should get professional advice.

 

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