The W-8BEN is a United States Internal Revenue Service (IRS) tax form used to determine the foreign status of non-resident aliens for the purposes of taxation. The IRS taxes all income paid by companies in the United States. People residing in the United State, those who hold a U.S. Green Card, and those who spend the majority of the year in the U.S. are subject to income tax. However, a non-citizen living outside of the U.S. is classified as a Non-Resident Alien (NRA) and is taxed at a different rate. Some countries have treaties with the U.S. that grant their citizens and residents a lower tax rate. All NRAs earning beneficial income in the U.S. must establish their country of residence. Then, the IRS uses that information to determine if the NRAs are eligible for a lower tax rate. By filling out the W-8 BEN, the NRAs claim the benefits of any existing tax treaties.
NRAs are subject to U.S. tax at a 30% rate on income they receive from U.S. sources such as interest, dividends, rents, royalties, premiums, annuities, compensation for services performed, substitute payments in a securities lending transaction and other fixed or determinable annual or periodical gains, profits, or income. With a current W-8BEN in place, NRAs may qualify for the reduced rate of 15% tax on dividends, or zero tax on interest due to an income tax treaty between NRAs home country and the United States.
Thomas M. Carden E.A. JSM