PART I:  What is Form W-8BEN, What is it Used For, Must I Complete It?

Lately, I have been fielding many questions about Form W-8 BEN, it’s brother, Form W-8BEN-E, and related family members Forms W-8ECI, W-8IMY, and W-8EXP. What are these things? And why are they giving you such a headache?  Let’s set out some basics one step at a time.  Today’s blog post will detail all the nuances about Form W-8BEN. A later post will examine some other Forms in the W-8BEN family.

Overview: “Chapter 3” versus “Chapter 4”

Form W-8BEN has been used by most foreign (non-US) beneficial owners who receive “US source” income from a US paying party (called a “payor” or “withholding agent”). It is used frequently when payment is from US source on income items such as dividends from a US corporation or sales proceeds upon the sale of US stocks.  The Form certifies the individual’s status as “foreign” and, if applicable, eliminates US withholding tax or permits the individual to claim a reduced treaty rate of withholding. This type of withholding is generally referred to as “Chapter 3” withholding, referring to a particular Chapter in the US Internal Revenue Code (Code) for withholding tax required on payments of US source income to foreign persons.

After the “Foreign Account Tax Compliance Act” (FATCA) came along, a new and revised version of Form W-8BEN made its appearance.  This form has been appearing all over the globe with regular frequency because it is being used not only by US paying parties (such as US banks and other US financial institutions), but also by foreign banks and financial institutions with their foreign customers. The new and revised Form W-8BEN as well as other new forms in the W-8 series (e.g., Form W-8BEN-E), are designed to address the person’s status for both withholding purposes (Chapter 3 of the Code) and FATCA purposes (Chapter 4 of the Code). The Form was revised in part, so that financial institutions would not have to maintain two separate forms.

The following part of this blog post will cover use of the Form W-8BEN for purposes of Chapter 3 of the Code, US income tax withholding. It will follow in Part II with a discussion of use of the Form and related Forms, for Chapter 4, FATCA purposes.

US Income Tax Withholding

Non-US persons (whether individuals or entities, such as foreign corporations) are subject to US tax at a flat 30% rate on certain kinds of income they receive from US sources.  Sometimes an Income Tax Treaty negotiated with the US and another country can be used to reduce this tax rate.  We will soon discuss the kinds of income that are subject to withholding.

This tax is withheld “at source” by the party paying the income ( “payor” or “withholding agent”). The payor has responsibility for withholding the required tax and paying it over to the US Internal Revenue Service (IRS).  If the payor fails to withhold as required, it can be held personally liable for the tax.  It is because of this threat of liability for the tax that smart payors are very careful to make sure they have done all that is necessary to get things right.  Part of this process is to obtain a certification from the payee as to whether the payee is a US person or a foreign person. Withholding tax is required only for payments made to foreign payees, it is not required when the payee is a US person. Thus, if you are getting paid by a US party, most often, that US party (because it may be required to withhold as a “withholding agent”) will want you to certify your US or foreign status.

Foreign persons complete one of the forms in the Form W-8 series (e.g., Form W-8BEN or W-8BEN-E). US persons do not complete a form in the W-8 series. Instead, they use Form W-9.   When the payor of the income has the W-8BEN on file, the payor will be apprised that the payee is a non-US person and will undertake its withholding duties. If the payee is a US person with a completed Form W-9, the payor will know it does not have to withhold this 30% tax.

Form W-8BEN

If a non-US individual will receive any of these certain types of US source income, he must provide the Form W-8BEN directly to the US-payor of the income. The US payor uses the information on the form to determine whether withholding applies and the correct rate. The Form is not submitted to the IRS. The Form is given to the US payor of the income so that the payor (as the withholding agent) can have it to support its withholding or reporting decision if later questioned by the IRS.  The US payor must report to the IRS, generally using Form 1042-S for a foreign person.

So, in summary, the Form W-8BEN is used by the foreign individual to establish that he is not a US person and to claim that he is the beneficial owner of the income.  Form W-8BEN must be signed and dated by the beneficial owner of the income, or, by an authorized representative as evidenced by a duly completed Power of Attorney (The IRS Form 2848, Power of Attorney, may be used for this purpose).

US Source Income Subject to Withholding Tax

As mentioned, the 30% withholding tax is required only for certain types of income provided the income has not been derived from conducting an active trade or business in the US.  In other words, the income is of a more passive nature.  The types of income subject to withholding include dividends, interest, rental income, royalties, alimony, grants and prizes, compensation for personal services and other items of so-called “fixed determinable annual periodical income”.  In order for withholding duties to arise, the income must be derived from what is called “US sources”. This in itself is a very complicated topic.

US Source – What Does This Mean?

When the US tax law speaks of “sourcing” of income, it is referring to the origin of the income as being earned in the United States or in a foreign country. The sourcing rules depend on the type of income being paid. In other words, different sourcing rules apply for different categories of income.

See my blog post here on the topic of “US source income” — what it is and why you should definitely  care about it as a foreign (non-US) person, or as a US payor of funds to a foreign person.


To add to the complexity, certain types of US-source income are not subject to foreign-person withholding. Some examples of such income are:

  • Broker proceeds (e.g., sales of US stocks / securities)
  • Short-term OID (183 days or less)
  • Bank deposit interest
  • Foreign source interest, dividends, rents, or royalties
  • Proceeds from a wager placed by a nonresident alien individual in the games of blackjack, baccarat, craps, roulette, or big-6 wheel

However, you may still be required to submit Form W-8BEN to claim an exception from US information reporting and so-called “backup withholding” for these types of US source income.

How Long is the Form W-8BEN Valid?

The Form W-8 BEN must be kept up-to-date. If it is not, the foreign person may find that the agent has wrongfully withheld tax on the income.  It is quite time-consuming, costly and cumbersome to get wrongfully withheld amounts refunded from the IRS.

Generally, a Form W-8BEN provided without a US “Taxpayer Identification Number” (TIN) will remain in effect for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on August 30, 2013, remains valid through December 31, 2016. A Form W-8BEN with a US TIN will remain in effect until a change of circumstances makes any information on the form incorrect, provided that the withholding agent reports on Form 1042-S at least one payment annually to the beneficial owner.

The IRS Form W-8BEN, Instructions and other useful information about the Form W-8BEN can be found at the IRS website here.

Additional Sources of Information

Form W-8BEN;

Instructions Form W-8BEN;

FATCA FAQ’s (See the Section “General Compliance”); 

“Instructions for the Requester of Forms W–8BEN, W–8BEN–E, W–8ECI, W–8EXP, and W–8IMY”


All the US tax information you need, every week –

Just follow me on Twitter @VLJeker (listed in Forbes, Top 100 Must-Follow Tax Twitter Accounts 2017 and 2018).

Subscribe to Virginia – US Tax Talk  to receive my weekly US tax blog posts in your inbox.

Visit my earlier US tax blog “Let’s Talk About US Tax” hosted by AngloInfo since 2011, it contains all my old posts.

3 thoughts on “PART I:  What is Form W-8BEN, What is it Used For, Must I Complete It?

  1. I think you need to mention that if the W8 or W8BEN-E is not up to date, the payer will withhold the full amount of any funds that may come into your brokerage account or bank account I believe. If you get your W8s updated before year end you can usually get the proceeds back to your account. After year end the financial institution will transfer the money to the US Treasury, and one will need to get a US TIN and file a US tax return to get the money back. If you wait i think more than 2 years to file your return, you cannot get the funds back. so for example if you sold some stock or a house and your W8 was not up to date the full amount of money is withheld. Perhaps Virginia can comment on this


    1. As mentioned in the blog post, it is critical that Form W-8BEN be kept up-to-date. If not, the payor may withhold tax on the income – I have never heard of the full amount of funds being withheld as opposed to the 30% rate. If you think getting a refund from the IRS might be an easy task, you are in for a rude awakening. Time limits are imposed and procedural steps (such as getting a US Taxpayer Identification Number (TIN)) have to be met, as well as filing a claim for a refund on a tax return. All of this will entail time, frustration and professional fees – not cheap!


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