When is a Form W-8 Required

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April 12, 2022
Author: Lorman Education


A Form W-8 is an Internal Revenue Service (IRS) form that grants a foreigner exemption from certain United States information return reporting as well as backup withholding regulations.

According to Investopedia, one of the main purposes of the W-8 form is to show mutual fund companies and brokers that a foreign investor is not subject to typical taxation practices. A foreign investor may not be subject to certain typical taxation practices including where tax is withheld from investment income. They will be held responsible for normal rates of backup withholding if a W-8 form is not provided.

The W-8 Series includes a variety of W-8 forms which handle several international issues. However, the form that is most commonly referred to simply as the W-8 is Form W-8BEN, or the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. A foreign person or corporation will use this to certify their non-American status. They must provide a United States Taxpayer Identification Number if the income is not dividends or interest from actively traded investments.

The W-8BEN is typically requested by firms or brokers, not the IRS, and is used to lower withholdings from dividends from foreign nationals. A withholding agent will typically request this W-8 form from a foreign client and, by filling out this form, a foreign investor can potentially save a great deal from tax withholdings. While a withholding agent must usually withhold around 30 percent of the income distributed to a foreign national, a Form W-8 can allow a foreign person to claim tax treaty status.

However, foreign individuals who are receiving non-service payments and who want to claim a tax exemption because they are eligible for tax treaty status in the United States must complete the Form W-8BEN as well as Form 8233. These forms will be given to the withholding agent, not the IRS. A Form 8233 will also be provided by an individual who is a nonresident alien and who claims exemption from withholding on compensation for independent or dependent personal services performed in the U.S.

A foreign person and the beneficial owner of an amount subject to withholding are required to give Form W-8BEN to the withholding agent. The IRS states those who are not required to use Form W-8BEN include: US citizens, even those living outside the US, those who are a disregarded entity with a single owner who is a U.S. citizen, those who are nonresident aliens who provide Form 8233, those who are filing for a foreign government or international organization and who those are receiving income that is effectively connected with the conduct of trade or business in the U.S.

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