A foreign vendor can certify its foreign status by providing the appropriate IRS Form W-8 series to the withholding agent or payer. The specific form to be used depends on the type of entity and the nature of the income. Here are the steps and forms involved:
- Determine the Appropriate Form:
- Form W-8BEN: Used by nonresident alien individuals to certify their foreign status and claim any applicable treaty benefits.
- Form W-8BEN-E: Used by foreign entities to certify their foreign status, claim treaty benefits, and document their chapter 4 status under FATCA.
- Form W-8ECI: Used by foreign persons to certify that income is effectively connected with the conduct of a trade or business in the United States.
- Form W-8EXP: Used by foreign governments, international organizations, foreign central banks of issue, foreign tax-exempt organizations, and foreign private foundations to claim exemption from withholding.
- Form W-8IMY: Used by intermediaries, flow-through entities, and certain U.S. branches to certify their status and provide information about the beneficial owners.
- Complete the Form:
- Form W-8BEN-E: For foreign entities, the form must be completed as follows:
- Part I: Provide identifying information, including the entity's name, country of incorporation, and address.
- Part II: If applicable, provide information about any disregarded entity or branch receiving the payment.
- Part III: Claim any applicable treaty benefits by entering the country of residence and certifying that the entity meets the limitation on benefits (LOB) provision, if any.
- Parts IV-XXVIII: Complete the part that corresponds to the entity's chapter 4 status (e.g., participating FFI, registered deemed-compliant FFI, etc.).
- Provide the Form to the Withholding Agent:
- The completed Form W-8BEN-E (or other appropriate W-8 form) must be given to the withholding agent or payer before income is paid or credited to the foreign vendor. This ensures that the withholding agent can apply the correct withholding rate and comply with IRS requirements.
- Update the Form as Necessary:
- If there is a change in circumstances that makes any information on the form incorrect, the foreign vendor must provide an updated form to the withholding agent within 30 days of the change.
By following these steps and providing the correct form, a foreign vendor can certify its foreign status and ensure that the appropriate withholding tax rates are applied to its U.S. source income.
Sources:
Publication 515 (2024)
Instructions for Forms 8804, 8805, and 8813 (11/2022)
Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY (06/2022)
Instructions for Form W-8BEN (10/2021)
Instructions for Form 8288 (01/2023)
Instructions for Form 1120-F (2023)
Instructions for Form W-8BEN-E (10/2021)
