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W8BEN vs W8BEN-E: Which Form Do You Need?

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When engaging in business or financial transactions in the United States as a foreign entity, you're likely to encounter two forms: W-8BEN and W-8BEN-E. Both are used to establish a claim of reduced withholding tax under a tax treaty, but which one is the right fit for you? Let’s explore the key differences between these forms to ensure you submit the correct one.

Understanding the Basics of W-8BEN and W-8BEN-E

At their core, both W-8BEN and W-8BEN-E are IRS forms designed for non-US persons to certify their foreign status. The primary purpose of these forms is to help reduce or eliminate withholding tax on payments from US sources, thanks to tax treaties. However, the key distinction lies in who the form applies to.

  • W-8BEN is used by individuals (non-US persons) who need to certify their foreign status.
  • W-8BEN-E is designed for entities (non-US organizations or companies) to claim benefits under a tax treaty and certify their foreign status.

W-8BEN: For Individuals

If you’re a non-resident alien earning income from US sources, the W-8BEN form is the right choice for you. It certifies your foreign status and, if applicable, allows you to claim a reduced tax withholding rate under a relevant tax treaty.

For instance, if you are an international freelancer or contractor working for US clients, this is the form you’ll likely need to submit to avoid excessive withholding on your income. You can read more about who needs to fill out the W-8BEN form in our post Who Needs to Fill the W-8BEN Form?.

W-8BEN-E: For Entities

W-8BEN-E, on the other hand, is required for foreign entities such as corporations, partnerships, and trusts. This form allows businesses to claim a reduced withholding tax rate if their home country has a tax treaty with the US. The W-8BEN-E form is significantly more complex than the W-8BEN form, as it includes various sections covering entity classifications and FATCA (Foreign Account Tax Compliance Act) status.

When to Use W-8BEN or W-8BEN-E?

In summary:

  • Use W-8BEN if you are an individual (e.g., freelancer, investor) claiming foreign status to avoid double taxation.
  • Use W-8BEN-E if you are an entity (e.g., company, trust) that operates internationally and wants to benefit from a tax treaty.

Key Differences in the Forms

While both forms share the same purpose, they differ in complexity and the type of information required.

  1. Length and Complexity:

    • W-8BEN is a one-page form with basic details required.
    • W-8BEN-E is much longer and requires specific details about the foreign entity's structure, ownership, and FATCA status.

  2. FATCA Requirements:

    • The W-8BEN-E form includes multiple sections dedicated to FATCA, which entities must comply with to ensure proper reporting to the IRS. Individual filers of the W-8BEN do not need to worry about FATCA compliance.

  3. Entity Classification:

    • W-8BEN-E asks foreign entities to classify their type of organization and provide a global intermediary identification number (GIIN) if applicable. For individuals, W-8BEN is straightforward without the need for such classifications.

Common Mistakes When Filling Out W-8BEN or W-8BEN-E

It’s crucial to ensure you're filling out the correct form and providing accurate information. Incorrect or incomplete filings can lead to delays or withholding at a higher rate than necessary.

For more on common mistakes, check out our article on 5 Common W-8BEN Mistakes and How to Avoid Them.

How Long Are These Forms Valid?

Once you submit your W-8BEN or W-8BEN-E form, it’s typically valid for three years. However, if your tax residency status changes, you'll need to file a new form. For more on this topic, read our post on How Long Is a W-8BEN Form Valid?.

Conclusion

Both W-8BEN and W-8BEN-E are vital forms for ensuring that you or your entity are taxed appropriately on income derived from US sources. Understanding which form you need is the first step toward compliance and optimizing your tax situation.

If you're still unsure about which form to submit, consider using our W-8BEN form generator to guide you through the process.

If you found this post helpful, explore our other resources on tax compliance for international individuals and businesses, like W-8BEN Withholding Tax and Tax Residency vs Physical Residency.