Who Needs to fill out Form W-8BEN-E? Accountancy Advice for UK Companies Operating in the US
If you do business in the US from the UK, it’s likely at some stage you will be asked to complete a W-8BEN-E form before your client pays your invoice. You’re probably thinking, what is a W-8BEN-E form? Do UK companies need to complete a W-8BEN-E form?
We get lots of similar questions from our clients doing business in the US from the UK. That’s why we asked an expert, Christina Woskobojnik from the US/UK accountancy firm Dyke Yaxley LLC. If you know someone who needs to fill out form W-8BEN-E, watch or read our session to eradicate any misunderstandings and simplify the process.
What is a W-8 Form?
A W-8 form is filled out by businesses or individuals who are not American citizens but have received income from US based companies. You are expected to provide your US client with the self-certification form to confirm that you are not a US taxpayer and therefore exempt from paying US tax.
If you do not provide the appropriate W-8 form when expecting payment from your US client, they may withhold some of the overdue funds to pay tax on your behalf to the IRS.
For non-US individuals – You need to fill out the W-8BEN form. This includes freelancers, contractors, and consultants who complete tasks for US companies.
For non-US business entities - You need to fill out the W-8BEN-E form. This applies to limited companies that provide services to a US company.
In this article, we are going to focus on the W-8BEN-E form as it is the most used form by our clients who are doing business in the US from the UK.
What is the W-8BEN-E form?
The W-8BEN-E form ("Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting") was developed by the Internal Revenue Service (IRS), which is a US federal agency that oversees the collection of taxes.
Residents in the US, those who hold a US Green Card, and those who spend most of their working year in the US are subject to US income tax. Therefore, if you are physically doing business in the US, your client has a responsibility to withhold federal withholding tax from the amount they paid you.
Those not living in the US are classified as a Non-Resident Alien (NRA) and as a result, are taxed differently. In many cases, foreign businesses working with US companies are simply making a transaction while based in another country. This is where the W-8BEN-E form comes into play.
The W-8BEN-E form tells your client that all your profits are UK based or in another country, therefore there is no tax filing responsibility in the United States. This means there is no requirement for the client to withhold US federal tax.
Tax Treaty Benefits From the W-8BEN Forms
UK businesses operating in the US can benefit from tax treaty benefits from the W-8BEN-E form, which quotes treaty language. Tax treaties between the UK and US keep businesses from being double taxed for operations.
The W-8BEN-E form includes the language from the proper section of this treaty and lets your US client know that they do not need to be taxed when doing business with you.
Who needs to fill out form W-8BEN-E?
We often get asked, “Who needs to fill out form W-8BEN-E form?” The answer is non-US companies making a transaction into the US when they are based outside of the country, whether it is a service or a product.
Your US client is responsible for asking you for the W-8BEN-E Form
You will not necessarily always be asked by your US client to provide the W-8BEN-E form. The onus is on the client to ask you to complete and provide them with the form. The reason being, if the US client is ever audited, they may be asked why they did not withhold federal US tax when engaging with a foreign business.
Businesses in the UK doing business in the US are not required to search for the W-8BEN-E form, but instead should be ready to complete it at their US client’s request. If you are asked by your US client to complete form W-8BEN-E , you should provide them with an explanation of why they do not have to withhold tax from you. Your client should then securely store this form, so they are covered if they are ever audited. The W-8BEN-E form can seem intimidating, but that is it.
You are more likely to be asked by large US companies for the W-8BEN-E form
Larger US clients are more likely to ask you to provide and fill out the W-8BEN-E form. For example, if you're working with a big tech company like Microsoft, they are going to be very in tune with their purchasing department and the paperwork they need to complete. Therefore, they are more likely to ask you to fill out the W-8BEN-E form than a small US client.
What happens if my US client does not send me a W-8BEN-E form?
As your client is a US taxpayer, it is their responsibility to have the form on file to prove that they didn’t have to withhold any US income tax from the payments they make to you. If they don't ask for it, you don't have to supply it to them. The bigger the company you're working with, the more likely you're going to get sent this form.
What is the main advice you would give UK businesses filling out the W-8BEN-E form?
Don’t worry about the tax identification number
Don't worry about getting a US federal tax identification number just to complete this form. You may need that number for other reasons, but not simply to complete the W-8BEN-E form. In the section that asks for your Foreign Tax Identification Number you should use your HMRC identifier.
Speak to a professional to find out how to fill out the W-8BEN-E form to relate it to your business
The first piece of advice Dyke Yaxley provides those doing business in the US from the UK, is that filling out the W-8BEN-E form can be intimidating but don't panic. It's a very common form. The IRS website provides instructions to help you fill out the W-8BEN-E form.
However, it is best to reach out to experts who work with foreign businesses like Dyke Yaxley who can help walk you through the form step by step in relation to your exact business scenario. This includes help with the right language to use and which exact boxes to tick because it can be confusing.
Where can you get a W-8 BEN-E form?
The W-8BEN-E form can be found on the IRS website as a fillable PDF. Don’t be discouraged by the length of the form, it’s designed for several types of businesses, hence the numerous pages.
Need help Doing Business in the US from the UK?
Doing business in the US from the UK can be complicated. It is essentially 50 different economies under an umbrella of federal taxation. Dyke Yaxley LLC provides consultancy for doing business in the US from the UK.
Whether that’s helping to decide where to set up, filling out forms, UK vs US taxation differences, insurance, managing filings, business and tax strategies, and any other business related questions on the US.
If you need help with any of these areas when doing business in the US from the UK, reach out to Christina Woskobojnik who would be happy to help. If need guidance on hiring employees in the US from the UK, PGC can answer all your payroll related questions.
Disclaimer: PGC does not endorse any personal views or opinions of the interviewee. All information here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.