A W-8 form is an Internal Revenue Service (IRS) form that provides foreigners with an exemption from specified U.S. information return reporting and backup withholding regulations. There are a variety of W-8 forms.
Non-resident aliens and foreign businesses that earn income from one or more U.S. sources utilize the W-8 form. Its purpose is to provide notification that these businesses and individuals will not be taxed in the traditional way. Resident aliens and American citizens use a W-9 form for certification of tax identification numbers. Although the W-8 form is an IRS form, it is submitted only to financial companies that request it and not to the IRS. Failure to submit the form as requested can result in a 30% tax withholding and, potentially, additional penalties.
There are several versions of the W-8 form. The two most common are the W-8BEN and the W-8ECI. The W-8BEN is one of the most commonly used. It certifies foreign status, regarding tax withholding on income. Tax-free income, as specified by this form, includes interest, dividends, rents, royalties and annuities. The form allows foreigners to claim tax treaty benefits. To receive benefits from a tax treaty between the U.S. and the foreigner's home country, the filer must provide certification of residency in the indicated country as well as a tax identification number. It is typical for foreigners to be taxed at a rate of 30% on income that is received from a U.S. source.
There are five variations of the W-8 form. In addition to the W-8ECI and the W-8BEN, there is also the W-8BEN-E form, which is used by beneficiary owners (businesses only) that claim to be tax residents outside of the United States. The W-8IMY form is for foreign individuals who act as intermediaries rather than acting as beneficiary owners. The W-8EXP form is for any international organization, foreign government, foreign tax-exempt organization, foreign central bank of issue, foreign private foundation or government of a U.S. possession that is simply claiming exemption from the Foreign Account Tax Compliance Act (FATCA).