When and how to complete form W-8BEN-E is a must for non-US tax resident entities earning money in the US.  This week’s I Hate Numbers podcast follows on from last week.

Last week I dealt with individuals and sole traders earning money from the US, who have income from the U S.  This week in I Hate Numbers, it is the turn of companies, partnerships, charities, and single member companies.

Tax and forms, tax and forms go hand in hand, just like chips and gravy, gin and tonic and pineapple and pizza. None more so do tax and forms go hand in hand when, as a non us tax resident, you are dealing with the us and earning money from there.

In this week podcast, it is the turn of companies, partnerships, charities, and single member companies.  When and how to complete form W-8BEN-E is my this week podcast focus .

What goes into form W-8BEN-E?

I will walk you through form W-8BEN-E.  My podcast may not be the perfect format for showing what the forms look like.  I have got you covered, check out my you tube video video for a visual.  Moreover, I am going to take you on step by step by journey to explain the form, what it is about, and what goes into it.

At 30 sections, the W-8BEN-E IS a weightier tome compared to the one that individuals and sole traders must complete.  Do not get overwhelmed though, not all thirty sections will apply to most of you, it’s a one size fits all form.

Abbreviations and forms are natural bedfellows, it must be a word space thing!   Let’s face it, it would not be a form unless you had abbreviations.  Abbreviations are FATCA, NFFE and TIN.  Phrases keep the abbreviations company.  One such phrase, or term if you prefer is the ownership and based erosion test.  You need to know what this is to complete the form.

Listen to find out more.

Single member companies

There are different tax and business structures in the US compared to the UK.  One example is the C corporation , which is the most common business structure.  The C corporation is taxed like UK limited companies.  The company pays tax on its profits. The individual shareholders directors will pay tax on the basis that dividends are withdrawn, or salaries paid to the owners.

Moreover, single shareholder companies are not recognized as US C corporations, which are limited company as we know them in the UK.   If you are a single member company that wants to be taxed as C Corporation then you must complete a couple of extra forms, as well a form W-8BEN-E.

Listen to find out more.

What next

In conclusion. If you do not complete the W-8BEN-E form correctly you will get a financial kick in your balls, 30% tax stopped at source.  Ouch! This podcast on When and how to complete form W-8BEN-E is useful stuff.

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Tax and forms. Tax and forms go hand in hand, just like chips and gravy, gin and tonic, and pineapple and pizza, none more so do tax and forms go hand in hand when as a non-US tax resident, you are dealing with the US and earning money from there.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. My name is Mahmood, and for the last 26 years I've been on a mission helping businesses like yours make more profit, save tax, save time, improve what goes on between your ears, your money mindset, and help you have the business that you aspire to have. What's not to love about that? Now, in this week's episode of I Hate Numbers, we are going to be picking up from where we left off from last week when we were dealing with individuals and sole traders who have income from the US.

This week we're going to be focusing on those other types of businesses, so companies, partnerships, and even single-trader-member companies that deal with the US, and the form that has to be completed there. Now, in last week's podcast, I talked about individuals and sole traders, and went through, what has to go into the form. It’s a WA form, and it's called a W-8BEN form.

Now, this week we are looking at the form that companies, partnerships, charities, and also single-member companies, which are companies that have a single shareholder. Now, the curious thing is, in the United States, a single-shareholder company is not actually recognised as a company, as we might do in the United Kingdom.

So, we've got a couple of extra forms to throw in, more of that later on in the podcast. Now, the form name, and there's always going to be a name for a form, is a W-8BEN-E. I'm going to walk you through what goes into the form. Obviously, forms are ripe for podcasts, and I've got a visual that in the show notes, if you click it through, you can see in visual terms what the form looks like,

and in this podcast, I'm going to take you through step by step. Now, one thing to know in the W-8BEN-E form, the one that corporations partnerships, charities, and single-member companies will have to complete is that it's a much weightier tone compared to the one that individuals and sole traders have to complete.

It's 30 sections. The good thing is the majority of the sections will not apply to the majority of the applicants who have to complete the form. Now, you might be thinking quite rightly, why do I need to complete the form? Well, there's two reasons. Number one, it is part of the regulations that all US payers have to have completed before they can pay any non-US tax resident.

And secondly, if the form is not completed, you've got 30% sliced of your income by what is called withholding tax, and that's going to be painful. So, let's crack on with the form. Now, part one, question one is where you enter your full name. Do not use abbreviations. Add a salutation. Include your country of incorporation i.e. where your company has been created and registered.

United Kingdom is to be used for those companies who have been incorporated in either England, Scotland, Ireland, or Wales. Now, remember, no abbreviation, so do not use UK. United Kingdom is the correct way to present that. Now, ignore question 3 unless you happen to be receiving money via a third party. Now, question four, ask what type of entity are you,

and this could cause a bit of head scratching. Now, in the majority of cases, applicants will be a corporation, what we might know in the UK as a limited company. Now, if your company is a single-member company, then you have the option of either disregarding that and being treated as a sole trader, which means that your tax situation might be quite erroneous.

What you have to do is to tick the corporation box, and then you've got two additional forms to complete. Now, question five, we enter the land of abbreviations. Now, the main abbreviations on the form, and it wouldn't be a form unless you had abbreviations, are the abbreviations FATCA, NFFE, and TIN.

Now, FACTA stands for the Foreign Account Tax Compliance Act. That's the piece of legislation that introduced this particular form. Now, NFFE stands for Non-financial Foreign Entity, and TIN stands for Tax Identification Number. I've mentioned those three main headline abbreviations because that's the ones that are likely to apply to your situation.

As in all these things, if in doubt, talk to your advisor, seek professional help, and you will be able to complete the form satisfactorily. Now, question six on the form refers to your address. Typically, this is your registered office address. Now, if you have a different address that you trade from, a different mailing address, then question seven must also be completed.

Now, question eight refers to your Tax Identification Number. Now, if we are filling this from the perspective of a corporation, a company, or as a partnership, or as a charity, that will be your corporation tax reference. Now, the good thing is the majority of the 30 parts of the W-8BEN-E form do not apply to most applicants.

Now, part three of the form is probably the more challenging aspect of the form, and that's where you have to specify and make the claim for the treaty benefits that apply to you, and also to make a note of the level of withholding tax you are claiming. Now, let's just roll back a little bit here and talk about treaty benefits and withholding tax.

Now, all countries in the world have relationships with other countries and they have tax treaties in place. Now, we're focusing on the US/UK Tax Treaty, but as a point of reference, the UK will have tax treaties with many countries around the world, and the US likewise. Now, in the UK/US Tax Treaty, it will lay out who has jurisdiction, who has taxing rights over certain types of income.

It will also specify, depending on what the type of income is that you have, which article or heading does that come under. Now in the main, for most applicants who are businesses, article seven will refer to business profits and Article 12 will refer to royalty income. The level of withholding tax that you are typically going to want to apply to your income is 0%.

It doesn't mean you can escape tax completely, by the way. It just means it's assessed in your UK tax return. If you don't complete that section correctly, then the payer will have to withhold 30% withholding tax. Now, question 14, tick that if you are the beneficial owner of the income and you’re tax resident in the United Kingdom.

Now, there's a strange phrase here called the ownership and base erosion test, which is a box that you normally will tick. Now, in essence, the ownership and base erosion test for the majority of situations is you confirming there is a bona fide commercial and economic connection between you, the UK and the US.

You need to tick that box to get the entitlement under the US/UK Tax Treaty. Now, question 15. Now, question 15, you are going to stipulate which relevant article from the US/UK Tax Treaty you are claiming relief under and from withholding tax. Now, the various types of income, as I mentioned earlier, are categorised by articles.

Article 7 refers to business profits and Article 12 refers to business royalties. Now, if you have other examples of income like dividends, capital gains, rental income, then you need to stipulate and state the relevant article that applies. Now, in the last thing in this section, you need to add a form of wording that says, in essence, that you are not a

US resident entity, you don't have a permanent establishment there, and you don't carry out business in the United States. Obviously, add that statement if it's true for your particular situation. If you don't add that key statement, you run the risk of the form being rejected and having 30% withholding tax applied.

Now, we move on to part 30 of the form, and I haven't mentioned every single part of the W-8BEN-E form because most of it will not apply to most people. Now, part 30 of the form is the certification part, the sign-off section. Typically, directors will normally complete this part. You need to print your name, enter the date, and remember to enter the US date format.

So, that's month, day of the month, and then the year using a four-digit notation. Now, before we wrap up this podcast, I'm going to specifically mention single-shareholder companies. Now, in the US there are different tax and business structures that we have compared to the UK. Now, one example often quoted is what's called the C Corporation.

This is the most common form in the US and this is largely similar to the UK Limited company i.e. for a UK limited the taxation situation is the company itself pays tax on its profits, the individual shareholders directors will pay tax on the basis that dividends are withdrawn or salaries paid to the owners.

Now, if you want that applied to you, you are only going to be paying tax, obviously, on the dividends that come out, then you've got to complete two additional forms. The two additional forms are what's called an SS form and an F8832 form. Now, the F8832 form is the one where you are going to be classifying yourself as a foreign entity, electing to be classified as an association, taxable as a corporation.

Now, that's a bit of a mouthful, but effectively complete those two forms. There are help notes issued by the IRS. The IRS are receptive to you actually calling them directly if you need assistance with the form. And as in all these things folks, check out the show notes at the end. Check out blog articles that are written, and you are always welcome to drop us a line, make contact with us, and we can help you accordingly.

So, have you found this podcast useful? Hope you've got some value from that. I'd love it if you could listen, even leave a review. That would be super-duper. And until that time, folks, till we meet again next week, have a fantastic week ahead. We hope you enjoyed this episode and appreciate you taking the time to listen to the show.

We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.