W-8BEN: What it is and when to use it

Filing taxes in one country can be confusing. Filling out forms in multiple countries, especially when tax treaties and different withholding rates come into play, can feel downright overwhelming. 

If you’re a non-U.S. citizen, resident, or business entity that earns income from U.S. sources, you’ll likely need to submit an Internal Revenue Service (IRS) Form W-8. Five versions of W-8 forms exist, each designed to confirm your foreign status and type of income to determine how much U.S. income tax should be withheld.

In this guide, we’ll focus on Form W-8BEN, including what it is, who needs it, and how to complete it properly.

What is Form W-8BEN?

Form W-8BEN—or the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting, as it’s officially known—might seem like a mouthful. But its purpose is straightforward. 

The W-8BEN tells U.S. payers and financial institutions that the person receiving income is a non-U.S. individual (foreign businesses and other entities use the W-8BEN-E to certify their non-U.S. status). While you don’t send the W-8BEN directly to the IRS, the form verifies your foreign tax residency, which can reduce or eliminate U.S. tax withholding under an applicable tax treaty.

Without this tax form, foreign individuals are generally subject to a flat 30% withholding tax on payments like: 

• Interest
• Dividends
• Rents
• Royalties
• Premiums
• Annuities
• Compensation for services 

Form W-8BEN helps you avoid double taxation and claim any exemptions, reduced withholding rates, or other benefits your country has with the United States. For a full list of foreign governments that have a tax treaty with the United States, check the IRS’s official website.

Why is Form W-8BEN important?

Beyond international tax compliance, Form W-8BEN ensures that non-U.S. individuals who receive U.S.-sourced income are taxed correctly. Here’s how: 

• Confirms foreign tax status: The W-8BEN establishes that a filer is a non-U.S. taxpayer, which helps prevent double taxation in the U.S. and their country of tax residency. 
• Reduces or eliminates withholding tax: Without a W-8BEN, the IRS requires employers to withhold 30% on certain types of income, including interest, dividends, and other payments. 
• Applies tax treaty benefits: Eligible filers can claim a reduced tax rate based on international agreements between the U.S. and their country of tax residency, significantly reducing their tax burden in the United States. 

In short, without Form W-8BEN, a non-U.S. individual's income may be taxed at the highest withholding rate, even when a lower rate should apply. 

Who should file Form W-8BEN?

Non-U.S. individuals who receive certain types of income from U.S. sources must file Form W-8BEN. In most cases, nonresident aliens (NRAs) earning U.S.-sourced income need to submit the form before receiving their first payment. 

You should file Form W-8BEN if you meet the following criteria:

• You’re a non-U.S. citizen or resident who earns U.S.-sourced income.
• You receive payments such as interest, royalties, rent, or compensation for services.
• You’re the sole owner of a disregarded entity that receives income from the U.S. 
• You hold an NRA-classified account at a foreign financial institution (FFI) that requires certification of foreign status.
• You’re a non-U.S. individual transferring an interest in a partnership with gains connected to a U.S. business.

Form W-8BEN can also be used to claim an exemption from backup withholding on certain types of payments that are ordinarily subject to U.S. reporting rules. 

Again, for non-U.S. businesses and entities, the correct form is a W-8BEN-E. It serves a similar purpose but applies specifically to organizations rather than individuals. 

How to fill out Form W-8BEN

Form W-8BEN stays valid for three years from the date you sign it. Again, you'll submit it directly to the U.S. payer or financial institution, not the IRS. Here’s how to complete it:

1. Enter your complete name: In Box 1, write your full legal name as it appears on your passport or official identification. 
2. Fill in your country of citizenship: In Box 2, enter the country where you are a tax resident. 
3. Provide your address: Use Box 3 for your permanent address. If your mailing address is different, list it in Box 4.  
4. Enter your U.S. tax identification number (TIN): If you have a U.S. Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN), enter it in Box 5. If not, leave Box 5 blank. 
5. Enter your foreign tax identification number (FTIN): In Box 6a, provide your FTIN (e.g., SIN for Canada) and your date of birth in Box 8. 
6. Claim tax treaty benefits, if applicable: If your country of residence has a tax treaty with the U.S., you’ll need to fill in the relevant details in Part II in order to claim tax treaty benefits. 
7. Sign and submit: Provide your signature and printed name along with the date of signing. Submit the completed form to the appropriate U.S. payer or financial institution that’s requesting it.

Simplify compliance in the U.S. and beyond

Managing payroll taxes and legal paperwork is complicated—especially when hiring across borders. Navigating international tax laws, withholding requirements, and compliance rules add extra nuance to every paycheck. 

Oyster makes it simple. With built-in compliance, localized expertise, and a dedicated in-house legal team, Oyster ensures that your global tax management is seamless and fully compliant. From onboarding international talent to handling tax specifics, Oyster takes care of all the details so you can focus on taking care of your team. 

Book a demo to learn more.

Note: This is a revised and expanded version of an article originally written by Jake Erdman.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.

FAQs

What’s the difference between Form W-8 and Form W-9? 

Form W-8 (including W-8BEN) is for non-U.S. individuals and entities to confirm their foreign status, potentially making them exempt from the standard 30% withholding tax. Form W-9 is for U.S. citizens, residents, and entities to provide their taxpayer identification number (TIN) and certify their status for income reporting to the IRS—typically as independent contractors or other non-employees.

What’s the difference between Form W-8BEN and Form W-8ECI? 

Form W-8ECI (Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States) is for foreign individuals or beneficial owners of U.S.-sourced income that’s connected to a U.S. trade or business. Unlike W-8BEN, which typically applies to passive income, W-8ECI applies to active business income that is effectively connected with U.S. operations.

What’s the tax risk of failing to provide a W-8BEN? 

If a foreign individual doesn’t submit a W-8BEN, the payer must withhold tax at the default 30% rate—even if a lower rate applies under a tax treaty. This can lead to incorrect tax reporting, potential penalties for payers and financial institutions, and delays or complications for both payroll departments and the individual receiving payment.