CEO and Founder of Kruze Consulting
What is the W-8BEN(E) Form?
The W-8BEN(E) form is the international equivalent of the domestic W-9 form; it is collected by us for our records and is liability protection for the company. The W-8BEN is for foreign individuals while the W-8BEN-E is for foreign entities. The W-8BEN is a form that certifies that your international contractor is not a U.S. Citizen and not subject to U.S.Withholding Tax. The W-8BEN-E is a form that certifies the foreign status of the company for income tax, tax treaty benefits, and FACTA purposes. These forms are valid for 3 years.
Failing to collect a W-8BEN(E)?
For qualifying vendors outside of the U.S., if we do not have a foreign vendor’s assertion of treaty benefits through the W-8BEN(E) form, the company is generally required to withhold 30% of all payments made to him/her for “backup withholding”(for vendors inside the US who refuse to provide an SSN with a W-9, the rate is 28% in 2017, but reduced to 24% in 2018). The company is legally required to submit these backup withholding amounts to the IRS (even if they failed to withhold from the contractor). This backup withholding would be submitted on payroll tax Form 945.
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