Different Types of Form W-8 Withholding Certificates

The IRS has several types of withholding certificates. The first certificate is the Form W-9, used by U.S. persons, while the next batch of certificates falls within the Form W-8 series, used by non-U.S. persons.

Non-U.S. persons (foreign individuals and entities) used Form W-8 to certify their foreign status and claim any applicable exemption or reduction in U.S. withholding taxes on certain types of investment income.

Deciding which Form W-8 to use can be a complex analysis for a non-U.S. person. Here is a breakdown and summary of the various forms and which one you should be using.

Form W-8BEN: Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)

Individuals (i.e., natural persons) use Form W-8BEN to certify they are the beneficial owner of the income. The information required includes the person’s name, country of citizenship, address, taxpayer identification number (TIN), and date of birth. Corporations, trusts, partnerships, or governmental entities do not use this form.

Form W-8BEN should also be used by a non-U.S. person who is the sole owner of a disregarded entity. For example, suppose John Doe is a Bermuda citizen and resident. John opened a Delaware LLC and owned 100% of the LLC membership units, making him the sole owner. John did not file an election to treat the LLC as a corporation, so the LLC is a disregarded entity. If the LLC desires to open a bank account, John must provide a Form W-8BEN using his individual details because the entity is disregarded. The LLC should not prepare a Form W-9.

Form W-8BEN-E: Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)

This form is similar to Form W-8BEN. However, Form W-8BEN-E is used by foreign entities and not by natural persons. Foreign entities include a foreign corporation, partnership, foreign trust or estate, foreign government, or other international organization.

For example, suppose John Doe opens a Limited Company (Ltd) in the Cayman Islands, which is treated as a corporation for federal tax purposes. The limited company wants to open a corporate bank account in the United States, so it provides a completed Form W-8BEN-E certifying its foreign status.

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

Foreign persons or entities use Form W-ECI when they are engaged in a U.S. trade or business and generate effectively connected income (ECI) with that trade or business.

To use Form W-8ECI, the individual or entity must obtain a U.S. taxpayer identification number (TIN). The taxpayer must then file an income tax return at the end of the year to report the income, expenses, and pay federal income taxes on the net taxable income of the business.

An individual would file Form 1040-NR (US Nonresident Alien Income Tax Return), while a foreign corporation may file Form 1120-F (US Income Tax Return of Foreign Corporation).

Form W-8IMY: Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting

Form W-8IMY is used by foreign intermediaries (such as foreign financial institutions), pass-through entities (such as partnerships), foreign trusts, or certain U.S. branches to certify their status and provide documentation regarding the beneficial owners of the income they receive on behalf of others.

In addition to certifying the entity’s Chapter 3 classification for U.S. tax purposes, the entity must also certify its Chapter 4 classification under the Foreign Account Tax Compliance Act (FATCA).

For example, assume that a New York hedge fund wants to open an investment feeder fund in the Cayman Islands. The fund opens a Cayman limited partnership (LP), which will is classified as a nonwithholding foreign partnership for Chapter 3 purposes. Because this entity will be an actively managed investment fund, the hedge fund manager determined the LP is a Reporting Model 1 FFI under the Cayman IGA.