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Compliance with the Various W-8 Series of Forms – Completing the Form

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Rödl & Partner Tax Matters Vol 2014 – 16, published in October 2014

 

Throughout 2014, the IRS has released new versions of the various W-8 series of forms to comply with the Foreign Account Tax Compliance Act ("FATCA") which generally went into effect on July 1, 2014. FATCA requires U.S. persons to disclose foreign financial assets with their U.S. tax return while foreign financial institutions must disclose the identities of U.S. persons holding accounts with the institutions. In addition, certain non-financial foreign entities must disclose the identities of their substantial U.S. owners. FATCA imposes 30% withholding on any withholdable payment made to an undocumented account holder/payee or a non-compliant foreign entity even though a treaty may provide a lower rate under the normal U.S. withholding regime. Form W-8 is used by non-U.S. persons to document their status as payee under Chapter 4 of the Internal Revenue Code ("IRC"), the FACTA provisions, and as a beneficial owner of the income under Chapter 3 of the IRS, the withholding provisions. The W-8 is also used to document entitlement to a reduced rate of withholding under a treaty. Whether you are requesting a W-8 or completing it, the changes introduced by FATCA have led to many questions regarding compliance with the W-8 form, which are further addressed below. Please note that these questions and answers are generally for non-financial institutions.

 

Which form do I use?

IF YOU ARE A FOREIGN PERSON WHO IS A:ARE YOU THE BENEFICIAL OWNER FOR U.S. PURPOSES?IF NOT, WHO IS THE BENEFICIAL OWNER?PROVIDE FORMCOMMENTS
Nonresident alien individualYesN/AW-8BEN 
Foreign corporation (i.e. GmbH or AG)YesN/AW-8BEN-E 
Entity is on the U.S. "per se" corporation listYesN/AW-8BEN-E

 

 

 

 

All members have limited liability and no CTB election has been madeYesN/AW-8BEN-E

Default rule is the entity is treated as a corporation for

U.S. tax purposes

All members have limited liability and a CTB election has been made to treat the entity as a partnershipNoThe members or shareholdersW-8IMY and W-8BEN or W-8BEN-E 
Foreign partnership (i.e. GmbH & Co KG) with NO CTB election in place (or an entity in which at least one member does not have limited liability and no CTB election has been made)NoThe partners or members W-8IMY and W-8BEN or W-8BEN-E for the foreign partners

In determining the beneficial owner, the treaty country

is relevant for determining

whether an entity is fiscally transparent or not.

Foreign partnership (i.e. GmbH & Co KG) with a CTB election in place (reverse hybrid) (or an entity in which at least one member does not have limited liability and a CTB election has been made to treat the entity as a corporation)NoThe partners or membersW-IMY and W-8BEN or W-8BEN-E for the foreign partners

In determining the beneficial owner, the treaty country

is relevant for determining

whether an entity is fiscally transparent or not.

 

Limited liability entity with a single member but a CTB election has been made to treat the entity as a disregarded entity (hybrid) (e.g. a foreign corporation elects to be treated as a disregarded entity) NoThe members or shareholdersW-8BEN-E

Default rule is the entity is treated as a corporation for

U.S. tax purposes

NomineeNoPrincipalW-8 by the beneficial owner 
Foreign simple and grantor trustsNoThe grantor and / or beneficiariesW-8IMY and W-8s for the beneficiaries 
Foreign complex trustsYesN/AW-8BEN-E 
Entity engaged in a trade or business in the US and the income is ECIDepends – see the above answersDepends – see the above answersW-8 ECIOn Form W-8ECI the foreign payee represents that: 1) The foreign payee is the beneficial owner of the income, 2) The income is effectively connected with the conduct of a trade or business of the United States, AND 3) the income is includible in the payee's gross income
Individual providing services in the U.S. to a U.S. employer or branch – dependent or independent personal servicesYesN/A8233

To prevent back-up

withholding under IRC 3406;

individual needs ITIN or SS #.

 

 

Can I still use the old W-8 form?

The old version of Form W-8 may be used until December 31, 2014. Requestors, however, may insist on you providing the new version of Form W-8.

 

Do I need a US identification number or can I provide a foreign identification number?

Generally a foreign identification number can be provided. If, however, you are claiming treaty benefits and do not provide a foreign identification number, a U.S. identification number must be provided. In addition, a partner in a partnership conducting a trade or business in the U.S. must provide a U.S. identification number.

 

Can I provide the form solely to document my foreign status?   

Yes. The W-8 Form may be used to document your foreign status.

 

Do I have to provide my FATCA status?

FATCA status is not required unless you are receiving a FATCA withholdable payment which generally consists of interest and dividends although other payments may be subject to FATCA withholding so you should consult with your tax advisor.

 

When does the form expire?

Generally Form W-8 will remain valid for both Chapter 3 withholding and Chapter 4 FATCA purposes, including claims for treaty benefits, for a three year period beginning on the date the form was signed and ending on the last day of the third succeeding calendar year. Under certain circumstances a W-8 may remain in effect indefinitely.

 

If you have any questions, please contact your Rödl and Partner representative.

 

 

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