Page 13 - Withholding Taxes for Foreign Entities

10:50 - 14-Feb-2020
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Fileid: … tions/P515/2020/A/XML/Cycle10/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
withholding. You are not, however, responsible payee. An offshore obligation is an account • Claim that such individual is the beneficial
for misstatements on a Form W-8, documentary maintained at an office or branch of a bank or owner of the income for which the form is
evidence, or statements accompanying docu- other financial institution located outside the being furnished or a partner in a partner-
mentary evidence for which you did not have United States or an obligation, contract, or other ship subject to section 1446 withholding;
actual knowledge, or reason to know, that the instrument with respect to which the payer of and
statements were incorrect. Certain withholding the payment is either engaged in business as a • If applicable, claim a reduced rate of, or
agents, such as financial institutions, have limi- broker or dealer in securities or a financial insti- exemption from, withholding under an in-
ted reason to know requirements for this pur- tution that engages in significant activities at an come tax treaty.
pose. See Regulations section 1.1441-7(b) for office or branch located outside the United
these requirements. States. Note. Form W-8BEN is now used exclu-
You may rely on documentary evidence
Exceptions to TIN requirement. A for- given to you by an NQI or a flow-through entity sively by individuals. Entities documenting their
status as a foreign person and beneficial owner
eign person does not have to provide a U.S. or with its Form W-8IMY. This rule applies even for Chapter 3 purposes, their Chapter 4 status
foreign TIN to claim a reduced rate of withhold- though you make the payment to an NQI or as a payee for Chapter 4 purposes, or eligibility
ing under a treaty if the requirements for the fol- flow-through entity in the United States. In most for making a claim of treaty benefits (if applica-
lowing exceptions are met. cases, the NQI or flow-through entity that gives ble) should use Form W-8BEN-E.
• Income from marketable securities (dis- you documentary evidence also will have to A withholding agent in some cases may
cussed next). give you a withholding statement, discussed substitute its own form for a Form W-8BEN for
• Unexpected payments to an individual later. individuals. Solely for purposes of Chapter 3, a
(discussed under U.S. or Foreign TINs, Form W-8BEN with a revision date of February
later). Documentary evidence. You may apply a 2006 provided to you by an entity before Janu-
The allowance to provide a foreign TIN reduced rate of withholding to income from mar- ary 1, 2015, will remain valid until the form’s val-
(rather than a U.S. TIN) does not apply to a pay- ketable securities (discussed earlier) paid out- idity expires under the applicable Chapter 3
ment to compensate an individual for personal side the United States with respect to an off- regulations. For purposes of Chapter 4, a Form
services. shore obligation if the beneficial owner gives W-8BEN with a revision date of February 2006
See U.S. or Foreign TINs, later, for when a you documentary evidence in place of a Form provided to you by an entity before such date is
foreign person is required to provide a foreign W-8. To claim treaty benefits, the documentary and will remain valid to the extent permitted un-
TIN for purposes other than making a treaty evidence must be one of the following. der Chapter 4.
claim. 1. A certificate of residence that: Form W-8BEN also may be used to claim
Marketable securities. A Form W-8 provi- a. Is issued by a tax official of the treaty that the foreign individual is exempt from Form
1099 reporting and backup withholding for in-
ded to claim treaty benefits does not need a country of which the foreign beneficial come that is not subject to Chapter 3 withhold-
U.S. or foreign TIN if the foreign beneficial owner claims to be a resident, ing and is not a withholdable payment. For ex-
owner is claiming the benefits on income from b. States that the person has filed its ample, a foreign person may provide a Form
marketable securities. For this purpose, income most recent income tax return as a W-8BEN to a broker to establish that the gross
from a marketable security consists of the fol- resident of that country, and proceeds from the sale of securities are not
lowing items. subject to Form 1099 reporting or backup with-
• Dividends and interest from stocks and c. Is issued within 3 years before it is holding.
debt obligations that are actively traded. presented to you.
• Dividends from any redeemable security 2. Documentation for an individual that: Date of birth requirement for certain ac-
issued by an investment company regis- count holders. If you are a U.S. office or
tered under the Investment Company Act a. Includes the individual's name, ad- branch of a depository institution, custodial in-
of 1940 (mutual fund). dress, and photograph; stitution, investment entity, or specified insur-
• Dividends, interest, or royalties from units b. Is an official document issued by an ance company (each as defined in Regulations
of beneficial interest in a unit investment authorized governmental body; and section 1.1471-5(e)) documenting an individual
trust that are (or were upon issuance) pub- account holder (as defined in Regulations sec-
licly offered and are registered with the c. Is issued no more than 3 years prior to tion 1.1471-5(a)(3)) of an account that is a fi-
SEC under the Securities Act of 1933. being presented to you. nancial account (as defined in Regulations sec-
• Income related to loans of any of the above 3. Documentation for an entity that: tion 1.1471-5(b)), you must obtain the individual
securities. account holder’s date of birth on the Form
Offshore obligations. If a payment is a. Includes the name of the entity, W-8BEN in order for the form to not be invalid
for a payment of U.S. source income reportable
made outside the United States with respect to b. Includes the address of its principal on Form 1042-S. If the individual’s date of birth
an offshore obligation, a payee may give you office in the treaty country, and is not provided on the Form W-8BEN, the form
documentary evidence, rather than a Form c. Is an official document issued by an is not invalid if you otherwise have the date of
W-8, to establish that the payee is a foreign per- authorized governmental body. birth in your account files for the account holder
son. See Regulations section 1.6049-5(c)(1) for or you obtain the date of birth on a written state-
the requirements for documentary evidence for In addition to the documentary evidence, a ment (including a written statement transmitted
offshore obligations. For accounts opened on or foreign beneficial owner that is an entity must by email) from the account holder and asso-
after July 1, 2014, through December 31, 2014, provide a statement that it derives the income ciate the written statement with the Form
you may use the rules regarding the use of for which it claims treaty benefits and that it W-8BEN. See the related Foreign TIN require-
documentary evidence under Regulations sec- meets one or more of the conditions set forth in ment discussed under Foreign TIN requirement
tions 1.6049-5(c)(1) and (c)(4) as in effect prior a limitation on benefits article, if any (or similar for account holders, later, which also generally
to the issuance of the temporary regulations. provision), contained in the applicable treaty applies with respect to accounts described in
A payment is made outside the United and must identify the specific limitation on ben- this paragraph.
States if you complete the acts necessary to ef- efits provision. In the case of a withholdable
fect the payment outside the United States. payment made to an entity, you also must ob- Form W-8BEN-E. This form is used by a for-
However, an amount paid by a bank or other fi- tain the applicable documentation to establish eign entity to:
nancial institution on a deposit or account usu- that withholding does not apply under Chap- • Establish foreign status;
ally will be treated as paid at the branch or of- ter 4. • Establish an entity's Chapter 4 status to
fice where the amount is credited unless the the extent required for Chapter 4 purpo-
other requirements of Regulations section Form W-8BEN. This form is used by a foreign ses;
1.6049-5(e)(2) are met with respect to the individual to: • Claim that such entity is the beneficial
branch or office, unless the amount is collected • Establish foreign status; owner of the income for which the form is
by the financial institution as an agent of the
Publication 515 (2020) Page 11