Form W-8BEN-E Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities) is a form prepared by a foreign entity which must be provided to a withholding agent or payer if the foreign entity is receiving a payment subject to withholding under Chapter 3 of the Internal Revenue Code or if such an entity maintains an account with a Foreign Financial Institution (“FFI”) and that FFI requests this form. This form was devised as part of the promulgation of new rules under the Foreign Account Tax Compliance Act (“FATCA”). FATCA became law in March 2010 and focuses on reporting by U.S. taxpayers with foreign accounts, FFIs with financial accounts held by U.S. taxpayers, foreign entities in which U.S. taxpayers hold a substantial ownership interest and with reporting and proper withholding of payments under Chapters 3 and 4 of the internal revenue code.
A withholding agent or payer of income may rely on a properly completed form W-8BEN-E to treat payments associated with the Form W-8BEN-E as a payment to a foreign person who beneficially owns the amounts paid. If applicable, the withholding agent or payer may also rely on Form W-8BEN-E to apply a reduced rate, or exemption from, withholding.
In April of 2016, the IRS revised Form W-8BEN-E. The changes to W-8BEN-E are as follows:
Part III of the form, Claim of Tax Treaty Benefits, have new checkboxes added to identify what limitation on benefits (“LOB”) if any they satisfy for the treaty benefits being claimed. LOB provisions are placed into treaties to eliminate treaty shopping by taxpayers, that is, to eliminate the possibility of a taxpayer creating a foreign shell entity in a specific country solely to reduce their tax liability by virtue of establishing their business in that country. A taxpayer is now required to check the relevant box associated with the LOB test it meets with respect to the treaty benefits associated with this form. A taxpayer who has obtained a favorable discretionary determination from the U.S. competent authority that it qualifies for treaty benefits for a payment reported on W-8BEN-E must also check the relevant box in Part III.
- Part I, Line 5 of the form, Chapter 4 Status (FATCA status), now includes a checkbox to identify status as an “account that is not a financial account.” This line is only completed by payees of a withholdable payment or a taxpayer documents the status of an account in response to a request from an FFI. Accounts that are not a financial account are covered under Treasury Regulations § 1.1471-5(b)(2).
- Nonreporting Intergovernmental Agreement (“IGA”) FFIs now have increased compliance requirements on documenting and certifying themselves on Form W-8BEN-E. Where an FFI meets the requirements as both a nonreporting IGA FFI under the IGA and a deemed-compliant FFI under the regulations, it should certifying as a nonreporting IGA FFI on Form W-8BEN-E unless the entity meets the requirements for owner-documented FFI status for payments associated with Form W-8BEN-E, in which case it should certify that status only by completing Part X, Owner-Documented FFI, of the form.
These changes are the result of an ongoing effort under FATCA to ensure proper reporting of foreign assets and payments being made to foreign entities. A withholding agent may continue to accept the prior version of Form W-8BEN-E up to six months after the revision, however, if following a submission of the form a change in circumstances makes any information incorrected for purposes of either chapters 3 or 4 of the Internal Revenue Code, the withholding agent or FFI must be notified within 30 days of the change in circumstances by providing the documentation required under Treasury Regulations § 1.1471-3(c)(6)(ii)(E)(2).