Does your company provide services or manufacture products for U.S. entities? You must submit W-8BEN-E form – otherwise, you may end up paying (high!) taxes in the U.S. More and more Polish companies provide services or produce goods for U.S. clients. After the completion of a given order, American companies ask their Polish business partners to fill out Form W-8BEN-E. What is this form for, and why is it important to fill it out correctly?
What is the purpose of Form W-8BEN-E?
Form W-8BEN-E is a tool used by the U.S. government to prevent tax evasion by companies registered in the U.S. It is part of the reporting obligations of U.S. companies to the IRS. The legal basis for Form W-8BEN-(E) is the Foreign Account Tax Compliance Act (FATCA).
Simply put, by submitting Form W-8BEN-E, you inform the IRS of (1) the tax residency of the entity in question and (2) whether this entity can rely on the provisions of the double taxation treaty (DTT) between the U.S. and the entity’s country of tax residence concerning the income to which Form W-8BEN-E applies. The application of the relevant DTT provisions allows for the non-withholding or reduced withholding of U.S. tax (the so-called “withholding tax”) on specific income of the Polish company (e.g., payments for services rendered to a U.S. entity).
Failure to submit Form W-8BEN-E by a Polish entity will result in the withholding of taxes according to U.S. rates (e.g., 30%) on the income in question.
Who submits Form W-8BEN-E?
Form W-8BEN-E is submitted by foreign entities. The form clearly states that it is not intended for individuals. Individuals must submit Form W-8BEN, which we discussed in a previous post.
Therefore, Form W-8BEN-E is primarily completed by partnerships, corporations (including single-member LLCs), and investment funds.
How to complete W-8BEN-E form?
The form can be downloaded from the IRS website: https://www.irs.gov/pub/irs-pdf/fw8bene.pdf
When completing Form W-8BEN-E, special attention should be paid to the following sections:
- determining the FATCA status of the entity (Part I, 5),
- indicating tax residency (Part III, 14a), and
- applying for the benefits of the DTA (Part III, 15).
The form is completed in English and should be submitted to the tax withholding agent or payer. The form should not be sent to the IRS.
Important notice!
The IRS warns about numerous scams where fraudsters attempt to obtain data from foreign entities by sending fake Form W-8BEN-E.
Link: https://www.irs.gov/privacy-disclosure/fake-form-w-8ben-used-in-irs-tax-scams
In these fake forms, additional fields are included, such as passport numbers or bank account details. We recommend always ensuring that Form W-8BEN-E you are completing matches the official version provided by the IRS.
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How Can We Help?
We assist businesses in completing Form W-8BEN-E. Our primary service is analyzing the provisions of the relevant contract and helping properly match the income sources to the provisions of the DTT. In this way, we safely help businesses apply the appropriate withholding tax exemption. Feel free to contact us through www.outsourced.pl.
