Have your U.S. contractor requested you to submit W-8BEN form and you’re unsure why or how to complete it? Your concerns are completely understandable. Our clients – contractors for U.S. companies, as well as investors receiving dividends from U.S. companies – often ask for support in completing Form W-8BEN. Through this brief Q&A, we aim to address the most common questions on the subject.
However, let us reassure you upfront: submitting the W-8BEN form generally has a positive effect on the taxpayer’s liability.
Below, we present a set of frequently asked questions regarding Form W-8BEN, along with their answers.
What is W-8BEN form?
Question: Why is Form W-8BEN completed?
Answer: The form is completed to ensure that tax on the given transaction is only paid in Poland or to reduce the tax rate withheld in the U.S.
Simply put, by submitting Form W-8BEN, you inform the U.S. tax authorities of your tax residency. Generally, individuals residing in Poland (according to Article 3, paragraph 1a of the PIT Act) are also Polish tax residents (Article 3, paragraph 1 of the Personal Income Tax Act).
Submitting Form W-8BEN when performing contracts for U.S. entities is crucial, as it allows you to benefit from the provisions of the double taxation treaty, thus avoiding a situation where tax is deducted both in Poland and the U.S. on the same income (e.g., payment for services provided to a U.S. contractor).
Poland has a double taxation treaty (DTT) with the U.S., and it is this DTT that you should reference to in Form W-8BEN to avoid U.S. tax withholding or to reduce the tax rate. The applicable tax rate depends on the category of income under the DTT. The DTT between Poland and the U.S. has been in force since 1974. A new treaty from 2013 has yet to be ratified by the U.S. side, so it’s essential to keep an eye on this 😊
For a U.S. company for whom a Polish tax resident has performed a service, a completed Form W-8BEN is necessary to fulfill tax reporting obligations with the U.S. tax authorities.
Question: Who completes Form W-8BEN?
Answer: Individuals complete Form W-8BEN. On the other hand, corporations complete Form W-8BENE.
According to IRS instructions, Form W-8BEN is intended for individuals, which theoretically includes sole proprietors. Form W-8BEN-E is filled out by entities (e.g., limited liability companies, including single-member LLC/sp. z o.o.).
Question: Where can I find Form W-8BEN?
Answer: Form W-8BEN is available on the IRS website: https://www.irs.gov/forms-pubs/about-form-w-8-ben.
We recommend veryfing the version of Form W-8BEN the U.S. contractor sends – the version downloaded from the IRS website will always be a current one.
Question: What happens if I don’t submit Form W-8BEN?
Answer: You could be subject to a 30% income tax rate in the U.S.
Failure to submit the form will result in withholding (by the U.S. contractor) income tax at the rates applicable in the U.S. In such cases, a Polish resident can only request a refund of a portion of the U.S. tax withheld.
How to fill out the form?
Question: How do I complete Form W-8BEN?
Answer: In the form, you provide your personal information (Part I) and make declarations (Part III), but the most crucial part is specifying the appropriate DTT provision (Part II – Claim of Tax Treaty Benefits). The form is completed in English.
In Part II of Form W-8BEN, you indicate your tax residency (9) and cite the relevant article of the DTT between Poland and the U.S. that you want to reference (10).
For software development services, the most commonly cited provisions of the DTT between Poland and the U.S. are:
- Article 8 – business profits,
- Article 13 – royalties,
- Article 15 – income from independent professional services or other independent activities (Independent Personal Services), and
- Article 16 – wages, salaries, and other similar remuneration from employment (Dependent Personal Services).
(*) Unless there is a foreign tax establishment in the U.S., but that’s a separate issue.
For dividends paid by U.S. companies, the basis for reducing the tax from 30% to 15% is Article 14 of the DTT (Capital Gains).
PytaniQuestion: Does Form W-8BEN have an expiration date?
Answer: Yes, in theory, it is valid for three calendar years, counting from the year in which it was completed.
However, updates or changes may be required, and in some cases, a new form may need to be submitted if providing different types of services.
Question: Do I need a tax advisor to complete Form W-8BEN?
Answer: There is no formal requirement for this form to be filled out by a tax advisor. Instructions for completing the form can be found on the IRS website (https://www.irs.gov/instructions/iw8ben).
However, since correctly indicating the relevant DTT provision in Part II of the form affects the amount of tax paid, it’s worth considering consulting a specialist in international tax if you have any doubts. We assist entrepreneurs in completing W-8BEN forms, primarily by analyzing the terms of their agreements and helping match the income source to the appropriate DTT provisions. We encourage you to contact us.
W-8BEN form – how can we help you?
If you’re wondering how to correctly fill out Form W-8BEN or, more importantly, whether you’re eligible for a withholding tax exemption, feel free to contact us at: www.outsourced.pl .
