US 30% withholding tax & IRS Form W-8BEN-E (w8 form) for UK and foreign companies
It’s vital to understand the US 30% withholding tax & IRS Form W-8BEN-E for UK and foreign companies to reduce your tax bill.
Why? Because if you were unaware of the W-8BEN-E form, $30,000 would likely be taken off you in tax out of every $100,000.
This article will highlight how to make tax savings and the financial dangers of taking no action.
If you wish to know how much income tax you will pay to the Internal Revenue Service (IRS), please use our US income tax estimator online calculator.
I know that you are allowing the IRS to take more money from you in the form of US withholding tax than necessary.
I know from experience that IRS would take more tax if I allowed them to.However, I am fortunate enough to have a bunch of tax advisors that support me in making the right financial & tax decision when dealing with my business and investment income streams in the US.
Under US tax regulations, a mandatory 30% must be withheld by any company paying a foreign entity conducting business within the US.This happens when a foreign country has an income tax treaty with the United States.
Under these treaties, residents (but not necessarily citizens) of these countries may be eligible for tax at a reduced rate or exempt from US income taxes on certain items of income received.
If the foreign entity comes from a country within a US tax treaty, such as the UK, they can fill out and submit a W-8BEN-E form. This will exempt them from the US’s 30% withholding tax law.
What are the basics of US 30% withholding tax?
As an expat tax advisor who owns real estate property investments, I know that the US 30% withholding tax is complex.It can be difficult to navigate, and mistakes can be costly.
Here are just some of the questions we get asked regularly.
What is the W-8BEN-E form used for?
Form W-8BEN-E for UK limited companies is a form required by the IRS to collect Nonresident Alien (NRA) taxpayer information from foreign businesses and organizations.
It is also called a Certificate of Foreign Status of Beneficial Owner for US Tax Withholding or the shorter version w8 form or ben e form for UK companies.
A foreign person uses W-8BEN-E to establish beneficial ownership and foreign status. It enables a UK business outside the US to claim tax exemption on US-sourced income.
It is also used to claim income tax treaty benefits regarding income. Any foreign (non-US) company that receives payment from an American business must fill out a W-8BNE-E form and send it to the IRS.
What is the other W-8BEN-E for used for?
The form for individuals is the W-8BEN. The W-8BEN-E is required when making non-US source income payments to an NRA. These are payments when an NRA outside the US performs the services.
What types of income are Non-Resident Aliens subject to US tax on, and how is this tax collected?
Nonresident Aliens are subject to US tax at a 30% rate on income they receive from US sources that consist of:
Interest, dividends, rents, royalties, premiums, annuities, compensation for services performed.
Substitute payments in a securities lending transaction
Other fixed annual or periodical gains, profits or income
Tax is imposed on the gross amount paid and is usually collected by withholding.
A withholding agent or payer of the income may rely on a properly completed W-8BEN-E to treat a payment associated with the W-8BEN-E as a payment to a foreign person who beneficially owns the amounts paid.
If applicable, the withholding agent may rely on the W-8BEN-E to apply a reduced rate of (or exemption from) withholding at the source.
This is also known as a tax treaty benefit.
How long is the W-8BEN-E form valid for?
The W-8BEN form is generally valid for three years from the date it is signed, provided there were no changes.
For example, if you signed the form in May 2024, the form would be valid until the end of 2024, then for 3 years; 2025, 2026, 2027 expiring on January 1st 2026.
What information is required on the W-8BEN form?
The form requires details about the entity, such as name, country of incorporation, address, taxpayer identification number, and the types of income the form applies to.
On the form, what is Chapter 4 status?
If none of the long list of entity types apply to your business, it is often advised to check the box for an active NFFE, an active non-financial foreign entity.
On the form, what is my U.S. taxpayer identification number (TIN)?
A TIN is used to ensure proper tax reporting and to claim any tax treaty benefits. There is a field on the form that requests a foreign TIN number. The UK does not issue TINs but uses a unique tax number reference (UTR).
Where should I send the W-8BEN form?
The completed form should be submitted to the withholding agent or financial institution, for example, if you are a contractor this might be your US employer.
How does the W-8BEN-E form affect withholding tax rates?
By submitting the form, you (your foreign entity) may be eligible for a reduced rate of on certain types of income based on an applicable tax treaty.
What happens if I don’t submit a W-8BEN-E form?
If the form is not submitted, the withholding agent must withhold tax at the default rate of 30% on applicable income paid to the foreign entity.
Who or what are withholding agents?
A withholding agent is a person or entity responsible for withholding and remitting taxes on behalf of another party. In the context of a 30% withholding tax, this usually refers to:
Employers paying wages to employees
Banks or other financial institutions paying interest or dividends
Businesses paying rents, royalties, premiums, annuities, compensation for services, or other fixed or determinable annual or periodic income to nonresident aliens or foreign entities
The withholding agent must deduct the required tax amount from the payment and remit it to the IRS. This ensures that taxes are collected on income earned from U.S. sources by nonresident individuals or foreign entities.
The standard withholding tax rate is 30%, but this rate can be reduced if there is an applicable tax treaty between the U.S. and the recipient’s country.
Can the W-8BEN-E form be completed and sent online?
Many financial institutions and withholding agents accept electronically signed and submitted forms, but you should verify this with the institution or agent.
Is the W-8BEN-E form the same as the W-8BEN form?
No, they are completely different even if they look like the same thing. The W-8BEN form is for foreign individuals, while the W-8BEN-E form is specifically for foreign entities. Notice the additional E in the name of the form used for companies.
How to avoid the US 30% withholding tax for UK and other foreign companies?
If you were unaware of the W-8BEN form, $30,000 out of every $100,000 income would likely be taken off you by the tax.
Please note that the $30,000 or 30% US withholding tax is not based on profit but on gross income.
This tax charge is more significant than in the UK and most European countries. You could lose a lot of money because of the US tax system.
My tax advisors were able to help many of our UK limited company clients to solve this tax nightmare of the IRS and you are welcome to call us or book a 1 to 1 phone consultation at any time.
The W-8BEN form applies to foreign individuals and sole proprietors who earn money or income from US sources.
These individuals must provide a completed W-8BEN form to their US clients to avoid paying taxes to the IRS.
You can only avoid paying tax if:
Your business doesn’t have an office or branch in the US
Your country of origin has a tax treaty with the US
The US tax treaty with the UK allows individuals to make these tax savings.
What does the ‘claim of tax treaty benefits w-8ben uk’ mean?
The United States and the United Kingdom have an agreement called a tax treaty. It makes sure that people don’t have to pay taxes twice on the same money and helps businesses between the two countries.
The treaty explains how much tax people have to pay on different kinds of income like money from stocks, savings, and payments for using ideas or creations when someone from one country earns money from the other country.
Should you allow the IRS to take more money than they do from our UK limited company clients?
Summary
I know from first-hand experience that getting the right tax advice is essential so that you can use the tax-saved money on more critical aspects of your life.
If you don’t qualify for an exemption, you will be required to pay the IRS 30% of your earnings.
In short, the W-8BEN forms determine your status as a foreign individual and based on your country of origin, the W8 form determines how much (if any) tax you owe to the IRS.
You can find out more here on how to request the relevant W-8BEN forms from the IRS.
Download Form-W8BEN-E here today.
I also recommend that you read this article I have written for additional information on how to reduce your US tax bill.
The danger is that you read this article and take no decisive and immediate action to save time and money on your US tax affairs.
If you are having problems understanding the nuances of the W8BEN-E instructions or any other question relating to US tax, do yourself a favour and book time with one of my tax advisors, as I should have done many years ago.
Simon Misiewicz (as seen on You Tube)
US 30% withholding tax & IRS Form W-8BEN-E (w8 form) for UK and foreign companies
It’s vital to understand the US 30% withholding tax & IRS Form W-8BEN-E for UK and foreign companies to reduce your tax bill.
Why? Because if you were unaware of the W-8BEN-E form, $30,000 would likely be taken off you in tax out of every $100,000.
This article will highlight how to make tax savings and the financial dangers of taking no action.
If you wish to know how much income tax you will pay to the Internal Revenue Service (IRS), please use our US income tax estimator online calculator.
I know that you are allowing the IRS to take more money from you in the form of US withholding tax than necessary.
I know from experience that IRS would take more tax if I allowed them to.However, I am fortunate enough to have a bunch of tax advisors that support me in making the right financial & tax decision when dealing with my business and investment income streams in the US.
Under US tax regulations, a mandatory 30% must be withheld by any company paying a foreign entity conducting business within the US.This happens when a foreign country has an income tax treaty with the United States.
Under these treaties, residents (but not necessarily citizens) of these countries may be eligible for tax at a reduced rate or exempt from US income taxes on certain items of income received.
If the foreign entity comes from a country within a US tax treaty, such as the UK, they can fill out and submit a W-8BEN-E form. This will exempt them from the US’s 30% withholding tax law.
What are the basics of US 30% withholding tax?
As an expat tax advisor who owns real estate property investments, I know that the US 30% withholding tax is complex.It can be difficult to navigate, and mistakes can be costly.
Here are just some of the questions we get asked regularly.
What is the W-8BEN-E form used for?
Form W-8BEN-E for UK limited companies is a form required by the IRS to collect Nonresident Alien (NRA) taxpayer information from foreign businesses and organizations.
It is also called a Certificate of Foreign Status of Beneficial Owner for US Tax Withholding or the shorter version w8 form or ben e form for UK companies.
A foreign person uses W-8BEN-E to establish beneficial ownership and foreign status. It enables a UK business outside the US to claim tax exemption on US-sourced income.
It is also used to claim income tax treaty benefits regarding income. Any foreign (non-US) company that receives payment from an American business must fill out a W-8BNE-E form and send it to the IRS.
What is the other W-8BEN-E for used for?
The form for individuals is the W-8BEN. The W-8BEN-E is required when making non-US source income payments to an NRA. These are payments when an NRA outside the US performs the services.
What types of income are Non-Resident Aliens subject to US tax on, and how is this tax collected?
Nonresident Aliens are subject to US tax at a 30% rate on income they receive from US sources that consist of:
Interest, dividends, rents, royalties, premiums, annuities, compensation for services performed.
Substitute payments in a securities lending transaction
Other fixed annual or periodical gains, profits or income
Tax is imposed on the gross amount paid and is usually collected by withholding.
A withholding agent or payer of the income may rely on a properly completed W-8BEN-E to treat a payment associated with the W-8BEN-E as a payment to a foreign person who beneficially owns the amounts paid.
If applicable, the withholding agent may rely on the W-8BEN-E to apply a reduced rate of (or exemption from) withholding at the source.
This is also known as a tax treaty benefit.
How long is the W-8BEN-E form valid for?
The W-8BEN form is generally valid for three years from the date it is signed, provided there were no changes.
For example, if you signed the form in May 2024, the form would be valid until the end of 2024, then for 3 years; 2025, 2026, 2027 expiring on January 1st 2026.
What information is required on the W-8BEN form?
The form requires details about the entity, such as name, country of incorporation, address, taxpayer identification number, and the types of income the form applies to.
On the form, what is Chapter 4 status?
If none of the long list of entity types apply to your business, it is often advised to check the box for an active NFFE, an active non-financial foreign entity.
On the form, what is my U.S. taxpayer identification number (TIN)?
A TIN is used to ensure proper tax reporting and to claim any tax treaty benefits. There is a field on the form that requests a foreign TIN number. The UK does not issue TINs but uses a unique tax number reference (UTR).
Where should I send the W-8BEN form?
The completed form should be submitted to the withholding agent or financial institution, for example, if you are a contractor this might be your US employer.
How does the W-8BEN-E form affect withholding tax rates?
By submitting the form, you (your foreign entity) may be eligible for a reduced rate of on certain types of income based on an applicable tax treaty.
What happens if I don’t submit a W-8BEN-E form?
If the form is not submitted, the withholding agent must withhold tax at the default rate of 30% on applicable income paid to the foreign entity.
Who or what are withholding agents?
A withholding agent is a person or entity responsible for withholding and remitting taxes on behalf of another party. In the context of a 30% withholding tax, this usually refers to:
Employers paying wages to employees
Banks or other financial institutions paying interest or dividends
Businesses paying rents, royalties, premiums, annuities, compensation for services, or other fixed or determinable annual or periodic income to nonresident aliens or foreign entities
The withholding agent must deduct the required tax amount from the payment and remit it to the IRS. This ensures that taxes are collected on income earned from U.S. sources by nonresident individuals or foreign entities.
The standard withholding tax rate is 30%, but this rate can be reduced if there is an applicable tax treaty between the U.S. and the recipient’s country.
Can the W-8BEN-E form be completed and sent online?
Many financial institutions and withholding agents accept electronically signed and submitted forms, but you should verify this with the institution or agent.
Is the W-8BEN-E form the same as the W-8BEN form?
No, they are completely different even if they look like the same thing. The W-8BEN form is for foreign individuals, while the W-8BEN-E form is specifically for foreign entities. Notice the additional E in the name of the form used for companies.
How to avoid the US 30% withholding tax for UK and other foreign companies?
If you were unaware of the W-8BEN form, $30,000 out of every $100,000 income would likely be taken off you by the tax.
Please note that the $30,000 or 30% US withholding tax is not based on profit but on gross income.
This tax charge is more significant than in the UK and most European countries. You could lose a lot of money because of the US tax system.
My tax advisors were able to help many of our UK limited company clients to solve this tax nightmare of the IRS and you are welcome to call us or book a 1 to 1 phone consultation at any time.
The W-8BEN form applies to foreign individuals and sole proprietors who earn money or income from US sources.
These individuals must provide a completed W-8BEN form to their US clients to avoid paying taxes to the IRS.
You can only avoid paying tax if:
Your business doesn’t have an office or branch in the US
Your country of origin has a tax treaty with the US
The US tax treaty with the UK allows individuals to make these tax savings.
What does the ‘claim of tax treaty benefits w-8ben uk’ mean?
The United States and the United Kingdom have an agreement called a tax treaty. It makes sure that people don’t have to pay taxes twice on the same money and helps businesses between the two countries.
The treaty explains how much tax people have to pay on different kinds of income like money from stocks, savings, and payments for using ideas or creations when someone from one country earns money from the other country.
Should you allow the IRS to take more money than they do from our UK limited company clients?
Summary
I know from first-hand experience that getting the right tax advice is essential so that you can use the tax-saved money on more critical aspects of your life.
If you don’t qualify for an exemption, you will be required to pay the IRS 30% of your earnings.
In short, the W-8BEN forms determine your status as a foreign individual and based on your country of origin, the W8 form determines how much (if any) tax you owe to the IRS.
You can find out more here on how to request the relevant W-8BEN forms from the IRS.
Download Form-W8BEN-E here today.
I also recommend that you read this article I have written for additional information on how to reduce your US tax bill.
The danger is that you read this article and take no decisive and immediate action to save time and money on your US tax affairs.
If you are having problems understanding the nuances of the W8BEN-E instructions or any other question relating to US tax, do yourself a favour and book time with one of my tax advisors, as I should have done many years ago.
Simon Misiewicz (as seen on You Tube)
