Having a skilled workforce often means targeting and hiring talent across international borders. If a U.S. employer pays foreign employees and contractors outside of the United States, a W-8BEN Form is a necessary tax requirement to certify their country of residence.
The guide below outlines the purpose of a W-8BEN Form, who needs to fill it out, and why it’s a crucial element in your global workforce toolbox.
A W-8BEN is a tax form that classifies a foreign worker’s status as a non-U.S. citizen and determines proper tax reporting and withholdings for the entity providing them income. A W-8BEN Form is formally the Internal Revenue Service's (IRS) Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals). A U.S. employer should request a W-8BEN from any of its non-U.S. citizen employees or international contractors before putting them on payroll.
Foreign individuals working for a U.S. business and receiving U.S. income are subject to a 30% tax withholding rate. However, the U.S. has an income tax treaty with numerous countries that protects individuals from being taxed by both the U.S. government and the government of their country of residence. A W-8BEN Form ensures individuals are not double taxed and determines a reduced withholding rate or exemption, if applicable.
An employee or contractor typically needs to fill out a W-8BEN Form if they apply to the following criteria:
- They are not a U.S. citizen
- They are not a U.S. resident
- They do not have a green card
- They performed the work outside of the U.S.
- They are the beneficial owner of the income provided
An employer is responsible for providing a W-8BEN to their international employee or contractor. It is the employee’s responsibility to complete the W-8BEN and submit it back to their employer before they receive payroll. The form is collected by the withholding agent or payer (typically the employer) or when requested by a Foreign Financial Institution (FFI).
You can download the W-8BEN Form below:
If a W-8BEN form is not collected from the foreign employee or contractor, the individual is subject to the full 30% tax withholding rate on their U.S. income.
A W-8BEN Form is valid for three years. Specifically, it remains in effect from the date it is signed until the last day of the third succeeding calendar year if no change in circumstances has occurred. (For example, if a W-8BEN is signed on August 1, 2022, it is valid until December 31, 2025.)
However, if a change in circumstances affects any of the submitted information, the W-8BEN is no longer valid. The employee or contractor must notify the withholding agent, payer, or FFI within 30 days of the change and file a new W-8BEN Form.
A W-8BEN Form does not need to be submitted to the IRS. Instead, the W-8BEN should be filled out and signed by the employee, and given to the employer or entity allocating payment. An FFI may also request this form to document the non-U.S. account.
W-8 refers to a series of IRS tax forms that foreign individuals or entities fill out to establish their non-U.S. status and claim exemptions. There are five W-8 Forms, including the W-8BEN Form. The other four include:
- W-8BEN-E: Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)
- W-8ECI: Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States
- W-8EXP: Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting
- W-8IMY: Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting
While a W-8BEN is used for foreign individuals, a W-8BEN-E Form is used for foreign entities. If an international contractor acts as an entity, corporation, or partnership rather than as an individual, a W-8BEN-E Form is issued instead.
When it comes to expanding your global workforce, staying compliant with international labor laws and tax requirements is a top priority. A W-8BEN Form helps you adhere to tax regulations and correctly pay your foreign employees and contractors.
While paying an international workforce can be complicated, working with a global partner streamlines the process. Velocity Global's full suite of solutions, cloud-based technology, and personalized expertise connects employers with talent worldwide. Engage, manage, and pay your distributed workforce with Velocity Global's Global Work Platform, including Multi-Country Payroll, global Employer of Record, Contractor Payments, and more.
Reach out and learn how Velocity Global can help you easily pay and manage your global talent.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. You should contact your attorney or tax advisor to obtain legal and/or tax advice with respect to your particular situation. Only your individual attorney or tax advisor can provide assurances that this information – and your interpretation of it – is applicable or appropriate to your specific situation. All liability with respect to actions taken or not taken based on this information are hereby expressly disclaimed. All content is provided "as is" and Velocity Global makes no representations or warranties concerning this information.