Foreign persons complete one of the forms in the Form W-8 series (e.g., Form W-8 BEN).US persons do not complete a form in the W-8 series. When the payor of the income has the W-8BEN on file, the payor will be apprised that the payee is a non-US person and will undertake its withholding duties.If the payee is a US person with a completed Form W-9, the payor will know it does not have to withhold this 30% tax.
This payor, also known as a “withholding agent”, has responsibility for withholding the required tax and paying it over to the US Internal Revenue Service (IRS).
In the event withholding is required and the withholding agent fails in its duties, the agent can be held personally liable for the tax.
For this reason, payors are usually very careful to ensure they have undertaken all the necessary actions, part of which is to obtain a certification from the payee as to whether the payee is a US person or a foreign person.
The 30% (or lower Treaty rate) withholding tax is required only for payments made to foreign payees, it is not required when the payee is a US person.
Form W-8BEN must be signed and dated by the beneficial owner of the income, or, by an authorized representative as evidenced by a duly completed Power of Attorney (The IRS Form 2848, Power of Attorney, may be The Form W-8 BEN must be kept up-to-date.
If it is not, the foreign person may find that the agent has wrongfully withheld tax on the income.
It is quite time-consuming, costly and cumbersome to get wrongfully withheld amounts refunded from the IRS.
Non-US persons (whether individuals or entities, such as foreign corporations) are subject to US.
tax at a flat 30% rate on certain kinds of income they receive from US sources.