A W-8 form is a tax form that tells organizations and people doing business within the United States that the person they are doing business with is not a U.S. citizen. The form exempts the foreign resident from certain U.S. tax laws. Four different forms fall under the heading of a W-8 form. Each is used under particular circumstances.
In order to be eligible to use the W-8 form, a person must be a nonresident alien. The Internal Revenue Service (IRS) has published several criteria to determine whether someone is a nonresident alien. To fit this criteria, the person must not have or have had a green card or immigrant visa in the last year. He or she must also not have spent more than 30 days in the United States over the last year or more than 182 in the last three years.
There are four different types of W-8 forms. Form W-8BEN is the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. This is the most commonly used W-8 form. It should be requested of any person who will become the owner of the paid income.
The W-8ECI is used by persons who claim that the income is connected with a trade or business within the United States. This means that although the person who receives the money is foreign, the business itself is not. Often this form is used in connection with U.S. branches of foreign companies.
A W-8EXP should be used only for people who are claiming certain exemptions or withholding reductions under U.S. tax law. The W-8IMY is for intermediaries with foreign partnerships. These are people who receive money on behalf of a foreign country.
The relevant W-8 form should be requested before payments are made to any person who is not a U.S. citizen or resident. It is the responsibility of the U.S. business to request the form. It is also the responsibility of the U.S. business to make sure the relevant W-8 form is filled out completely and accurately. If the form is not filled out correctly, the U.S. business may be held liable.
According to sections 1441 and 1442 of U.S. tax law, U.S. businesses must withhold 30 percent of any payment to a foreign person in order to pay applicable taxes unless a W-8 has been filed. If a form is not requested before payment is made, the U.S. business may be required to pay a 30 percent tax on any money paid out and suffer penalties for noncompliance with IRS tax law.