W-8BEN what's that all about?

Here's a link to the form:
http://www.irs.gov/pub/irs-pdf/fw8ben.pdf

And here are the instructions:
http://www.irs.gov/pub/irs-pdf/iw8ben.pdf

The document is called, Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding
 

I'm not familiar with the form, though I am familiar with
the tax it goes along with.  The instructions give you most
if not all the information you will need to know.
 
The term "beneficial ownership" means who is the person who
really benfits from the transaction, as opposed to the legal
owner, who may not be.  For example when there is a trust,
the trustee is the legal owner but the beneficiary is the
beneficial owner.  There are other situations where one
person (perhaps a parent or someone on the parent's behalf)
takes legal ownership but the person actually intended to
benefit (whether there is a formal trust agreement or not)
is the beneficial owner.
 

The term "beneficial owner" is explained in the
instructions.  It is clear they are talking about the
beneficial owner of the taxable income, not the owner of the
underlying asset.
 
For clarification of the US based people, in the UK the term
"company" generally means "limited company" or, in American,
a corporation.  These are considered separate tax-paying
entities, and the owner of the shares is not generally
considered the beneficial owner of the company's income.
 
Stu

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W-8BEN is used to certify that the recipient of a US-sourced
payment is a non-US person and to claim the benefit of any
reduced rates under the applicable tax treaty.
 

"Beneficial owner" means the beneficial owner of the
payment.  The reason they use this term is because of the
possbility of agents or intermediaries getting in the way.
The form is asking who the payment legally belongs to.  This
is generally the person that will have to treat the payment
as taxable income.
 

If you don't provide the certificate, US law requires that
30% of the payment amount be withheld and turned over to the
Internal Revenue Service.  If there is any question about
whether the company could be considered a US company and a
higher withholding rate would apply to a US person, then the
higher withholding rate would apply.
 

As long as the company is a UK company and pays income taxes
in the UK (i.e. it's not a flow-through type of entity),
then the company is the proper party to be filling out the
form.  What happens later when the company distributes the
funds to the US shareholder is a different tax question.
 
W-9 can only be used to certify that a taxpayer is a US
person.  Since the company is based in the UK, it could not
legitimately sign a W-9 form.
 
I'd recommend contacting an accountant in the US that has
some international tax experience.  You will want to see
whether you should be claiming any tax treaty benefits on
the W-8BEN.
 
--Chris

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Hey, wait.  People have correctly pointed out that the point
of a W8BEN is to establish that a payee is a resident of a
tax treaty country so the payor doesn't have to withhold
tax.
 
BUT, unless I completely misread the instructions, the W8BEN
and the ITIN tax number that it reports is for individual
payees, not businesses.  Since you're a business, I presume
that the business does what it does, and the owners report
their share of the business' profits.  Your American owner
probably pays UK taxes (if he's a UK resident) and credits
that toward his US taxes.
 
If your client is really a UK company with no operations in
the US, I don't see any reason that any US taxes apply.
Perhaps you might want to advise your client's customer that
your client is a company, not an individual, not subject to
US taxes, so W8BEN doesn't apply.
 
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You misread the instructions. On page 3 of the instructions
is the definition of a foreign person: "A foreign person
includes a nonresident alien individual, a foreign
corporation . . ." Form W-8BEN does apply to foreign
companies. They are considered "persons" for this purpose,
as the definition makes clear.
 

That's right. And the company has to provide the Form W-8BEN
to certify that this is the case.
 
Bob Sandler

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The section 1441 tax applies to individuals, but there's a
very similar tax imposed under section 1442 that applies to
corporations. W-8BEN can be used by either individuals or
businesses.
 

Just because the business is a company with no operations in
the US doesn't automatically make it exempt from US taxes.
Payments from US sources can be taxed by the US government,
even if the recipient is a business and even if the
recipient has no operations in the US.  Those taxes are
usually enforced by withholding at the source, since the US
government would otherwise be unable to get jurisdiction
over the recipient.
 
The company should fill out the W-8BEN, as requested,
especially if any of the US-UK tax treaty provisions provide
for a reduced (or maybe even zero) withholding rate on the
type of income involved.
 
--Chris

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