The long awaited instructions for Form W-8BEN-E, Certification of Foreign Status of Beneficial Owner for United States Tax Withholding (Entities), were finally posted on the IRS website on June 24, 2014.
Form W-8BEN-E will now be the most common form to be used by foreign entities to certify their status under both (i) Chapter 3 of the U.S. Internal Revenue Code (the Code) relating to the withholding of U.S. tax on U.S. source income of foreign entities, and (ii) Chapter 4 of the Code relating to the withholding of US tax to enforce reporting on certain foreign accounts pursuant to the Foreign Account Tax Compliance Act (FATCA).
The revised Form W-8BEN, on the other hand, is now only to be used by individuals to certify their foreign status under Chapter 3 of the Code and to make a claim of treaty benefits for reduced withholding.
Entities are required to provide their identifying information as well as FATCA classification type in Part I of the Form W-8BEN-E and certify in Part XXIX that the entity is not a U.S. person as well as the entity’s status under FATCA. Part III of the form is used to claim a treaty exemption for certain types of payments from the 30% U.S. federal income tax withholding required under Chapter 3. Parts IV-XXVIII of the form contain separate certifications for each type of FATCA classification for which entities need only focus on the particular section that corresponds to their FATCA classification type selected in Part I.
While some welcome assistance has been provided with the introduction of the Instructions, the continued process of implementation and completion of the Form W-8BEN-E is expected to be complex until the FATCA regime is fully operational.