If you’re located outside the US and doing work for (or being paid by) a US-based company, you may be asked to provide something called an W8BEN form.
This could happen if you are:
- Working freelance for a US company
- Selling ebooks through a US seller, e.g., Amazon
- In a situation where a US entity is paying you but you are not located in the US
What the W8BEN does
The W8Ben is a form created by the Internal Revenue Service (IRS), the tax authority of the United States. Its purpose is simply to certify that the person (or entity, if you’re incorporated), completing the form, AKA the beneficiary of the income in question, is not associated with the US for tax purposes.
Why W8BEN matters
A US entity making payments to a person who is associated with the US for tax purposes, may be legally required to withhold a portion of those payments and forward them to the IRS. This is similar to a Canadian company withholding tax on your paycheque and forwarding it to the Canada Revenue Agency (CRA).
This can be costly and/or a hassle if, as a Canadian-based person, you don’t actually owe tax to the IRS. In order to get that tax back, you may have to file a US return. And if you don’t get it back, you’ll end up paying more income tax in total (because you’re paying it to two countries) than you should have to.
By confirming that the payee is based outside the US, the W8BEN gives the US-based payer the option of not withholding any tax for the IRS. This is not only means less tax for you; it also means less administrative hassle for the payer. So the W8BEN is a win/win.
Who cannot complete a W8BEN
Examples of people associated with the US for tax purposes:
- US citizens (regardless of where they currently live)
- US residents (regardless of their immigration status)
- Corporations considered to be based in the US
If none of these apply to you, and your only connection with the US is that you’re being paid by a US-based entity, you can complete a W8BEN.
How Personal Tax Advisors can help
We can help you complete the W8BEN, though many choose to do it themselves — it is actually a fairly straightforward form.
If you have already had tax withheld by a US payer and would like to discuss your options for either getting it back, or at least reducing your overall tax burden by claiming a foreign tax credit, we can help you with that too.