What are W-8 forms? 

W-8 forms are Internal Revenue Service (IRS) tax forms used by foreign persons or entities to certify tax status when receiving income from US sources. W-8 forms are also known as Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).

What are W-8 forms used for?

W8 are mandated forms used to collect the correct nonresident alien (NRA) taxpayer information. Foreign persons are subject to a 30% tax rate on income they received from the US that consists of:

• Interest

• Dividends

• Rents

• Royalties

• Premiums

• Annuities

• Compensation for, or in expectation of, services performed

• Substitute payments in a securities lending transaction

• Other fixed or determinable annual or periodical gains, profits or income

Who can file W-8 forms?

Non-resident or foreign businesses who receive US income must file these forms to verify their country of residence. Residents of a foreign country that the US has an income tax treaty with can claim a reduced tax rate or exemption.

According to the US Securities and Exchange Commission (SEC), a person may also be required to submit a W-8 form to claim an exception from domestic information reporting and backup withholding for certain types of income that are not subject to foreign-person withholding.

Such income includes:

• Broker proceeds

• Short-term (183 days or less) original issue discount (OID)

• Bank deposit interest

• Foreign source interest, dividends, rents, or royalties

• Proceeds from a wager placed by a nonresident alien individual in the games of blackjack, baccarat, craps, roulette, or big-6 wheel

US citizens are not required to fill this form.

How to file W-8 forms

The completed W-8 form must be sent to the person requesting it. This will typically be the person the payment is being received from or the creditor of the account. It is important to provide the completed W-8 form before the income is received.

Failure to provide the W-8 form could lead to the agent withholding a 30% tax rate or backup withholding rate. 

If there is a change in circumstances, making any information on the submitted W-8 form incorrect, the withholding agent or payer must be notified within 30 days of the change and a new W-8 form or other appropriate form must be filed.