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Tax Help Archives > 2006 > Instructions > Form W-8BEN, W-8ECI, W-8EXP, & W-8IMY (Requester)
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| Instructions for Form W-8BEN, W-8ECI, W-8EXP, & W-8IMY (Requester) |
2006 Tax Year |
Instructions for the Withholding Agent
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
These instructions supplement the instructions for:
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Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.
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Form W-8ECI, Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the
Conduct of a Trade or Business in the United States.
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Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding.
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Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax
Withholding.
For general information and the purpose of each of the forms described in these instructions, see those forms and their accompanying
instructions.
Throughout these instructions, a reference to or mention of “Form W-8” includes Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY.
A withholding agent must withhold 30% of any payment of an amount subject to withholding made to a payee that is a foreign
person unless it can
associate the payment with documentation (for example, Form W-8 or Form W-9) upon which it can rely to treat the payment as
made to (a) a
payee that is a U.S. person or (b) a beneficial owner that is a foreign person entitled to a reduced rate of withholding. However, a
withholding agent making a payment to a foreign person need not withhold if the foreign person assumes responsibility for
withholding on the payment
as a qualified intermediary, a withholding foreign partnership, or a withholding foreign trust and has provided a valid Form
W-8IMY. Withholding is
also not required if the payment is made to a U.S. branch of certain foreign insurance companies or foreign banks that agree
to be treated as U.S.
persons and provide a valid Form W-8IMY.
Generally, an amount is subject to withholding if it is an amount from sources within the United States that is fixed or determinable
annual or
periodical (FDAP) income. FDAP income is all income included in gross income, including interest (and original issue discount),
dividends, rents,
royalties, and compensation. FDAP income does not include most gains from the sale of property (including market discount
and option premiums). FDAP
income also does not include items of income excluded from gross income without regard to the U.S. or foreign status of the
owner of the income, such
as interest under section 103(a).
Who Is the Withholding Agent?
Any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding or who can disburse
or make payments of an
amount subject to withholding is a withholding agent. The withholding agent may be an individual, corporation, partnership,
trust, association, or any
other entity, including (but not limited to) any foreign intermediary, foreign partnership, or U.S. branch of certain foreign
banks and insurance
companies. If several persons qualify as withholding agents for a single payment, the tax required to be withheld must only
be withheld once.
Generally, the person who pays (or causes to be paid) an amount subject to withholding to the foreign person (or to its agent)
must withhold. See the
instructions for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign
Person's U.S. Source Income Subject to Withholding, for return filing and information reporting obligations.
Responsibilities of the Withholding Agent
If you are a withholding agent making a payment of U.S. source interest, dividends, rents, royalties, commissions, nonemployee
compensation, other
fixed or determinable annual or periodical gains, profits, or income, and certain other amounts (including broker and barter
exchange transactions,
and certain payments made by fishing boat operators), you are generally required to obtain from the payee either a Form W-9, Request for
Taxpayer Identification Number and Certification, or a Form W-8. These forms are also used to establish a person's status
for purposes of domestic
information reporting (for example, on a Form 1099) and backup withholding. If you receive a Form W-9, you must generally
make an information return
on a Form 1099. If you receive a Form W-8, you are exempt from reporting on Form 1099, but you may have to file Form 1042-S
and withhold under the
rules applicable to payments made to foreign persons. See the Instructions for Form 1042-S for more information.
Generally, you must withhold 30% from the gross amount paid to a foreign person unless you can reliably associate the payment
with a Form W-8. You
can reliably associate a payment with a Form W-8 if you hold a valid form, you can reliably determine how much of the payment
relates to the form, and
you have no actual knowledge or reason to know that any of the information or certifications on the form are unreliable or
incorrect.
Do not send Forms W-8 to the IRS. Instead, keep the forms in your records for as long as they may be relevant to the determination
of
your tax liability under section 1461. Use the information on Forms W-8 to prepare Forms 1042-S.
Failure To Obtain Form W-8 or Form W-9 — Presumption Rules
If you do not receive a Form W-8 or Form W-9, or cannot otherwise determine whether a payment should be treated as made to
a U.S. person or to a
foreign person, use the presumption rules provided in the regulations under sections 1441, 6045, and 6049.
Request a Form W-8 from any person to whom you are making a payment that you presume or otherwise believe to be a foreign
person. You should
request the form before making a payment so that you have the form when you make the payment. A withholding agent or payer
that fails to obtain a Form
W-8 or Form W-9 and fails to withhold as required under the presumption rules may be assessed tax at a 30% rate (foreign-person
withholding) or backup
withholding rate of 28%, as well as interest and penalties for lack of compliance.
When you receive a completed Form W-8, you must review it for completeness and accuracy. This responsibility extends to the
information attached
to Form W-8IMY, including beneficial owner withholding certificates or other documentation and information. The following
special rules apply when
requesting a specific type of Form W-8.
Request Form W-8BEN from any foreign person or organization to which you are making a payment if it is the beneficial owner
of the income, whether
or not it is claiming a reduced rate of, or exemption from, withholding.
Also request Form W-8BEN when a payee may claim an exception from domestic information reporting as a foreign person or to
establish that certain
income is not effectively connected with the conduct of a U.S. trade or business.
A beneficial owner is required to enter its U.S. taxpayer identification number (TIN) on line 6 of Form W-8BEN if it is a
beneficial owner that is
claiming benefits under an income tax treaty.
However, a U.S. TIN is not required to be shown in order to claim treaty benefits on the following items of income:
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Dividends and interest from stocks and debt obligations that are actively traded;
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Dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940
(mutual
fund);
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Dividends, interest, or royalties from units of beneficial interest in a unit investment trust that are (or were upon issuance)
publicly
offered and are registered with the SEC under the Securities Act of 1933; and
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Income related to loans of any of the above securities.
A U.S. TIN is not required to claim treaty benefits if the payment is unexpected and you, the withholding agent, meet certain
requirements. A
payment is unexpected if you or the beneficial owner could not have reasonably anticipated the payment during a time when
an IRS individual taxpayer
identification number (ITIN) could be obtained. This could be due to the nature of the payment or the circumstances in which
the payment is made. A
payment is not considered unexpected solely because the amount of the payment is not fixed. For more information, see Regulations
section 1.1441-6(g).
Request Form W-8ECI from any foreign person or organization to which you are making a payment if it is the beneficial owner
of the income and it
claims that the income is effectively connected with the conduct of a trade or business within the United States.
Note:
If you receive a Form W-8ECI without a U.S. TIN entered on line 6, you generally may not treat the income as effectively connected
with a U.S.
trade or business and you must apply the appropriate presumption rules.
Your receipt of Form W-8ECI serves as a representation by the payee or beneficial owner that all the income with which that
form is associated is
effectively connected with the conduct of a trade or business within the United States. Therefore, if a beneficial owner provides
you with a Form
W-8ECI, you may treat all of the U.S. source income identified on
line 9 paid to that beneficial owner as effectively connected with the conduct of a trade or business within the United States.
If you pay items of income that are not identified on line 9 by the beneficial owner as effectively connected with the conduct
of a trade or
business within the United States, you are generally required to obtain from the payee another type of Form W-8.
You may not treat an amount as income effectively connected with the conduct of a trade or business within the United States
unless the beneficial
owner gives you a valid Form W-8ECI. However, there are exceptions for income paid on notional principal contracts and payments
made to certain U.S.
branches.
Notional principal contracts.
Withholding at a 30% rate is not required on amounts paid under the terms of a notional principal contract whether
or not a Form W-8ECI is
provided. However, if the income is effectively connected, it is reportable by the withholding agent on Form 1042-S. A withholding
agent must treat
income as effectively connected with the conduct of a U.S. trade or business, even if a Form W-8ECI has not been received,
if the income is paid to a
qualified business unit of a foreign person located in the United States or, if the income is paid to a qualified business
unit of a foreign person
located outside the United States and the withholding agent knows, or has reason to know, the payment is effectively connected
with the conduct of a
U.S. trade or business. However, a payment is not treated as effectively connected with the conduct of a trade or business
within the United States if
the payee provides a Form W-8BEN representing that the income is not effectively connected with a U.S. trade or business or
makes a representation in
a master agreement that governs the transactions in notional principal contracts between the parties (for example, an International
Swaps and
Derivatives Association Agreement), or in the confirmation on the particular notional principal contract transaction, that
the payee is a U.S. person
or a non-U.S. branch of a foreign person.
Payments to certain U.S. branches.
A payment to a U.S. branch of certain foreign persons is presumed to be effectively connected with the conduct of
a trade or business within the
United States even if the foreign person (or its U.S. branch) does not give you a Form W-8ECI. U.S. branches to which this
presumption applies are:
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A U.S. branch of a foreign bank subject to regulatory supervision by the Federal Reserve Board.
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A U.S. branch of a foreign insurance company required to file a National Association of Insurance Commissioners (NAIC) annual
statement with
the insurance department of a state, a territory, or the District of Columbia.
However, a payment to a U.S. branch described above is not treated as effectively connected income if the branch provides
a Form W-8IMY on which it
indicates that the income it receives is not effectively connected with the conduct of a trade or business within the United
States and that it is
using Form W-8IMY either to transmit appropriate documentation for persons for whom the branch receives the payment or as
evidence of its agreement
with the withholding agent to be treated as a U.S. person. If Form W-8IMY is not provided and the income received by the branch
is not effectively
connected income, then the branch must withhold, whether the payment is collected on behalf of other persons or on behalf
of another branch of the
same entity.
Request Form W-8EXP from any foreign government, international organization, foreign central bank of issue, foreign tax-exempt
organization,
foreign private foundation, or government of a U.S. possession to which you are making a payment if such person is claiming
an exemption from
withholding under section 115(2), 501(c), 892, or 895, or claiming a reduced rate of withholding under section 1443(b). For
all other purposes,
request Form W-8BEN or W-8ECI.
A withholding agent may treat a payee as an international organization without requiring a Form W-8EXP if the name of the
payee is one designated
as an international organization by Executive Order (pursuant to 22 U.S.C. 288 through 288(f)) and other facts surrounding
the payment reasonably
indicate that the beneficial owner of the payment is an international organization. With regard to amounts derived from bankers'
acceptances, a
withholding agent may treat a payee as a foreign central bank of issue without requiring a Form W-8EXP if the name of the
payee and other facts
surrounding the payment reasonably indicate that the beneficial owner of the payment is a foreign central bank of issue.
A U.S. TIN is required if the beneficial owner is claiming an exemption based solely on a claim of tax-exempt status as a
foreign private
foundation (or other foreign organization described under section 501(c)). However, a U.S. TIN is not required from a foreign private
foundation that is subject to the 4% excise tax on gross investment income (under section 4948(a)) on income that would be
exempt from withholding
except for section 4948(a) (for example, portfolio income).
Request Form W-8IMY from any person that is an intermediary (whether a qualified intermediary or a nonqualified intermediary),
a withholding
foreign partnership, a withholding foreign trust, or a flow-through entity. A flow-through entity includes a foreign partnership
(other than a
withholding foreign partnership), a foreign simple or grantor trust (other than a withholding foreign trust), and, for any
payments for which a treaty
benefit is claimed, any entity to the extent it is treated as fiscally transparent under section 894. Appropriate withholding
certificates,
documentary evidence, and withholding statements must be associated with Form W-8IMY or you must apply the presumption rules.
Note:
A qualified intermediary, withholding foreign partnership, or a withholding foreign trust must provide the EIN that was issued
to the entity in
such capacity (such as its “QI-EIN”, “WP-EIN”, or “WT-EIN”). Otherwise, any Form W-8IMY it submits is not valid.
Due Diligence Requirements
You are responsible for ensuring that all information relating to the type of income for which Form W-8 is submitted is complete
and appears to be
accurate. You may rely on the information and certifications provided on the form (including the status of the beneficial
owner as an individual,
corporation, etc.) unless you have actual knowledge or reason to know that the information is unreliable or incorrect. You
have reason to know that
the information is unreliable or incorrect if you have knowledge of relevant facts or statements contained in the withholding
certificate or other
documentation that would cause a reasonably prudent person in the position of the withholding agent to question the claims
made. For example, if you
have information in your records that contradicts information provided on the form, you may not rely on the form. If you know
or have reason to know
that any information is unreliable or incorrect, you must obtain a new Form W-8 or other appropriate documentation.
Financial institutions and actively traded instruments.
If you are a financial institution (including a regulated investment company) paying dividends and interest from stocks
and debt obligations that
are actively traded, dividends from any redeemable security issued by an investment company registered under the Investment
Company Act of 1940,
dividends, interest, or royalties from units of beneficial interest in a unit investment trust that are (or were upon issuance)
publicly offered and
registered with the SEC under the Securities Act of 1933, and amounts paid with respect to loans of such securities, you have
reason to know that the
Form W-8 is unreliable or incorrect for payments to direct account holders if one or more of the following circumstances exist.
In that case, you must
either request a new form or additional documentation to substantiate the claims on the form.
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The Form W-8 is incomplete with respect to any item that is relevant to the claims made, the form contains any
information that is inconsistent with the claims made, the form lacks information necessary to establish that the beneficial
owner is entitled to a
reduced rate of withholding, or the withholding agent has other account information that is inconsistent with the claims made.
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The Form W-8 is used to establish foreign status and has a permanent residence address in the United States, a
mailing address in the United States, the withholding agent has a residence or mailing address in the United States as part
of its account information
or is notified of a new residence or mailing address in the United States. However:
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a. |
An individual who has provided a Form W-8 may be treated as a foreign person if: |
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The withholding agent has in its possession or obtains documentary evidence (which does not contain a U.S. address) that has
been provided
within the past 3 years, the documentary evidence supports the claim of foreign status, and the individual provides the withholding agent
with a reasonable explanation, in writing, supporting his or her claim of foreign status, or
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The account is maintained at an office of the withholding agent outside the United States and the withholding agent is required
to report
payments to the individual annually to the tax authority of the country in which the office is located and that country has
an income tax treaty in
effect with the United States.
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b. |
An entity that has provided a Form W-8 may be treated as a foreign person if the withholding agent does not know
or have reason to know that it is a flow-through entity and:
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The withholding agent has in its possession or obtains documentation that substantiates that the entity is actually organized
or created
under the laws of a foreign country, or
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The account is maintained at an office of the withholding agent outside the United States and the withholding agent is required
to report
payments to the entity annually to the tax authority of the country in which the office is located and that country has an
income tax treaty in effect
with the United States.
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The form is provided with respect to an offshore account and the account holder has standing
instructions directing the withholding agent to pay amounts from its account to an address in, or an account maintained in,
the United States, unless
the account holder provides a reasonable explanation in writing that supports its foreign status.
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The Form W-8 is used to establish residence in a treaty country and: |
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The permanent residence address is not in the treaty country or the withholding agent is notified of a new
permanent residence address that is not in the treaty country. However, the beneficial owner may be treated as a resident
of the treaty country if it
provides a reasonable explanation for the permanent residence address outside the treaty country or the withholding agent has in its
possession, or obtains, documentary evidence that establishes residency in a treaty country.
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b. |
The mailing address is not in the treaty country or the withholding agent has a mailing address that is not in the
treaty country as part of its account information. However, the beneficial owner may be treated as a resident of the treaty
country if:
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The withholding agent has in its possession, or obtains, additional documentation supporting the claim of residence in the
treaty country
and the additional documentation does not contain an address outside the treaty country,
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The withholding agent has in its possession, or obtains, documentation that establishes that the beneficial owner is an entity
organized in
a treaty country (or an entity managed and controlled in a treaty country, if required by the applicable treaty),
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The withholding agent knows that the beneficial owner is a bank or insurance company that is a resident of the treaty country
and the
mailing address is the address of a branch of that bank or insurance company, or
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The beneficial owner provides a written statement that reasonably establishes that it is a resident of the treaty country.
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c. |
The account holder has standing instructions for the withholding agent to pay amounts from its account to an
address outside, or an account maintained outside, the treaty country unless the direct account holder provides a reasonable
explanation in writing
establishing the account holder's residency in a treaty country.
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For additional information on the due diligence requirements applicable to withholding agents, see Regulations section
1.1441-7(b).
Dual claims.
If you are making payments to a foreign entity that is simultaneously claiming a reduced rate of tax on its own behalf
and on behalf of persons in
their capacity as interest holders in that entity, you may, at your option, accept the dual claims even though you hold different
withholding
certificates that require you to treat the entity inconsistently for different payments or for different portions of the same
payment. If, however,
inconsistent claims are made for the same portion of a payment, you may either reject both claims and request consistent claims
or you may choose
which reduction to apply.
Requesting a New Form W-8
Request a new Form W-8:
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Before the expiration of an existing Form W-8 (see Period of Validity below for more information),
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If the existing form does not support a claim of reduced rate for a type of income that the submitter of the form has not
previously
received, or
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If you know or have reason to know of a change in circumstances that makes any information on the current form unreliable
or
incorrect.
Example.
A foreign investor opens an account with a broker to purchase U.S. Treasury bonds and provides Form W-8BEN to obtain the portfolio
interest
exemption. The investor does not complete Part II of Form W-8BEN (because he is not claiming treaty benefits). Later, the
investor purchases U.S.
stock and claims treaty benefits on dividend income. The investor at that time completes a new Form W-8BEN providing the information
required in Part
II.
Generally, a Form W-8BEN provided without a U.S. TIN will remain in effect for a period starting on the date the form is signed
and ending on the
last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect.
For example, a Form
W-8BEN signed on September 30, 2003, remains valid through December 31, 2006. A Form W-8BEN with a U.S. TIN will remain in
effect until a change of
circumstances makes any information on the form incorrect, provided that the withholding agent reports on Form 1042-S at least
one payment annually to
the beneficial owner.
Generally, a Form W-8ECI will remain in effect for a period starting on the date the form is signed and ending on the last
day of the third
succeeding calendar year, unless a change in circumstances makes any information on the form incorrect.
Generally, a Form W-8EXP provided without a U.S. TIN will remain in effect for a period starting on the date the form is signed
and ending on the
last day of the third succeeding calendar year. However, in the case of an integral part of a foreign government (within the
meaning of Temporary
Regulations section 1.892-2T(a)(2)) or a foreign central bank of issue, a Form W-8EXP filed without a U.S. TIN will remain
in effect until a change in
circumstances makes any of the information on the form incorrect. A Form W-8EXP furnished with a U.S. TIN will remain in effect
until a change in
circumstances makes any information on the form incorrect provided that the withholding agent reports on Form 1042-S at least
one payment annually to
the beneficial owner.
Generally, a Form W-8IMY remains valid until the status of the person whose name is on the certificate is changed in a way
relevant to the
certificate or circumstances change that make the information on the certificate no longer correct. The indefinite validity
period does not extend,
however, to any withholding certificates, documentary evidence, or withholding statements associated with the certificate.
Moreover, it does not
extend to any statements attached to the certificate if a change of circumstances makes the information on the attached statements
no longer correct.
Forms Received That Are Not Dated
If a Form W-8 is valid except that the person providing the form has not dated the form, the withholding agent may date the
form from the day it is
received and measure the validity period from that date.
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