Pioneering a path through paperwork and tax codes

What are W-8ECI and W-8BEN Forms?

Generally, a foreign person is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to U.S. tax of 30%. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person’s country of residence and the U.S.  If you expect to receive both income that is effectively connected (rental income) and income that is not effectively connected (bank interest, dividends) from a withholding agent, you must provide Form W-8ECI for the effectively connected income and Form W-8BEN for income that is not effectively connected.

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 U.S.

You must give Form W-8ECI to the withholding agent or payer (management company or booking agent) if you are a foreign person and you are the beneficial owner of U.S. source income that is (or is deemed to be) effectively connected with a U.S. trade or business.  Effectively connected income must be reported along with the appropriate expenses on your annual US income tax return.  Follow the above link for sample form and instructions…

Form W-8BEN – Certificate of Foreign Status of Beneficial Owner for U.S. Tax Withholding

During the tax year, you may receive Form W-8BEN from your bank or lender.  The form confirms your foreign status and is generally associated with income that is not effectively connected with a U.S. trade or business such as bank interest, royalties or dividends.

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