W-8BEN was introduced to me when I joined BizTalk360. This form is used for all our US Sales for Taxation purpose. I had never seen this form in my life time, and little did I know that soon it was going to give me some nightmares. We realised that we had not been filling the form right for last 2 years when couple of our customers came back asking us for a US Tax Payer Number and if we didn’t provide this soon they will have to withhold 30% of our payment.
But what I failed to understand was that we are a UK based Company and we do not have any business operations in US so why did we need a US Tax Number?
I tried looking up on the internet for more details on W-8BEN but only found lot of confusing and conflicting information, which is also one of the reasons that motivated me to write this Blog.
The last resort for us was to speak to the concerned Authority – IRS. We spoke to the IRS to check on this and we were assured by them that we are on the right path. We were back to where we had started. Hassled and clueless!!! We did not know who to believe.
Finally, Accounts Payable Department of one of our customers pointed out to a treaty between UK and US. A detailed research into this told us that under this treaty we being a Software Company, the payments we would receive from any such sale would be considered as Royalties (Article 12). I think the process is similar for other countries dealing with US ,you need to just find the right treaty document between your country and US.
Further investigation into this I found that all that we needed to do was to apply for a Tax Identification number for “W-8BEN Purpose Only” to claim the benefits of the treaty which is called EIN (Employer Identification Number).
I had heard all complex problems are solved by sudden epiphany, and had just experienced it. All of a sudden I understood the emotion that Newton and Archimedes had felt when they made their discoveries. I had a Eureka moment!!
From there on it was a very a straightforward procedure.
- Downloaded the SS-4 form and filled it up
- When completing line 7b of Form SS-4, the applicant should write “N/A” in the block asking for an SSN or ITIN, unless the applicant already has an SSN or ITIN. When answering question 10 on Form SS-4, the applicant should check the “other” block and write or type in immediately after it one of the following phrases as most appropriate: “For W-8BEN Purposes Only” or “For Tax Treaty Purposes Only”
- Questions 11 through 17 on Form SS-4 do not apply to the applicant because he has no U.S. tax return filing requirement, such questions should be annotated “N/A”. A foreign entity that completes Form SS-4 in the manner described above should be entered into IRS records as not having a filing requirement for any U.S. tax returns
- The form can be mailed or faxed but the easiest was to give a call to a toll number mentioned on the website.
- It took about 30 minutes to get through to the person on the other end and about 20 minutes for the form filling over the phone where we had to spell out the Company name and address. And all that it asked of us was to be patient through this process.
- Our patience was rewarded and we had the EIN verbally at the end of the call. A sigh of relief!!!
- It took about 6 weeks for them to send the hard copy to us by post.
Now all that remained was to fill the W-8BEN form right.
We followed the instructions on the form to fill the other parts such as Name, Address etc. and fill the below bits which were crucial.
- Part I – Line 6 checked the EIN box and entered the EIN number (our newly acquired proud possession)
- Part II – Line 9 Checked the boxes a, b and c
- Part II – Line 10 provided the Article number under which we would claim the treaty benefits, entered the rate, the treaty reduces it to (0%, 10% etc.) and the reason under which the company meets the terms of the treaty.
We now had a fully filled up W-8BEN form which we could present to all our US customers. All through this process we had this lovely person from one of our customer’s Accounts Department guiding us whom I am really thankful to.
So that one was finally ticked off on my To- Do list. I thought I should share this experience with people out there not knowing how easy and straightforward this procedure was.