Payments to Foreign Entities

Payments to Foreign Entities

Flowchart

 Here is an overview of each W-8 form available to Foreign Entities.  Payments to Foreign Entities (not individuals) flowchart

Payments to Foreign Entities

  • Payments for tangible goods or products are not subject to U.S. reporting or tax withholding.
  • Payments for services provided outside the U. S. by Foreign Entities and individuals are considered foreign source, and are not subject to U.S. reporting or withholding.
  • Services provided inside the U.S. are subject to U.S. Taxation which include reporting and/or tax withholding when applicable.
  • Payments for Royalties, Software licenses, or Access or Use licenses purchased from foreign entities and used inside the U.S. are subject to U.S. taxation.

Collect the appropriate W8 form from the organization. There are five W8 forms available.  The vendor may determine the appropriate form by following the criteria outlined at the top of each of the forms or their instructions. The W-8BEN-E form is most commonly used by foreign entities to claim foreign status and treaty benefits. See Central Accounts Payable and Invoice Payments under Forms for W-8 forms and information.

Foreign entities may also use the W-8ECI, W-8IMY and W-8EXP forms if specific criteria outlined on the forms and their associated instructions are met.

W-8BEN: Individuals only, most common form for individuals. This form is used to claim foreign status and can also be used to claim treaty benefits for royalty/passive income or scholarships/fellowships only.

  • Individuals not eligible for the other W8 forms should use the W-8BEN.
  • A birthdate is required on the W-8BEN form.
  • A U.S. Tax identification number is not required unless treaty benefits are requested.
  • Part II, lines 9 and 10 are not required unless treaty benefits are requested.
  • Treaty Benefit requests for an exemption from tax withholding must be made "form"ally and do require a U.S. Individual Taxpayer Identification Number or a U.S. Social Security Number.
  • Not all countries have a tax treaty with the U.S., and not all tax treaties contain a tax exemption for for student scholarships/fellowships.
  • Royalty or scholarships/fellowships Treaty Benefits requests can be made using the W-8BEN form, and require completion of all fields in lines 9 and 10.
  • Independent personal services or honorarium Treaty Benefits requests can only be made one an 8233 form.   The 8233 form requires U.S. taxpayer identification number. Otherwise these payments will require 30% tax withholding.  All taxes withheld are paid to the IRS in the individuals name. See 1042-s reporting.  Contact Joy Germack at jgermack@uoregon.edu for assistance with the 8233 form.

W-8BEN-E: Used primarily by entities  to claim foreign status and and also to claim treaty benefits.

  • Entities not eligible for the other W8 forms should use the W-8BEN-E.
  • A foreign entity from a country that has negotiated a tax treaty with the U.S. that has an article contained that exempts the type of income they are providing, will need to complete a W-8BEN-E to claim treaty benefits.
  • A Foreign or a U.S. tax identification number is required for exemption from tax withholding.
  • All fields in line 14-15 must be completed to claim treaty benefits exemption.

W-8ECI: Used primarily by the payee or beneficial owner that all the income that is listed on the form is effectively connected with the conduct of a trade or business located within the United States.

  • The type of income must be identified on Line 9 of the form to qualify for exemption. If it is not listed we are required to obtain from the entity a different type of W8 form.
  • A U.S. tax identification number is required for exemption from tax withholding.

W-8EXP: Used by the following entities to claim exemption from tax withholding, foreign governments, foreign tax exempt organization, foreign private foundation, govt. of a U.S. possession, or foreign central bank of issue.

  • The entity must be claiming exemption under IRS code 115(2), 501 (c), 892, 895 or 1443(b). Otherwise they need to file a W-8BEN or W-8ECI.

W-8IMY: Used by an intermediary, a withholding foreign partnership, a withholding foreign trust, or flow through entity.

  • Copies of appropriate withholding certificates, documentary evidence, and withholding statements must be attached to the W-8IMY as well.