Form W 8BEN E 2023 is tax information related to non-US legal entities (like W 8BEN E India) withholding tax benefit under the Treaty for income from US. Further, W 8BEN E Form instructions clearly provides for certain specific details to be filled out to claim treaty benefit.
| Who is required to file W 8BEN E Form ? | Non US Legal Entity |
| Tax Treaty benefit available under W 8BEN Form | Yes, after filling Part III, Tax Treaty benefit can be availed |
| Can lower tax deduction on royalty income be claimed by W 8BEN ? | Yes |
| Can a Partnership file Form W 8 BEN E to avail treaty benefit? | Yes |
| Can a Trust file Form W 8 BEN E to avail treaty benefit? | Yes |
| Can a Disregarded Entity file Form W 8 BEN E to avail treaty benefit? | Yes |
| Importance of W 8 BEN E | Reduced withholding tax, Tax Treaty benefits, etc. |
| W 8Ben and W 8BEN E are same | No |
Introduction
W 8BEN E Form is a crucial document in the context of international taxation and regulatory compliance. It is a tax form used by foreign entities, including Indian entities, to establish their status as foreign taxpayers with the United States Internal Revenue Service (IRS).
The W 8BEN E is specifically designed for foreign entities, such as corporations, partnerships, trusts, and other entities that derive income from U.S. sources. In this Article we would cover the following aspects : –
- What is W 8BEN E Form?
- Importance of W 8BEN E Form
- Eligibility for Form W 8BEN E
- Requirements under Form W 8BEN E
- Claiming Treaty Benefit under W 8BEN E
- Compliance Requirements for Form W 8BEN E
- Penalties for Non-Compliance
- Practical Case Study of Form W-8BEN-E
- Conclusion
What is W 8BEN E Form?
Foreign entities use W 8BEN E, a specific tax form, to certify their foreign status to the United States Internal Revenue Service (IRS). The primary purpose of this form is to establish the foreign entity’s eligibility for reduced withholding tax rates or exemptions when they receive income from U.S. sources. In essence, W 8BEN E helps prevent over-withholding of U.S. taxes on payments made to foreign entities.
Importance of W 8BEN E Form
Indian entities engaged in cross-border transactions with the United States have a significant interest in W 8BEN E Form. Here are some reasons why this form is crucial for Indian entities:
- Avoidance of Double Taxation: By filing W 8BEN E, Indian entities can claim the benefits of this tax treaty, reducing the risk of paying taxes on the same income in both countries.
- Reduced Withholding Tax: Completing W 8BEN E allows Indian entities to claim reduced withholding rates or exemptions, preserving more of their income.
- Compliance with U.S. Regulations: The IRS requires foreign entities to provide accurate and up-to-date information about their structure and ownership.
Eligibility for Form W 8BEN E
W 8BEN E is applicable to non US legal entities that can get benefit of lower taxation under the double tax avoidance treaty. It can be taken by different entities like:
- Corporations
- Trusts
- Partnership
- Estate
- International Organization
- Disregarded Entity, etc.
Don’t know how to fill W 8BEN E or unsure if it should be filed or not? Book a consultation today.
Requirements under Form W 8BEN E
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Part I – Identification of Beneficial Owner
Part I of W 8BEN E instructions focuses on identifying the beneficial owner of the income. For Indian entities, the beneficial owner is the entity that is the ultimate recipient of the income.
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Part III – Claiming Treaty Benefit
This part signifies the fact that the person is claiming tax treaty benefit between US and their country of residence. It provides for specification of income and paragraphs and articles of the tax treaty for claiming the benefit of lower taxation.
What is the right clause to complete W 8BEN E? Contact us today.
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Relevant Part as per the Entity’s Status
The relevant part is to be filled as per the status of the entity. There are categories in which an entity is divided with different instructions and specifications like:
- Active Non-Financial Foreign Entity (Active NFFE)
- Passive Non-Financial Foreign Entity (Passive NFFE)
- Participating Foreign Financial Institutions (Participating FFIs)
- Owner-Documented FFI
- Restricted Distributor, etc.
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Part XXX – Certification of Beneficial Owner
This certifies the accuracy of the information provided in previous parts. Indian entities should verify that the information is correct, and the authorized person has the authority to complete the form on behalf of the entity.
Claiming Treaty Benefit under W 8BEN E
Additionally, the beneficial owner is to fill out Part III of the form for claiming Tax Treaty benefits through W 8BEN E instructions. Filling Part III is a complicated process and requires knowledge of the US Tax Treaty with the applicable country.
- Relevant Article of the Treaty for claiming the benefit
- Relevant Paragraph of the Treaty for claiming the benefit
- The applicable withholding rate to be clearly filled out
- Explanation on eligibility for the rate of withholding
It is therefore essential to fill out these information accurately and correctly to avoid rejection or penalties.
Unsure how to fill Part III of W8BEN E to claim Treaty Benefit? We can help you with that.
Compliance Requirements for W 8BEN E
Indian entities must ensure compliance and these include:
- Documentation and Reporting: Indian entities should maintain accurate records related to their U.S. income and transactions.
- Fulfillment of Tax Obligations: Filing W 8Ben E does not exempt Indian entities from their tax obligations in India.
Can you fill W 8BEN E and get withholding tax benefits? Reach out to us know.
Penalties for Non-Compliance
Non-compliance with by the failure to file or inaccurately completing Form 8Ben-E can result in various penalties and adverse consequences for Indian entities. Some potential penalties and consequences include:
- Withholding at Maximum Rate: Failure to provide a valid W 8BEN E may lead to the U.S. withholding agent withholding taxes at the maximum statutory rate, resulting in a higher tax liability.
- Interest and Penalties: Late or inaccurate filings can result in interest charges and penalties imposed by the IRS.
- Loss of Treaty Benefits: Non-compliance may cause Indian entities to lose the benefits of the U.S.-India tax treaty, leading to higher tax liabilities on U.S.-sourced income.
Practical Case Study of W-8BEN-E
ABC Pvt. Ltd., an Indian company, is transacting with XYZ Inc., a US company, in relation to electronic products. It had income of $1000 from such transaction.
If ABC Pvt. Ltd. files the W 8BEN E 2023, it would not be able to get withholding tax treatment for its income as per the India-US Tax Treaty.
Conclusion
In conclusion, W 8BEN E 2023 holds great significance for Indian and other foreign entities involved in cross-border transactions with the United States. This tax form serves as a key tool for establishing the foreign status of Indian entities and plays a pivotal role in their ability to optimize their tax position when dealing with U.S. income sources.
We can solve your query on W 8BEN E. Contact us today.
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This article was supported and created through efforts of Ms. Rashi Khandelwal, as a part of her legal internship at Sorting Tax.
