By Terri Eyden
In response to the new requirements imposed by the Foreign Account Taxpayer Compliance Act (FATCA) and the proposed regulations promulgated thereunder, the IRS has prepared two new withholding certificates:
- Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (Individual).
- Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding (Entities).
While the withholding forms provide a first look at the actual new reporting requirements that FATCA ultimately will impose on virtually all non-US persons receiving passive income from US sources, the IRS has not yet published draft instructions for the new certificates. As a result, certain important implementation issues raised under the Proposed Regulations and FATCA generally remain unanswered.
The new withholding certificates effectively divide the information reporting requirements between two classes of payees: nonresident alien individuals and all foreign entities other than individuals.
New W-8BEN will simplify the declarations required to be made by foreign individuals. It will only require basic identifying information, declarations with respect to treaty status (as relevant), and a general certification as to foreign status.
New W-8BEN-E will require each foreign entity to make two distinct declarations:
- The foreign entity's status for purposes of the US outbound withholding tax regime (e.g., the 30 percent withholding tax generally imposed on US-source dividends paid to non-US persons unless reduced by an applicable income tax treaty). This will be the same as the declaration required in the current IRS Form W-8BEN, as last revised in 2006.
- The FATCA-related declaration, which will require an entity to provide substantial detail by declaring its overall status for FATCA purposes from among twenty-four different categories (all described in detail in the Proposed Regulations).
In addition, new W-8BEN-E will require a foreign entity to provide its Foreign Financial Institution Employer Identification Number and FATCA ID, as applicable (both are discussed in the Proposed Regulations).
To learn more about the withholding of tax on nonresident aliens and foreign entities, see IRS Publication 515 (2012).