Form W-8BEN & W-8BEN-E: What is it and how is it used?

## **What is form W-8BEN and W-8BEN-E?**

Form W-8BEN is a tax form used by foreign individuals who are not U.S. citizens or residents to declare their foreign status to the United States Internal Revenue Service (IRS). This form is a part of the U.S. tax system and is used to establish that the foreign individual is not subject to U.S. tax withholding on certain types of income, such as interest, dividends, rents, and royalties, earned in the United States.\
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Form W-8BEN-E is a tax form used by foreign entities, such as corporations, partnerships, and other organizations, to establish their foreign status and claim beneficial owner status for tax purposes in the United States. This form is related to Form W-8BEN but is specifically designed for entities rather than individuals.

## **Understanding form W-8BEN and W-8BEN-E**

Form W-8BEN, officially titled "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)," is designed to help U.S. withholding agents determine whether they need to withhold a portion of the income they are paying to a foreign individual. The form collects essential information about the individual's foreign status, tax residency, and eligibility for reduced or exemption from U.S. tax withholding.\
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Form W-8BEN-E, officially titled "Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities)," is a document that foreign entities complete to provide information about their foreign status, tax residency, and eligibility for reduced or exempt tax withholding on income earned in the U.S.

## **Purpose of form W-8BEN and W-8BEN-E**

The primary purpose of Form W-8BEN is to establish the foreign individual's status as a beneficial owner of income earned in the U.S. The form provides information that helps the IRS and U.S. financial institutions ensure that the appropriate amount of tax is withheld and reported according to the U.S. tax laws and any applicable tax treaties.

The main purpose of Form W-8BEN-E is to help U.S. withholding agents determine whether they should withhold a portion of payments made to foreign entities. Just like with individuals, this form helps ensure that the appropriate amount of tax is withheld and reported according to U.S. tax laws and any applicable tax treaties.

### **Uses of Form W-8BEN** 

* **Preventing double taxation:** Many countries have tax treaties with the United States that allow foreign individuals to avoid being taxed on the same income in both their home country and the U.S. Form W-8BEN helps individuals claim the benefits of these tax treaties, which may reduce or eliminate U.S. tax withholding.
* **Reduced withholding rates:** Foreign individuals who qualify for a reduced rate of withholding on certain types of income, such as dividends or royalties, can use Form W-8BEN to certify their eligibility. This ensures that they are subject to a lower rate of withholding or no withholding at all.
* **Interest and dividend payments:** U.S. financial institutions, like banks and investment firms, often require foreign individuals to submit Form W-8BEN before making payments of interest or dividends. This form helps the institutions comply with IRS regulations regarding tax withholding.
* **Rental income and royalties:** Foreign individuals receiving rental income or royalties from U.S. sources may need to provide Form W-8BEN to document their foreign status and claim any applicable reduced withholding rates.

### **Uses of Form W-8BEN-E**

* **Preventing overlapping taxes:** Similar to individuals, foreign entities can also face the risk of being taxed twice on the same income – once in the U.S. and once in their home country. Form W-8BEN-E helps foreign entities claim the benefits of tax treaties and avoid this double taxation.
* **Reduced withholding rates:** If a foreign entity qualifies for a reduced tax withholding rate or an exemption, Form W-8BEN-E helps them prove their eligibility. This ensures that they are subject to the correct and fair amount of tax withholding.
* **Income from U.S. sources:** When foreign entities receive various types of income in the U.S., such as interest, dividends, royalties, or rents, the IRS requires them to provide this form. By doing so, the entities can confirm their foreign status and meet the IRS requirements.
* **Documentation for financial transactions:** Many financial transactions involving foreign entities, like opening bank accounts or investing in U.S. markets, require the submission of Form W-8BEN-E. This helps financial institutions comply with tax regulations and verify the entity's tax status.

## **Essential Tax Documents needed for International Investors** 

The W-8BEN and W-8BEN-E forms serve as crucial U.S. tax documents tailored for individuals who are not U.S. residents. These forms are utilized jointly by Hedonova and the IRS to determine your residency status and the applicable tax obligations related to your investment profits with Hedonova. Prior to initiating withdrawals from Hedonova, it is imperative to have these forms properly completed and on record.

In the event that you do not provide these forms as substantiation of your non-U.S. residency status, Hedonova will be obligated to retain 30% of your upcoming investment profits and remit this withheld amount as a withholding tax to the IRS. However, by diligently completing a new W-8BEN/W-8BEN-E form with accuracy and completeness, the need for withholding U.S. income tax can be obviated.

To fulfill the W-8BEN or W-8BEN-E requirements, the process is carried out within the Tax Information section of your account settings:

## **Frequently Asked Questions**

### What are the W-8BEN and W-8BEN-E forms, and why do I need to complete them?

The W-8BEN and W-8BEN-E forms are essential U.S. tax documents specifically designed for individuals who are not U.S. residents. Completing these forms is necessary for Hedonova and the IRS to determine your residency status and the applicable tax obligations related to your investment profits with Hedonova.

### Who needs to fill out Form W-8BEN?

All non-U.S. individual taxpayers who withdraw funds from Hedonova must complete the W-8BEN form to verify that they are not U.S. Persons.

If you are representing an entity, you must complete Form W-8BEN-E instead of the W-8BEN.

### What happens if I don't complete the W-8BEN/W-8BEN-E forms?

Failure to complete the W-8BEN/W-8BEN-E forms as proof of your non-U.S. residency status could result in Hedonova withholding up to 30% of your future investment profits. This withheld amount would then be remitted as a withholding tax to the IRS.

### What is the IRS?

The [Internal Revenue Service (IRS)](https://www.irs.gov/) is the U.S. government’s national tax collection and enforcement agency.

### What is a Tax Identification Number and how do I get one?

This is the number that your country uses for collecting your tax information and may have a different name, such as PAN in India, for example. Some countries may use a National ID number. You may be able to find information about your country’s TIN [here](https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-identification-numbers/). If you have questions about your number, you will need to consult a tax advisor in your country or contact your local tax authority.

### If I submit a W-8BEN or W-8BEN-E after you I withdrew a portion of my profits, will you refund the taxes I’ve already paid?

No, we send the taxes we withhold from you to the IRS and cannot provide a refund once they are withheld and submitted.

### Where can I find the W-8BEN/W-8BEN-E forms and complete them?

You can access and complete the W-8BEN/W-8BEN-E forms within the Tax Declaration section of your account settings.

### What information is required to complete the W-8BEN/W-8BEN-E forms?

To complete these forms, you'll need to provide:

* Confirmation of non-U.S. taxpayer status
* Your tax address
* Your legal name
* Federal tax classification (choose from available options)
* Birthdate and country of citizenship (for individuals) or country of incorporation (for corporations/partnerships)
* Tax identification number used for reporting taxes in your home country

### Can I modify my Form W-9 if my information changes?

Absolutely. If there are changes to your information (e.g., name change, TIN update), please notify us within 30 days so that we can ensure accurate and up-to-date records.

### Are U.S. individuals required to complete any forms?

Yes, U.S. individuals are required to complete a Form W-9. However, the W-8BEN/W-8BEN-E forms are specifically for non-U.S. Persons.

### How do you use the information that I provide on Form W-8BEN or W-8BEN-E?

We only use the form to confirm that you are not a U.S. Person and that we are not required to withhold taxes from your earnings for the IRS. This includes providing this information to the IRS if they request it.

This form is a part of the U.S. tax system and is used to establish that the foreign individual is not subject to U.S. tax withholding on certain types of income, such as interest, dividends, rents, and royalties, earned in the United States.

Form W-8BEN & W-8BEN-E: What is it and how is it used?

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