W-8BEN-E for UK Limited Companies
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- เผยแพร่เมื่อ 24 ก.ค. 2024
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International Tax - Fundamentals for Beginners: www.udemy.com/course/internat...
If you're doing business with the US you'll likely be asked to fill in a W-8BEN-E at some point. These forms can be pretty complex and overwhelming so I'll walk you through a typical case for a UK Limited company owner and explain some of most crucial aspects.
UK / US Double Tax Treaty: assets.publishing.service.gov...
0:00 Introduction
0:18 What is a W-8BEN-E?
1:49 What if I don't fill in the W-8BEN-E?
2:19 Part I: Identification of Beneficial Owner
5:38 Part III: Claim of Tax Treaty Benefits
8:11 Part III - Double Tax Treaty Rates & Conditions
9:40 Summary of UK / US tax treaty withholding tax rates
14:18 Part XXV: Active NFFE
15:02 Certification / signature
A BIT ABOUT ME
I've been advising on international tax since 2014, and qualified as a Chartered Accountant in 2018. I worked for consulting firms PricewaterhouseCoopers and BDO, before I started a remote international tax consultancy firm, Degen Tax Advisers, in 2020.
I work with online entrepreneurs to help them navigate the complex world of international tax. I work with e-commerce businesses, digital nomads, content creators, tech startups, crypto investors and many more in the digital space. Like my clients I'm pretty nomadic. I've lived in the UK, US, Japan, China, Malaysia, Thailand and Singapore. Currently I'm spending most of my time around Southeast Asia.
DISCLAIMER
My videos are for general guidance, education and providing you an introduction to the concepts of international tax. They in no way constitute specific advice to your specific circumstances. I accept no liability for any reliance placed upon the content of these videos or references, therein.
Thanks Andy. This was a lifesaver!
Thanks for this. Form was looking pretty impenetrable so this was a very helpful resource.
I rarely comment on anything, but I have to say that this is the best and most comprehensive explanation of the W8-BEN-E. I had to do it for Udemy a couple of years back and it was Hell. Now doing it for Podia affiliate link, and I just couldn't bare to have to work it all out all over again. This video was perfect. Thank you so much!!!
Thanks Adam for the kind words, hugely appreciated! I've been through the process myself, including with Udemy, so I know the struggle! Glad this has been able to help.
Thank you so much for this - so glad I found it!
Thank you for this! Amazingly helpful!
Incredibly helpful! Thank you Andy.
Perfect, thanks Andy, your clarity and advice was much appreciated.
Cheers Andy, much appreciated.
Thank you Andy! Very easy to follow
This is a fantastic explanation that solved my questions instantly. Thank you
this was so ridiculously helpful, thank you so much
Thank you Andy for the video, really appreciated
Really clear and useful. A perfect guide. Thank you for posting this - it really helped me.
Thanks for the great comment, hugely appreciated and glad to know it was useful!
Super helpful, thanks Andy!
Thank you Andy, very helpful!
Amazing job, it helped me immensely thank you so much
Very helpful video. Thanks!
Really appreciate the video Andy. Took what would have been a painful task and made it straight forward and easy to complete.
That was so helpful, thank you so much!
Thanks so much for this - it's a really confusing form, and you're straightforward walkthrough has really helped.
absolute legend - thanks so much for this
Awesome video, Andy - thank you!
Thanks for the great comment Idin, glad it was useful. I really enjoyed your Day in the life of a corporate lawyer in London video, subscribed!
@@WorldTaxAndy Thank you, Andy!
Thanks, great help!
Thanks a lot, this was really useful 🙏
Thanks for your kind words, very happy to help!
Great video Andy thanks very much 👍
Thanks so much for this Andy!
Thank you so much for this! Very scary looking form xo
Thanks for the great comment Bilal, much appreciated. And yep the form is way more intimidating than it needs to be!
Thank-you sir!
Aces, thanks mate :)
thx mate
In ecommerce, certain US states mandate the collection of sales taxes once specific thresholds are exceeded, based on customer location rather than the business's physical presence. As a UK business offering services to clients in the US, are there any similar requirements to be aware of regarding sales tax or other taxes? This video has been extroadinarily helpful by the way! Like many others, I was under the impression I'd have to arrange a TIN with the IRS.
Hi Nathan, thanks for the kind words and glad it was useful. So yes, the US thresholds apply regardless of your company's jurisdiction. For example, if you make over $500,000 of sales into California, then you will usually have to charge Californian sales taxes on your products to clients there. This is similar to UK VAT in the sense that only the customer location is relevant, your business could be in any country but will still have to account for VAT if you cross the UK VAT sales threshold.
Amazing info thanks. I will be applying under Article 16 (Entertainers and Sportsmen) do you know what rate the withholding is for that category? I can't see it listed on the treaty in Article 16.
Hi thanks for the kind words - indeed you're in a unique spot as a musician. If you're going to receive more than $20,000 in the US then Article 16 applies. If its less than $20,000, then Article 7 Business profits applies (i.e no US tax).
In the case of Article 16, because there's no limitation of the withholding tax amount, they will generally have to withhold tax at the default US rate which is 30%. You would have the option to file a US tax return as a non-resident at the end of the year to claim back some of this, because in many cases, the 30% is more than the tax they would have paid in the US had you declared their income on a US return normally.
@@WorldTaxAndy Thanks very much for the info
Cheers
Thanks, really helpful. One question, I’m a UK Ltd company and will be being paid later this year by a US company for work I will be doing for them for a few weeks in an EU country. I will never touch US soil. I guess I fill out part 14 a and b as you said but do I have to fill out 15?
Hi, thanks for the kind words. Yes you should still fill out section 15 just to ensure they understand the correct treatment (i.e 0% tax) and don't mistakenly withhold 30% tax from you as a default So I would use the Business Profits article reference unless it fits the profile of any of the other income types.
Thank you. Really helpful. What if you're filling this in as a UK ltd charity? And what if the income is an arts grant?
Hi, most of the form should be the same, however for Chapter 3 status, "tax-exempt organization" is generally the box I've seen used for charities if its a UK charity with no uk corporate tax. As grants are not specified in the treaty, at part III Claim of Tax Treaty Benefits, we can use "Article 22 (1)".... to claim a "0% rate of withholding tax" on
"Other income"
Hey, thanks for this helpful video. In the LOB section I am not sure what to pick. We are two persons and both of us are 50% owners of the company. I picked the "Company with an item of income that meets active trade or business test" option since we both are non-UK residents, but the thing is our company didn't start selling a product yet. Is this a valid choice or should I resubmit the W-8BEN-E with another option? Maybe we can still pick the ownership test one, since the countries we reside in also have tax treaties with the US, so obviously we didn't set up the company in the UK to benefit from the treaty. Looking forward to hear from you, and thanks again.
Hi, thanks for the kind words - yes, this option (Company with an item of income that meets active trade or business test) is still good for the purposes of the W-8BEN-E in your case - whether or not a product has been sold is not as important as the intent - if the company is set up with the purposes of generating its income from an active business then this box would still be suitable.
As a general rule of thumb the W-8BEN-E forms are usually required to be collected by the US party every 3 years, so the form is completed on the basis of the company's most likely status over the next 3 years, and so if the product is expected to be sold in that period, then this still makes sense to choose.
@@WorldTaxAndy A product will be sold in a couple months at most, this is great then. Thank you so much for your quick response!
Awesome video andy, thanks! Just wanted to ask, I sell on Amazon in the US with a UK LTD company, a lawyer told me because I have inventory storing there, I'm subject to ECI (effectively connected income) and therefore need to file taxes in the US. What is your take on that? (Products are produced and obviously stored at the Amazon warehouse.
Hi Roman, thanks for the kind words - so I'd agree that its ECI is there's your physical inventory stored in the US. Which generally requires a US tax filing. However, the income is subject to UK corporate taxes since its via a UK Ltd company - so given there's an effective dispute between who has taxing rights we need to refer to the UK US double tax treaty. Under article 7: business profits, the UK retains taxing rights unless you have a permanent establishment (PE) in the US - holding inventory is not sufficient to constitute a PE in my view, since you don't own the Amazon warehouse (note: you have dependent agents in the US or an office then you may have a PE, but I'm assuming its just the inventory that ties you to the US for now). So in this case the UK would be the jurisdiction in which all business profits are taxed
Hi, this video is brilliant :) As a UK limited company, I was just wondering if you know what article & paragraph would apply for tax relief on buying and selling US shares for a profit. Any help would be much appreciated. Many Thanks
Hi thanks a lot for the great feedback, much appreciated!
So UK residents (both individuals and Ltd companies) do not pay any US capital gains taxes on the profits made from buying/selling shares in the US so long as they do not have a Permanent Establishment in the US or are 'engaging in a trade or business' in the US (in simple terms this just means physically being present in the US for a large part of the year, employing US staff, perhaps having a physical office space etc).
So if you simply have a UK Ltd company that is not run from within the US but is buying & selling US shares you can refer to Article 13: Paragraph 5. This confirms that any capital gains tax will be taxable only in the State in which the beneficiary is tax resident (in this case the UK).
@@WorldTaxAndy Awesome Andy, that's really helpful. I imagine this answer will help a lot of folks out there as anyone opening a stock broker account for business use or a pension sipp is asked to fill out one of these forms.
Thanks, I've been told that an EIN would need to be obtained from the IRS by completing a SS-4 form to obtain this. Does my business UTR code negate this?
Hi, yes this is a common misconception and thankfully we don't need to obtain EINs which can be a burdensome process - the UTR is sufficient here
@@WorldTaxAndy Thanks, appreciate it. I’m in the process of contracting for a US business via my Ltd and that form looked really confusing!
@@WorldTaxAndy sorry just a quick question, I sent this across to my accountant and they’re adamant that the TIN would be Company Number rather than UTR, they referred me through to this - www.gov.uk/hmrc-internal-manuals/international-exchange-of-information/ieim902330
@@jasonfashanu9652 Hi Jason, it's likely that the company number would also be acceptable. I've seen numerous IRS audits of W-8BEN-Es over the past decade and I've never seen them rejected on the basis of using the UK company number, or even in one case, a VAT number. However this isn't what I've seen most commonly used in practice - I'd estimate that 80-90% of forms are submitted using the UTR. This is because the IRS adheres to the OECD's definition and guidelines for TINs. The OECD only references NINOs or UTRs as equivalent UK tax identifying numbers. Personally I've always been more comfortable with this interpretation too given its a specific tax identifier rather than a general company identifier. But as above, its highly unlikely to be rejected even if you do go with company identifier - worst case scenario during an audit is that the IRS could simply ask the US client for the UTR if they really needed it (these audits are quite uncommon).
www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-identification-numbers/UK-TIN.pdf
@@WorldTaxAndy that’s perfect thank you, I came across that same link from the OECD and based the submission on that. Thanks again, this really helped with navigating the form !
If I'm a sole director and sole shareholder of a UK Limited company. Am I not treated as a disregarded entity (I.e. As a sole trader) by the US? and therefore need to apply for a 8832 to be officially classed as a company under their laws?
Hi, from the US perspective a UK limited company is viewed as a 'foreign corporation', regardless of its ownership structure. The US does view this as an entity separate & distinct from its owner thus does not deem you to be a sole trader even if solely owned.
The reason for this is that the key threshold the US looks at is limited liability, not number of owners - if all owners of the foreign company have limited liability, then its a foreign corporation, and not disregarded. Interestingly, this means that even UK LLPs are usually considered to be foreign corporations in the eyes of the US because in most cases members all have limited liability.
@@WorldTaxAndy Hi Andy, thanks for the info it's very much appreciated, you're a life saver 🙌. I've been struggling with this for weeks because most of the top UK search results are accountants saying that I need to file an SS-4 and 8832 (which would also require me to get a new phone deal so I don't pay a small fortune calling the IRS). I looked into those 2 forms and they all seem to counteract each other. Based on your info I was able to look into the IRS guidelines for the forms and validate that the UK UTR is sufficient and the other two forms aren't required because a UK LLC is exempt from having to go through that process regardless of how the US classes their equivalent business type.
If you're looking for a new video idea, I'd definitely recommend doing a video explaing all that and going through the IRS guidelines to prove it because I'm sure there are many people who have a single member UK LLC in the same position as me having the same problems. And unfortunately, resources on the topic are sparse and largely inaccurate.
Thanks so much for your help ❤️
I own a UK LTD Based company but I am not a resident of the UK.
Will "Company that meets the ownership and base erosion test" still apply? if not, which other option should I choose?
Thank you so much this is very helpful.
Hi, this option would only apply if UK residents have 50% or more of the voting rights in the UK Ltd company so we'd have to choose one of the others.
The most common would be "Company with an item of income that meets the active trade or business test". This essentially just means that the company is actively trading outside of the US, and that its non-US activities are larger than its US activities.
Alternatively, you can choose: "Other" and reference Article 23 paragraph 6. This basically confirms that you did not set up your UK Ltd company purely for tax benefits under the double tax treaty - you set it up for some sort of other commercial reason.
@@WorldTaxAndy Thank you so much for the detailed answer :) I could not find it anywhere else.
@@WorldTaxAndy if we tick "Company with an item of income that meets the active trade or business test", would still the article 7(1) be applicable or another one? What would be the 'justification' given in point 15 then? Thank you for your answer in advance, the video is brilliant! Greetings from Poland :)
@@KatarzynaN-zi6 thanks for the kind words! Yes in this case 7(1) would still be applicable, as long as the income you are receiving from the US is some form of business income / business profits. Section 14b doesn't impact section 15 at all - 15 will always be solely dependent on what type of income we are getting from the US.
@@WorldTaxAndy Awesome, thank you! Your channel is a life-saving place in the Internet! 🤩
It is also required to fill out forms SS-4 and 8832?
This depends. If you have a UK UTR then you don’t need form SS-4 (this is an EIN application form which is only needed if you dont have tax identifier already). 8832 generally no but this can be more complex & depends on your structure, business done with the US etc
@@WorldTaxAndy Thanks for your fast reply. I have a UTR number. The business is registered as a Limited company and has one director only, and the business done with the US client offers engineering consultation and product development.
@@19thplaylistable okay great, in that case I see no reason why you’d need to fill in either of those forms. W-8BEN-E should be sufficient. Be skeptical of anyone advising you otherwise as they’re likely upselling unnecessary services. Unfortunately a common occurrence with LLCs
@@WorldTaxAndy Thank you for your advice. I was skeptical of the other advice and help some others are offering online too. I didn't understand the real reason why the other 2 forms would be required. BTW: Great video it was great adive!
@@19thplaylistable thank you & hugely appreciate the comments. Hopefully I can provide some clarity & help you avoid being ripped off by some of these agencies.