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How to complete Form W-8BEN-E for a Foreign Corporation - YouTube
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hello YouTube Jim Bakker here from
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Montebourg of tax consultants I had to
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prepare w8 bene for a client and realize
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that there's nothing good on YouTube
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about this form so here I am making this
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video today explaining the purpose and
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how to complete the form so if you take
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a step back generally background the w8
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bene you see is certificate of status of
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beneficial owner of united state tax
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withholding and reporting so this form
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is going to be necessary when you have a
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u.s. entity who is making reportable
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payments to a foreign or non-us entity
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so reportable payments are and if we go
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to the instructions here we're talking
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dividends rents royalties premiums
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annuities compensation like a salary or
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substitute payments for was si and
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securities lending or other fixed
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determinable annual or periodic payments
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so if you are if you have a foreign
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entity that's receiving any kind of
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these payments from a u.s. entity the US
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entity is by default required to
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withhold 30 percent of that payment and
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remit that payment to the to the IRS
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let's go back here put me back on the
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screen so this form the purpose of this
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form is to show the US company that you
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are not subject to the full 30 percent
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withholding and to certify that you're
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it's just to certify your status the
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benefit the status of the beneficial
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owner so I'm gonna go through how like
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very basic way to complete this form and
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because there's a lot of options here
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but most most companies the majority of
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company is gonna complete it the same
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way so let's say that you have a
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nineties Columbus use a treaty so
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Columbia is in that treaty country but
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let's go to the de Mexico so let's say
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you have a a foreign company mexic
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Mexico company in Mexico and it's
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receiving foreign payment just
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Maxon corporation receiving royalties
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from a US company for software licensing
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out suicidal Mexico chapter three status
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just an entity type it's pretty simple
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it's going to be a corporation or if
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it's a pass-through a discarded entity
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or partnership but most are going to be
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corporations and in this example it's a
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Mexican corporation fine and then the
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chapter four status is a little more
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complicated it goes through all these
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different options so FFI is a foreign
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financial institution so this is all
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about doing stuff with banks and then so
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down here this box active non-financial
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non foreign non-financial foreign
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entities so it's yes I'm going to double
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check non-financial foreign entities so
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just a regular active non-bank
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foreign corporation this is gonna be
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most of these companies if you have a
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bank or a non-profit or something wacky
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you should you should find an account
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that can help you out with this so you
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don't have to have your payments if
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you're getting a million dollars you
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don't want to receive 700,000 instead of
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a million when you do a million and then
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have 30 percent you sent to the US
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government you don't want that so make
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sure is this filled out right okay so
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you're active non-financial foreign
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entities you put your address on here
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I'm almost certain you are required to
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put a US tax ID to complete this form
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the instructions are here we can check
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through the instructions they're pretty
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interesting but it's really long who
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must provide and um let's go to that
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line item and check it out with you so
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they go over almost every line item here
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specific instructions line one all the
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way down to you know pretty long form
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line 13 14 so in any case that's that's
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where it is oh one other thing I wanted
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to mention that this form isn't actually
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sent to the IRS this form is
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with held by the US and the US company
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is required to keep this and in their
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records but it's not actually sent to
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the IRS but in any case um the foreign
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entity should have a u.s. tax ID and you
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can get that by completing SS for I have
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another video for that at the time of
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recording this video the US government
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shutdown so it's very very taking
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forever to get that done okay okay so
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once you have this basic information set
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out um you can go down and look at here
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it says you just have to do active
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non-financial point any you just have to
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complete home part 25 xx be however
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Mexico has a treaty with the US and if
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you're getting royalties from Mexico you
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want to claim the treaty benefits so
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that they withhold less so that's the
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whole point so benefit the beneficial
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owners resident of Mexico and within the
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meaning of the income tax treaty then if
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the shona drives the item of income and
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meets your requirements the provision
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dealing with limitation of benefits sure
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sure sure okay okay this is where we're
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gonna put the portion of the treaty
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we're claiming so I actually didn't do
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this ahead of time so I'm going to just
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pull it out now us-mexico tax treaty so
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you can do this with any country working
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with again if it's big numbers are busy
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to get you know a second opinion no tax
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convention so here we go so the treaty
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goes through everything we can go
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through royalties article twelve article
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twelve says royalties may be taxed so
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ever
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okay the tax charge and I see ten
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percent so instead of thirty percent as
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a 10 percent tax so that's what we're
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saying for this treaty so let's go back
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here and um
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article was 12 paragraph three ten
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percent rated was holding in type of
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income royalties and then you can take
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that paragraph out if you want and just
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cut a copy and paste it if you want see
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that works fine I mean you can fill it
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out all the way explained the conditions
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that the owner of me spell okay for the
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holdings the owner is receiving
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royalties sure and always be better but
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that's the main most important part
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because now you're telling the u.s.
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entity again this isn't going to the or
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at the IRS but you're telling us entity
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that you're a Mexican company and per
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this provision they should only withhold
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ten percent and this is saving 20% of
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taxes everything else is for different
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kinds of foreign financial institution
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bangs little cows and these are all like
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owner documented FFI you're not going to
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complete these unless your banks or
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financial institutions and again it's
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going to tell you in this section which
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which one you have to complete
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retirement plan is eternal deed
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compliance sponsor school sale
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investment vehicle so it's and crazy
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stuff but all you likely have to go here
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is 225 so we're going to X X to X V and
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it's really check a box I certify that
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the entity identified in part one is a
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foreign entity that's not a foreign
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financial institution less than fifty
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percent of the income is passive income
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and less than 50% are passive or passive
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so you have to certify this not a
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passive a business and it's an active
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business if it's faster than yeah
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certified as passive in check the other
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box and that's if you have like the
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company of receiving the royalties again
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um has passive income I'm
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oversimplifying this form a little bit
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it's a complicated form but that's I'm
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trying to oversimplify it for people
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that it applies to just so you can get
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an idea of how to fill it out and that's
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it really you sign it printed dated
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certify it
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and then you send it to the US entity
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that's paying you and they should
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withhold the correct amount that you're
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telling them and really the most common
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use of this form like I said is going to
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be here in part three to claim the
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treaty benefits that's gonna be the most
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common thing you're using this for okay
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and if you're a US company requesting
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this from a foreign entity
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I would I would require the US tax ID
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and also yeah double check everything
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make sure it's alright because if you're
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US entity that's supposed to be doing
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the withholding you will be on the hook
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if you under withhold and you're wrong
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you're on the hook for the difference of
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the withholding so that could be a big
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deal okay so I hope this video was
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helpful we went through the completing
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of the W event II let me know in the
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comments if you have any questions I
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don't know where my where my picture
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went but let me know in the comments if
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you have any questions and I'll try and
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answer all of those and if the video is
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wrong or missing I'll upload another one
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let me know if you have any other forms
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you're curious about or have questions
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about and I'll be happy to put up some
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explanations how to complete them don't
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forget to subscribe and follow I need to
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hit a hundred subscribers so that I can
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get a custom URL appreciate it thanks
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everyone
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