Everything you need to know about the W-8 BEN form

Does the W-8 BEN form sound familiar? If your business involves hiring international freelancers or employees, you have most likely encountered the term “W8 BEN form.” This form is essential for non-U.S. residents to claim a reduced or exempt withholding tax on income earned from working with a US company.

In this blog, we will delve deep into the details of the W8 BEN form, covering its purpose, requirements, and how to file it correctly. We will also discuss how Global Squirrels assists you in handling compliance relating to hiring and managing international freelancers without hassle.

What is W-8 BEN form?

A W-8 BEN form is an IRS-mandated form to certify the foreign status of a non-resident (also referred to as Non-Resident Aliens or NRAs) for taxation purposes. This verifies the individual’s country of residence and confirms the tax withholding requirements when making payments to these individuals.

Non-resident aliens (NRAs) are subject to a 30% tax on their gross income from a US-based employer. However, if a tax treaty exists between the U.S. and the country of the non-resident alien, they may be eligible for a reduced tax rate, which for many countries is zero. For instance, Canada and the UK are generally exempt from US tax, whereas France and Germany are subject to a reduced tax rate of 30%.

What is the purpose of W-8 BEN form?

W-8BEN form is used by foreign individuals to certify their foreign status, establish beneficial ownership of income, and, when eligible, claim a reduced rate or exemption from U.S. withholding under an applicable tax treaty.

Foreign status

The IRS applies different tax rates to U.S. citizens, permanent residents (Green Card holders), and non-citizens who work for U.S. organizations but reside outside the U.S. (NRAs). The W-8 BEN form is used to certify a person’s foreign status.

Tax treaty benefits

Some countries have income tax treaties with the U.S. that allow their citizens to benefit from reduced tax rates when receiving income from U.S. sources. The W8 BEN form helps determine whether an individual qualifies for these reduced rates based on their residency.

By completing this form, freelancers or beneficial owners can claim any applicable tax benefits under their country’s tax treaty with the U.S. This information allows the employer or withholding agent to apply the appropriate tax rate for income withholding.

Tax Identification Number (TIN)

Another key purpose of the W-8 BEN form is to provide a foreign Taxpayer Identification Number (TIN), a unique number used for tax implications. This ensures that the IRS can accurately track and maintain tax records.

This is particularly important when managing freelance/contractor payroll. Ensuring that tax identification details are correctly provided helps streamline operations, reduce compliance risks, and ensure smooth transactions within a growing organization.

Why does the IRS require a W8 BEN form?

When a U.S.-based company or withholding agent is about to make payments, such as dividends, interest, royalties, or wages, to a foreign individual, they should request the W8 BEN form to determine the correct withholding tax rate. If the non-U.S. individual is eligible for a reduced tax rate under a tax treaty between their home country and the U.S., the W8 BEN form must be submitted to claim those benefits.

When a U.S. business makes certain payments to a foreign individual, it may need documentation to establish the payee’s foreign status and determine the appropriate U.S. withholding treatment. Depending on the type of income and circumstances, the appropriate form may be Form W-8BEN or another IRS withholding certificate.

Who needs to fill out W-8BEN form?

Form W-8BEN is generally completed by a nonresident alien individual who is the beneficial owner of income subject to U.S. withholding. The individual provides the completed form to the withholding agent or payer when requested. The form is used to certify foreign status and, when applicable, claim a reduced rate of or exemption from U.S. withholding under an applicable income tax treaty.

For businesses working with international freelancers or contractors, this means the foreign individual—not the U.S. company—generally completes and provides Form W-8BEN to the payer or withholding agent. The payer uses the information on the form to determine the appropriate withholding and reporting treatment.

Who typically provides Form W-8BEN?

Form W-8BEN may be required when:

• A foreign individual receives income that is subject to U.S. withholding.
• The individual is the beneficial owner of the income.
• The individual needs to establish that they are not a U.S. person.
• The individual is eligible and wants to claim applicable tax treaty benefits.
• A withholding agent, payer, or applicable financial institution requests the form.

Who should not use Form W-8BEN?

Form W-8BEN is not the correct form for every foreign worker or entity. For example:

• A U.S. citizen or other U.S. person generally uses Form W-9 instead.
• A foreign entity generally uses Form W-8BEN-E rather than Form W-8BEN.
• A foreign individual claiming an exemption from withholding on compensation for personal services performed in the United States may need a different form, such as Form 8233, depending on the circumstances.

Important: Form W-8BEN is generally given to the withholding agent or payer, not directly to the IRS. The IRS states that the form should be provided when requested and before the relevant income is paid or credited.

Does the W-8BEN process differ by the contractor’s country?

The basic purpose of Form W-8BEN is the same for a foreign individual regardless of whether the contractor is based in Bangladesh, India, the Philippines, Mexico, or another country. A foreign individual who is the beneficial owner of income subject to U.S. withholding generally provides Form W-8BEN to the U.S. payer or withholding agent to certify foreign status and, when eligible, claim applicable treaty benefits.

However, the contractor’s country of tax residence can affect whether a U.S. income tax treaty applies and what treaty benefits may be available. Therefore, a U.S. company paying a contractor in Bangladesh should consider both the contractor’s U.S. withholding documentation and the applicable U.S.-Bangladesh tax treaty provisions. The IRS maintains specific treaty documentation for Bangladesh.

For example, being located in Bangladesh does not by itself determine a particular withholding rate. The applicable treatment depends on the type of income, the contractor’s status, the relevant treaty provisions, and whether the required documentation is properly provided.

Important: Form W-8BEN is for foreign individuals. If the contractor is a foreign entity, the appropriate form may instead be Form W-8BEN-E. Also, compensation for personal services can involve different documentation rules, so businesses should verify the applicable IRS requirements for the specific payment.

How to file a W8 BEN form?

Filing the W-8 BEN form is essential for non-U.S. individuals who earn income from U.S. sources to claim tax treaty benefits and avoid excessive withholding. The form is used to certify that your freelancer is not a U.S. citizen or resident, and it helps reduce the withholding tax rate on their income.

1. Obtain the form

You or your freelancer can download the W8-BEN form (PDF) from the official IRS website.

2. Fill out the form: Identification of the beneficial owner

This section is where your freelancer provides his details to identify as the beneficial owner of the income.

Line 1 (name): He/she must enter the full legal name (as it appears on the passport).

Line 2 (country of citizenship): Enter the name of the country in which he/she holds citizenship.

Line 3 (permanent residence address): He/she needs to provide the full permanent address. This should be where he/she ordinarily resides and pays taxes.

Line 4 (U.S. Taxpayer Identification Number, if applicable):

• If your freelancer has a U.S. Individual Taxpayer Identification Number (ITIN) or a Social Security Number (SSN), he/she can enter it here.
• If your freelancer does not have an ITIN or SSN, he/she can leave this blank. However, obtaining an ITIN might help if they want to claim treaty benefits in the future.

Line 5 (Foreign Tax Identification Number): Provide the Foreign Tax Identification Number (FTIN). This is the tax ID issued by his home country (it may be his/her local tax number, VAT number, etc.).

Line 6 (reference number(s)): Leave this blank unless the payer has assigned them a specific reference number.

Line 7 (date of birth): Enter the date of birth in MM-DD-YYYY format.

Note: The W-8 BEN form applies only to foreign non-residents. If you are hiring U.S.-based employees, a Form W-2 is required instead — see our guide on W-2 laws for employers to understand your domestic reporting obligations.

3. Claim of tax treaty benefits

This section is important if your freelancer is claiming a reduced rate of withholding or an exemption under an applicable tax treaty. The contractor should meet the applicable treaty requirements and provide the required information to the withholding agent. See the IRS guidance on claiming tax treaty benefits for more information.

Line 8 (country with which the U.S. has a treaty): He/she must enter the name of the country where he/she is a tax resident and with which the U.S. has a tax treaty.

Line 9 (special rates and conditions):

• If applicable, he/she can specify the article and paragraph of the tax treaty under which he/she is claiming the benefits (find these in the tax treaty between the U.S. and his country).
• Enter the rate of withholding claiming (e.g., “0%”, “10%,” etc.).
• Provide a brief explanation of why he/she qualifies for the tax treaty benefits (e.g., “I am a tax resident of [Country] and entitled to the benefits of Article [X] of the U.S.-[Country] income tax treaty.”).

4. Submit the form

After completing the W-8 BEN form, your freelancer should send it to your representative. You will need the form to apply the correct tax withholding rate.

• Example: If you are providing royalties to your freelancers, the freelancer must submit the form to you. Your freelancer must also keep a copy of the form for their records.

5. When to file the W8-BEN form

Your freelancers should file the W8-BEN form before they receive payments or income from you to ensure the correct withholding rate is applied.

• Expiry: The W8-BEN form is generally valid for three years unless your freelancer’s circumstances change (such as a change in tax residency or citizenship). After that, they must submit a new form to continue receiving treaty benefits.

What happens if a foreign contractor does not provide Form W-8BEN?

If a foreign contractor is required to provide Form W-8BEN and does not provide it when requested, the U.S. payer or withholding agent may not have the documentation needed to establish the contractor’s foreign status or apply an eligible reduced withholding rate. The IRS states that failure to provide Form W-8BEN when requested may result in withholding at the 30% foreign-person withholding rate or the applicable backup withholding rate, depending on the type of payment and circumstances.

For businesses, the key issue is therefore not simply a separate “W-8BEN penalty.” The absence of valid documentation can affect the withholding and reporting treatment of payments to a foreign person. A withholding agent that fails to obtain valid documentation and also fails to withhold as required may be liable for the tax that should have been withheld, along with applicable interest and penalties. See the IRS guidance for withholding agents.

What should a business do?

When paying a foreign contractor, businesses should:

• Determine whether the payee is a foreign individual or entity.
• Request the appropriate IRS withholding form before making the payment.
• Review whether the form is complete and can be relied upon.
• Check whether the contractor is claiming tax treaty benefits and whether the requirements are satisfied.
• Apply the appropriate withholding and reporting rules when valid documentation is not available.

The IRS also notes that Form W-8BEN is for foreign individuals. A foreign entity generally uses Form W-8BEN-E, while compensation for personal services may require Form 8233 when a treaty exemption is being claimed.

* Important: The exact withholding treatment depends on the type and source of income, the payee’s status, applicable treaty provisions, and the documentation provided. Businesses should verify the current IRS requirements for their specific situation.

How does Global Squirrels help you ensure compliance when working with freelancers globally?

Global Squirrels is a staffing and payrolling platform that simplifies compliance and payments of your global freelancers. Our subscription-based plans are designed to onboard and manage the freelancers you have already sourced. This plan will handle their payments, compliance, leaves, timesheets, and performance management. Your freelancers will sign a proper contract agreement before we onboard them.

It will include notice period clauses to ensure they do not abruptly quit while working on your projects and serve full notice before ending their contract.

We understand that obtaining the W-8 BEN form from your global freelancers, ensuring accuracy in tax withholding, and processing timely payments to them is tedious, especially for your accounting and HR departments. They also need to manually review the timesheets and take care of payments for your freelancers, which becomes time-consuming and prone to errors and delays.

With Global Squirrels, all the W8-BEN form requirements, pay disbursements to your freelancers, time management, and liabilities are handled by Global Squirrels.

You can leverage this plan almost at the cost of international wire transfer fees you incur to make payments to each of your freelancers. You end up paying the same fee you currently incur for making international wire transfers, and on top of us handling pay disbursements, you will also get to use a range of practical tools such as multi-country timesheet and leave management, one-time and recurring task assignments, performance management, and more!

How do we work?

Managing international hiring often involves navigating forms such as the W-8BEN, as well as broader compliance and payroll requirements. Global Squirrels simplifies this process by offering a range of plans, whether you’re sourcing new talent or onboarding candidates you’ve already selected.

Our platform manages the entire workflow, from onboarding and compliance to benefits administration and payroll, ensuring everything is handled accurately and in line with regulations. With built-in tools for task tracking, performance monitoring, and timesheets, you can efficiently manage your global workforce with full visibility and control.

Do you want to know more about how our platform works? Request a demo today!