How To Completing a W-8BEN Forms

Affiliate Marketing's Tax Consequences in Other Countries

Regardless of where the affiliate lives, the salary you pay them is subject to federal income tax. 

You are recognized as the withholding agent of the company that pays affiliate commissions, and you are responsible for getting the necessary tax withholding form from each affiliate. If you pay commissions to a foreign affiliate without receiving the required form, you must withhold a portion of the income for taxes and transmit it to the federal government.

What is a W-8BEN form?

You must obtain the foreign counterpart of a W-9, known as a W-8BEN, from an affiliate who lives outside the United States, is not a U.S. citizen, and receives payment for, or in expectation of, affiliate marketing services performed for you. Form W-8BEN establishes that a foreign associate is not an employee in the United States and claims the income. If you do not receive Form W-8BEN, you must withhold 30% of the affiliate's revenue for tax purposes. Read More

Withholding and Tax Treaties

Many nations have tax treaties with the United States that exclude specific types of income or give a lower withholding rate than the baseline 30 percent foreign tax. If a foreign associate lives in a country having a tax treaty, he should fill out Form W-8BEN with the details of the treaty agreement, and you should withhold at the treaty's rate. To claim tax treaty benefits, foreign affiliates must either have a Social Security Number or get a Taxpayer Identification Number from the Internal Revenue Service.

Residents Aliens and Non-Resident Citizens

If you have a foreign affiliate who lives outside of the US but is a US citizen, the affiliate is not considered a foreign affiliate for US income tax reasons and is not subject to 30% withholding. Instead of Form W-8BEN, obtain Form W-9 from nonresident citizens. If a foreign affiliate may claim U.S. residency for income tax purposes because she spent a particular amount of time in the United States during the preceding three years, she is not subject to 30 percent withholding and should submit Form W-9 instead of Form W-8BEN with you.

Validity of Form W-8BEM

Although you may seek a new Form W-8BEN from your foreign affiliates each year as a matter of policy, the elections made on the form are valid for three years from the date of the form. In some cases, the elections made on Form W-8BEN are permanent unless the foreign affiliate notifies you of a change in circumstances. Foreign affiliates must tell you within 30 days of a change in circumstances, such as moving to a foreign nation or changing their U.S. taxation status.



Bio of the Author

Steve McDonnell's business and startup experience match his technical knowledge of information, technology, and human resources. He graduated from Dartmouth College with a degree in computer science and has served on the WorldatWork editorial board, blogged for the Spotfire Business Intelligence blog, and written books as well as book chapters for Westlaw and International Human Resource Information Management.

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