Form W-8BEN for LLCs

If you are a foreign professional or entrepreneur working with U.S. companies, it is likely that at some point you have been asked for the form W-8BEN. Below, I explain in detail what this form is, what it is for, when to submit it and how to complete it.

What is the W-8BEN form?

The form W-8BEN (Certificate of Alien Status for U.S. Tax Withholding) is an official U.S. Internal Revenue Service (IRS) document that allows foreign individuals to prove their non-U.S. tax residency.

Its main purpose is to allow foreigners to obtain benefits from tax treaties between their countries and the U.S., thus avoiding double taxation.

What is the W-8BEN form for?

The W-8BEN form is essential for claiming the exemption or reduction of withholding tax in payments received from U.S. companies.

In most cases, the U.S. withholds a percentage of taxes on payments to foreigners.

However, many countries, such as Spain, have tax treaties with the U.S. that allow foreign residents to reduce this withholding or eliminate it altogether.

Who must file Form W-8BEN?

The W-8BEN must be filed by foreign individuals who receive income from U.S. sources. Examples of income that may require this form include:

• Payments for services performed for U.S. companies.
• Commissions from affiliate programs or marketing.
• Income from royalties or licenses.

If you are the sole owner of an LLC that is taxed as a disregarded entity (without separate U.S. taxpayer status), you must file a W-8BEN and not a W-8BEN-E because the LLC is not considered a separate tax entity from you.

When is the W-8BEN form used and when is it not?

The W-8BEN is used when:

1. You are a non-U.S. tax resident alien.You have no physical presence (offices, employees, etc.) in the USA.
2. You receive income from U.S. companies.: Such as payments for services, royalties, commissions, among others.
3. You do not generate revenue "effectively connected" to the U.S.This means that your business activities are conducted outside of the United States.

Not used W-8BEN yes:

• You are a foreign entity (corporation or partnership) that receives income. In this case, you would use the W-8BEN-E.
• The income is "effectively connected" to a U.S. activity (for example, if you have a U.S. office). In this case, you should file the W-8ECI.

Confusion between the W-8BEN and the W-8ECI

The use of the W-8BEN and the W-8ECI depends on how your LLC's income is generated.

• W-8BENYou must use this form if the income you receive from U.S. companies no are considered "income effectively connected" to a business activity in the U.S. In most cases of a foreign tax resident sole proprietorship LLC, income from services provided from outside the U.S. is not considered effectively connected, and therefore, this would be the correct form. This typically applies when you have an LLC that generates income from U.S. sources but without a physical presence or activity in the U.S..

• W-8ECIThis form, on the other hand, is used if you generate "income effectively connected" with a business activity in the U.S. That is, if your LLC had employees, offices, or conducted physical activities in the U.S.. that generate that income. This would imply that your LLC operates within the U.S., and, in that case, you would have to file a W-8ECI.

If, in your case, you are in Spain and your LLC does not have a physical presence in the U.S., the form W-8BEN is right for you.

Where to download the W-8BEN form?

In many cases, the U.S. company you are working with will already provide you with the form, but you can also get it directly from them. from the official IRS website in editable PDF format.

How to complete the W-8BEN?

The form is simple and can be completed in a few steps:

1. Basic information:
   • Full name and country of citizenship.
   • Tax residence address (it is important to use the address of your country of residence, in this case, Spain).
   • Tax Identification Number (NIF) in Spain.
2. Claiming tax treaty benefits:
   • In this section, specify the treaty country (Spain) and the withholding rate applicable according to the type of income.
3. Signature and date:
   • Finally, sign and date the form to validate the information.

On the official website of the IRS you can obtain all the information you need. instructions for completing the W-8BEN form in a more detailed and complete way.

To whom is the W-8BEN form issued?

Form W-8BEN is not sent to the IRS. Instead, you must give it to the U.S. company that is paying you.

They need it for their records and to be able to apply the exemption or reduced withholding rate on your payments.

Once submitted, the form is valid for three years or until your tax circumstances change.

Conclusion

The W-8BEN is a key form for non-U.S. tax residents to avoid double taxation on payments received from U.S. sources.

If you are the sole owner of an LLC and work with U.S. companies, this form allows you to make sure you are not paying more tax than necessary.