Consultants and Service Providers Need a W-8BEN, Not an ITIN
An IRS Form W-8BEN, "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding," is required when a non-US person is receiving income from a US source that is subject to withholding tax. This form is used to claim a reduced rate of, or exemption from, withholding tax under an income tax treaty between the foreign person's country of residence and the United States.
Examples of income that may be subject to withholding tax include:
- Interest income
- Dividend income
- Rent income
- Royalties
- Certain capital gains
- Certain payments made by US persons to foreign independent contractors
The W-8BEN form must be provided to the US payer, withholding agent, or intermediary before the income is paid to the foreign person. The form must be completed and signed by the foreign person, and the form must be kept on file by the payer.
It is important to note that the regulations and requirements for Form W-8BEN are subject to change, so it's best to consult with a tax professional or the IRS for the most up-to-date information.
We frequently receive requests for an ITIN from independent consultants such as graphic designers and programmers who are performing work for a US company and wish to receive payment. These people do not require an ITIN if they are working independently from outside of the United States. Instead, they can provide a W-8BEN form to claim a reduced rate of withholding tax or exemption under an income tax treaty. The treaty tax rate for independent personal services under Article 14 of the United States-Netherlands Income Tax Treaty is 0%.
The W-8BEN form is used to confirm the foreign status of the individual and if the form includes the foreign tax identification number, it is not necessary for the individual to have a US ITIN for the form to be considered valid.
If you did not provide a W-8BEN to the withholding agent, you may need to include this form with your Form 1040NR to claim a refund of excess withholding tax.
Tax treaty rates and provisions are subject to change and may be renegotiated. Please consult with a qualified tax professional or the IRS for the most up-to-date information and to confirm the treaty rate that applies to your specific situation.