Increased usage of form W-8BEN-E in conjunction with business with US clients

As we have previously written about, an increasing number of companies are requested to fill in form W-8BEN-E in conjunction with receiving certain payments from the US. The US entity making the payment is required to withhold 30 percent tax in the case the W-8BEN-E form is incomplete or lacking.

FATCA are tax rules introduced in the US to provide the American tax authorities with the increased possibility of identifying American taxpayers holding their financial assets outside the US. Sweden is one of the countries who have signed the FATCA agreement.

This implies, amongst other things, that foreign companies need to fill in a W-8BEN-E form if the executor of the payment in the US requests this to be done. When your company, as recipient of a payment from the US, presents a correctly completed W-8BEN-E, the payer can be secure that your company is the actual recipient of the payment in question. Depending on what the payment is referring to, the payer, then, withholds a reduced amount of tax, alternatively no tax, on the payment.

If your company, for example, executes technical services on behalf of a client in the US and has no operations there, i.e., there is no so-called permanent establishment, you usually pay no tax in the US on invoiced services.

Form W-8BEN-E has recently been updated (April 2016). This updating was of a more technical nature and implied no substantial changes.

Comments

It is important to remember that the form must be correctly filled in stating correctly, amongst other details, your status as a business operation (line 5 on the first page of the form, Chapter 4, status). Also, if any circumstances change, for example, as regards the ownership of your company, it is important that the form is updated with these new details.

Form W-8-BEN is used by private individuals covered by the regulations.

Contact your local tax advisor for further assistance regarding the formalities concerning forms W-8-BEN and W-8-BEN-E.