W8bene is a tax form for foreign-based businesses to claim tax exemption on U.S.-sourced income. The document is officially called Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities).

As required by U.S. tax law, payers are required to withhold 30 percent of a payment made to a foreign entity operating in the United States. However, if that company is based in a country that has a tax treaty with the United States, then it can submit a w8bene tax form for exemption from U.S. tax laws.

A w8bene tax form is a four-page document with eight sections that document the entity status and the FATCA (Foreign Account Tax Compliance Act) status of the foreign-based company. If the foreign entity doesn’t fill out the w8bene tax document correctly, then the company is automatically subjected to the 30 percent tax rate on income.

Best Practices

The role of accounts payable is to ensure not only the processing of remittances but also compliance with tax laws. From verifying payee information to calculating tax withholdings and more, tax compliance has traditionally been executed manually. However, accounts payable can reduce this manual, time-consuming effort by streamlining this process with these best practices:

  • Assist the payee with identifying and completing the tax form. A tax form like a w8bene has many sections to fill out, and a payee may struggle with filling out the form correctly. Accounts payable should utilize web-based technology, such as a web-based questionnaire, to help payees with selecting the correct tax form and filling it out correctly.
  • Leverage data automation technology to verify payee tax information. An inaccurate or incomplete w8bene tax form automatically subjects the payee to a 30 percent tax rate.
  • Collect tax forms and IDs digitally.
  • Adopt a software that allows for automatic updates of IRS filing requirements

Data Point:

Source: Tax Expatriation

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