What is the W-8 (US tax form) and why is it important?
The W-8 form is a United States (U.S.) Internal Revenue Service (IRS) document which allows foreign investors to claim concessional tax treaty benefits, including a reduced rate of withholding tax (as shown in the table below):
Valid W-8 |
Invalid or no W-8 |
|
---|---|---|
Sell trade |
0% tax on sale proceeds |
30% tax on sale proceeds |
Dividend Payment |
15% tax |
30% tax |
For example, if you were to buy $10,000 worth of Apple shares and sell the shares at a later date for the same value of $10,000 without a valid W-8, $3,000 (30%) of the proceeds will need to be withheld and remitted to the IRS and you would only receive $7,000 after settlement (less transaction costs). If you have a valid W-8 and are eligible for treaty benefits, you should receive the full $10,000 (less transaction costs) after settlement.
Please note: The above example is only used to show the difference a W-8 can make to the proceeds from a sale. There may be other tax implications from your transactions. Please speak to your accountant to understand your personal situation and implications.
Each form applies for three years or as the US Treasury determines. There is also a requirement to submit an updated form when any of your circumstances change (e.g. name change).
Your facts and circumstances determine which type of W-8 form applies to you. CommSec can only facilitate the transactions of clients that are eligible to provide either a W-8BEN or W-8BEN-E form. Prior to completing the relevant W-8 form, please review the IRS instructions and/or seek independent advice to determine the type of form that is most appropriate for your circumstances.
CommSec does not provide advice on taxation matters. The information provided is to assist you in your obligation to provide the necessary information for U.S. tax withholding and reporting requirements. You should make sure you understand your obligations before completing the W-8 form and if necessary, seek advice from your Adviser or Accountant.