What is the W-8 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): 

Australian Treaty Benefits

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 form, $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 form 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 form 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 W-8 form applies for three years or as the U.S. IRS 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. 

What do you need to know before completing the form?

Things to know for different account types

Please read the instructions on https://www.irs.gov/instructions/iw8ben before you complete the W-8BEN form.

If you have a joint account, each owner will need to complete their own W-8BEN form. 

 

Part II(9) Claim of Tax Treaty Benefits

 

Refer to where you are a resident for income tax purposes. If you are a tax resident of Australia, then please note that Australia has an income tax treaty agreement with the United States. If you wish to claim reduced rate of withholding, you can select “Yes”.

 

To assist you, we will prepopulate some details on your W-8BEN form based on the information we have available. For example, if Australia is your country of tax residence you may be exempt from providing a Foreign Tax Identification Number (FTIN) in accordance with IRS Notice 2018-20. 

 

Some sections may require you to provide further information. 

 

If any of the prepopulated details are incorrect, contact us on 1300 361 170 before submitting. 

Please read the instructions on https://www.irs.gov/instructions/iw8bene before you complete the W-8BEN-E form.

 

To assist you, we will prepopulate some details on your W-8BEN-E form based on the information we have available. For example, if Australia is your country of tax residence you may be exempt from providing a Foreign Tax Identification Number (FTIN) in accordance with IRS Notice 2018-20. Some sections may require you to provide further information.

 

If any of the prepopulated details are incorrect, contact us on 1300 361 170 before submitting.

 

Some important things to consider:

 

CommSec only accepts applications for Companies incorporated in Australia or Trusts established in Australia, and only accepts the following Chapter 3 and Chapter 4 statuses on W-8BEN-E forms.

 

CommSec Account Type Chapter 3 [Part I (4)] Chapter 4 [Part I (5)]
SMSF (individual or corporate trustee) Complex Trust Nonreporting IGA FFI
Trust (individual or corporate trustee) Complex Trust Active NFFE or Passive NFFE
Company Corporation Active NFFE or Passive NFFE

 

Complex Trust: CommSec can only facilitate the transactions of trusts that satisfy the U.S. tax definition of a “Complex Trust” and are eligible to provide a W-8BEN-E form. Information in relation to the U.S. tax definition of the different types of trusts can be found at  www.irs.gov/pub/irs-pdf/i1041.pdf. 
 

Corporation: Generally, most Australian ‘Pty Ltd’ companies would be considered a Corporation for U.S. tax purposes. 
 

Active Non-Financial Foreign Entities (NFFE) are Companies or Trusts that earn less than 50% of their total income from investment activities such as interest or dividends, or produces/holds less than 50% of their assets for producing investment income.

 

Passive Non-Financial Foreign Entities (NFFE) are any non-foreign financial entity that is not an active NFFE. A NFFE will be deemed a passive NFFE if 50% or more of gross income for the preceding calendar year was generated from passive income, and/or if 50% or more of the assets held by the entity are assets that produce or are held for the production of passive income (passive income generally includes income from financial products and investments including Dividends, Interest, Annuities, Insurance product returns, Net Transaction gains, Rents and Royalties other than those generated from active trade of business).

 

Chapter 4 (FATCA Status): 

When completing the chapter 4 (FATCA Status) section of the W-8BEN-E form, for Australian:

SMSF
Part XII(26) Nonreporting IGA FFI:

a. IGA country of your SMSF would generally be ‘Australia’  
b. Australia is considered a ‘Model 1 IGA’  
c. Australian SMSF's would generally have an IGA category of ‘Exempt Beneficial Owner – Retirement Plan’

Active Companies and Trusts
Part XXV(39) Active NFFE:

a. You will need to select the certification box (if appropriate)
  
Passive Companies and Trusts
Part XXVI(40) Passive NFFE: 

a. You will need to select the certification box in 'a' (if appropriate)
b. You will need to select the certification box ‘ ‘b’ (if appropriate)  
If you select ‘c’ indicating there are substantial U.S. owners, we will be unable to process your application 


Please note that CommSec International Shares does not presently support U.S. Persons in any capacity including where an account has substantial U.S. owners.
 

Part III Claim of Tax Treaty Benefits  

14(a)
Refer to where the company or trust is a resident for income tax purposes. If the entity is a tax resident of Australia, then please note that Australia has an income tax treaty agreement with United States. If you wish to claim reduced rate of withholding, you can select “Yes”.   

14(b)

Company:  Companies incorporated in Australia are a tax resident of Australia. The question also requires a confirmation that the company is entitled to the benefits of the Australia USA Double Tax Treaty, which are generally available provided the shares in the company are owned by Australian tax residents. If you are entitled to the benefit,  the limitation applicable to most Australian Pty Ltd companies is ‘Company that meets the ownership and base erosion test’.  

 

More information
‘Company that meets the ownership and base erosion test’ generally requires more than 50% of the vote and value of the company's shares be owned, directly or indirectly, by parties who are residents in the same country as the company. If you are uncertain about the eligibility of your company, you should consult a tax advisor .

 

Trust/SMSF:  Most Australian trusts/funds satisfy the Australian tax residency requirements and are entitled to benefits of the treaty as a result of ‘Article 16(2)’. However, this does not apply to all trusts and you should ensure you have understood the relevant definitions in the Treaty before completing Item 14. To find the relevant definitions, please visit https://www.austlii.edu.au/au/other/dfat/treaties/2003/14.html. If you are entitled to the benefit, please select ‘Other’ and specify Article 16(2)g. 

 

More information 
For the purposes of the Australia USA Double Tax Treaty, a trust would be considered a resident of Australia if it is considered an Australian tax resident under Australian tax law provided that, in relation to any income, the income is subject to Australian tax as the income of a resident, in the hands of a beneficiary, or, if that income is exempt from Australian tax, is so exempt solely because it is subject to United States tax.    

 

Relevant to trusts, Article 16 paragraph 2 provides “a qualified person” will be eligible for the benefits of the Treaty if it satisfies one of the following paragraphs: 

 

• (d)a trust in which:

(i) the principal class of units in that Trust is listed or admitted to dealings on a recognized U.S. or Australian stock exchange and is regularly traded on one or more of the recognized stock exchanges; or 

(ii) the direct or indirect owners of at least 50 percent of the beneficial interests in that Trust are qualified persons by reason of the fact that interests in the owner are listed and traded on one of the recognized exchanges; 

 

• (e) an entity organised under the laws of Australia or the USA and established and maintained in that State exclusively for a religious, charitable, educational, scientific, or other similar purpose, even if the entity is generally exempt from tax in that State; 

 

• (f)  an entity organised under the laws of Australia and established and maintained in Australia to provide, pursuant to a plan, pensions or other similar benefits to employed and self-employed persons, even if the entity is generally exempt from tax in Australia, provided that more than 50 percent of the entity’s beneficiaries, members or participants are individuals resident in Australia; 
 

• (g) a trust which: 

(i)  at least half the days of the taxable year persons that are “qualified persons” by reason of being: 

  • an individual, or 
  • a company whose shares are listed and traded on a recognized US or Australian stock exchange, or 
  • another trust whose units, are listed and traded on a recognized US or Australian stock exchange 
  • own, directly or indirectly, at least 50 percent of the beneficial interests in the trust; and      

(ii) less than 50% of the trust’s gross income for the taxable year is paid or accrued, directly or indirectly, to persons who are not residents of either Australia or the USA in the form of payments that are deductible for tax purposes (but not including arm’s length payments in the ordinary course of business for services or tangible property and payments in respect of financial obligations to a bank, provided that where such a bank is not a resident of Australia or the USA such payment is attributable to a permanent establishment of that bank located in Australia or the USA).

As these definitions are complex, we recommend you consult your tax advisor if you are uncertain of the applicability of the relevant definitions to your trust.   

 

Prior to completing the W-8BEN-E form, please visit the Internal Revenue Service (IRS) website or seek independent tax advice to determine the entity type and Foreign Account Tax Compliance Act (FATCA) status that are most appropriate to your circumstances. If you believe that your entity type and FATCA status are different to the ones listed above, please contact CommSec on 1300 361 170 to discuss your details. 

 

 

Important Information

This information has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. The information is general in nature and is not advice. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to the individual's objectives, financial or taxation situation and needs, and, if necessary, seek appropriate professional advice.    

Commonwealth Securities Limited is not a registered tax adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or registered tax adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.   

Please consider the FSG, Terms and Conditions and any other relevant documentation relating to trading in International Shares. The bank does not accept any liability for any loss or damage arising out of or in relation to the use of all or part of this information.    

For details of how any personal information you may have provided is handled by us, please refer to our Group Privacy Statement. 

 Investing in overseas markets exposes you to risks including those related to movements in foreign currency exchange rates and market prices.   

Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.  CommSec is a Market Participant of ASX Limited and Cboe Australia Pty Limited, a Clearing Participant of ASX Clear Pty Limited and a Settlement Participant of ASX Settlement Pty Limited. If you have a complaint, our dispute resolution process can be accessed on 1300 371 170. 

 

© Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. CommSec is a Market Participant of ASX Limited and Cboe Australia Pty Limited, a Clearing Participant of ASX Clear Pty Limited and a Settlement Participant of ASX Settlement Pty Limited.

The information on this page has been prepared without taking into account your objectives, financial situation or needs. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to their objectives, financial situation or needs, and, if necessary, seek appropriate professional advice.

CommSec does not give any representation or warranty as to the accuracy, reliability or completeness of any content on this page, including any third party sourced data, nor does it accept liability for any errors or omissions.

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