Tax Withholding for Payments from Inside to Outside the U.S.

Colleagues of mine from all over the world regularly comment on

their tax-related interactions (particularly the early ones) with

U.S.-based clients. It seems that such interactions tend not to go

very smoothly. Here are some observations on what seems most

worth knowing in advance on the subject.

If tax form W-8BEN is not submitted by you to a U.S. client, they

may have to withhold as much as 30 per cent of each payment

to you. (Still, the client may or may not have thought to send you

a blank or even mentioned the matter, so being proactive pays.)

The instructions for the form are at https://www.irs.gov/pub/irs-pdf/iw8ben.pdf

and form W-8BEN itself is at https://www.irs.gov/pub/irs-pdf/fw8ben.pdf

(both PDF files being at U.S. government pages, those of the Internal

Revenue Service in particular). Please note that this form has nothing

directly to do with VAT anywhere, the relevant taxes being held for the

U.S. Treasury and not (or at least not expressly) for tax authorities

abroad.

On to why submit form W-8BEN. Through the form, you can do the

following (in the words of the instruction set that I cited above):

"If applicable, claim a reduced rate of, or exemption from,

withholding as a resident of a foreign country with which the

United States has an income tax treaty and who is eligible

for treaty benefits."

It may take some extensive time working through search engine

results (unless use of a term like “France tax treaty” and then a

review of top results suffices) to find out whether your country

has an income tax treaty with the U.S. and then whether you are

eligible for benefits under it. With luck, this will be your only

difficult task in preparing any W-8BEN forms that you may need

to give your clients!