Reply to: Individual Taxpayer Identfcaton Number (ITIN) for US

[jamesbrown]

Thanks, I'm still not sure if I should supply an ITIN or a local tax ID, or if the client would have the right to withhold based on the absence of one or the other. I would rather not share any tax information I don't have to.

The advice in the link is that you don't need an ITIN, and that is consistent with the professional advice that I've received. The point of the form is that you're indicating, by your signature, that the payments are not withholdable payments, but it's up to your client to accept that declaration. Ultimately, it's their responsibility to retain the form (it is not sent to the IRS) and then evidence, upon request from the IRS, that the payments were not withholdable. If the client causes a fuss, there's little you can do, other than show them the professional advice you've received. I've personally never had a problem with my US clients once I've explained the position.

[darrenb]

Form 1099 for Payments to Foreign Contractors for Services? - International Tax Blog

Thanks, I'm still not sure if I should supply an ITIN or a local tax ID, or if the client would have the right to withhold based on the absence of one or the other. I would rather not share any tax information I don't have to.

[jamesbrown]

Thanks, that link is great. But is this assuming I've been hanging on to my UK Ltd (I haven't) or am incorporated in Europe? I'm just a regular freelancer.

Yes, indeed, this was my assumption. However, the main difference is the form, and not the level of complexity, which is the same. In that case, you'll need to complete the old W-8BEN, not the new form (E), which is for entities rather than individuals. Again, it's very simple if you're intending to complete the services wholly in the UK (in which case this is not "US source" income) and you're not a "US person", because these payments will not, under those circumstances, be witholdable payments. Here's the relevant (older) information on that:

Form 1099 for Payments to Foreign Contractors for Services? - International Tax Blog

[darrenb]

Bottom line, you should be filling out the new W8-BEN-E on behalf of YourCo, not an old W8-BEN on behalf of you personally.

Thanks, that link is great. But is this assuming I've been hanging on to my UK Ltd (I haven't) or am incorporated in Europe? I'm just a regular freelancer.

[jamesbrown]

I'm freelancing in Europe and I sometimes do work for US clients. I haven't had to fill out any US tax forms before, but my latest potential client seems a bit nervous, possibly because of FATCA and the ever-evolving regulatory environment.

I have a call with them tomorrow, and they might want me to walk things through with them a bit. Would appreciate any tips on how to soothe them, as I am a bit confused about it all myself. Especially would love to hear the experience of darmstadt who apparently had to deal with this last year, and from the wise jamesbrown!

It's occurred to me they may want me to fill out a W8-BEN. If so, should I be putting in an ITIN, a local tax ID, or asking for a different form entirely?

This is t'interweb (), so if you want completely accurate advice on complex issues, this is probably not the place. That being said, the advice below is consistent with the professional advice I've received in the past:

Payments to Foreign Contractor Entities: Form W-8BEN-E - International Tax Blog

I should warn you that I've also received incorrect advice from "well-qualified" cross-border tax professionals in the past so YMMV. Bottom line, you should be filling out the new W8-BEN-E on behalf of YourCo, not an old W8-BEN on behalf of you personally. Also, more than likely, the payments will not be withholdable payments, so it should be simple to complete, in line with the advice above. You should only need to do this if your client explicitly asks for it (because it's their responsibility).

[darrenb]

I'm freelancing in Europe and I sometimes do work for US clients. I haven't had to fill out any US tax forms before, but my latest potential client seems a bit nervous, possibly because of FATCA and the ever-evolving regulatory environment.

I have a call with them tomorrow, and they might want me to walk things through with them a bit. Would appreciate any tips on how to soothe them, as I am a bit confused about it all myself. Especially would love to hear the experience of darmstadt who apparently had to deal with this last year, and from the wise jamesbrown!

It's occurred to me they may want me to fill out a W8-BEN. If so, should I be putting in an ITIN, a local tax ID, or asking for a different form entirely?

[jamesbrown]

There's no obligation of course but you pay less tax. You can refuse to fill it in, but then you don't get your tax rebate.

You're basically informing the IRS that you are an alien and saving money.

Yes, I understand the situation with US equities purchased through a UK broker as I have purchased US equities in the past. However, there is no analogy here. Brokers impose certain conditions to maintain their status with the IRS and, IIRC, withhold at a 30% rate. In contrast, there is no withholding requirement on the money received by the OPs company from a US client if the work is done in the UK; it is "foreign-source" income received by a "non-US person". Further, alongside the absence of a withholding requirement, there was, until very recently, no reporting requirement. However, the OP may find that they are asked to complete the first few lines of the new W-8BEN-E by their US client, for which no ITIN or any other US reference would be required.

[BlasterBates]

Actually, for what it's worth, this is not quite the same thing. The W-8BEN has been around for a long time. However, pre-FATCA, there was absolutely no requirement for a non-US person receiving foreign-source income (and, for the OP, the income would be classified as foreign-source) to report anything to the IRS. What you're referring to above is actually a requirement imposed by certain financial institutions (your share broker) on their customers (you). This is not a requirement imposed by the IRS directly. Notwithstanding the link I posted above about the new requirements in the context of FATCA, there is absolutely no need or basis for a non-US person to report to the IRS on their foreign-source income (noting that both of these are technical terms).

There's no obligation of course but you pay less tax. You can refuse to fill it in, but then you don't get your tax rebate.

You're basically informing the IRS that you are an alien and saving money.

[BogBeast]

W-8BEN-E or W-8BEN

Sorry to jump in on this post. I am in the same (or similar situation) to the OP).

I am contracting to a US based company to provide training services in Europe. My employing company is asking me to fill out a W8 form and I am to trying to understand if I need an ITIN number (and wait the 6 to 12 weeks and the hassle of getting one)

As everything I do is outside of the US (‘Foreign-Performed Services’) plus I have no other financial connection to the US
I am don’t think I do need an ITIN and can get away with the minimal form fill.

However I am not sure which version of the form I need to fill. I am new to the contracting game and am in the process of setting up my own ltd company. Its just me, on my own and payments will be going to that company.

Does this mean I need to fill out the W-8BEN-E instead?

Thanks for any advice …

[jamesbrown]

I too have an ITIN number I had to fill out W-8BEN-E, that's because I've bought shares registered on the US stock exchange, so I'm subject to witholding tax on divis.

Purely routine, just fill out the form and send it to the IRS.

It's to confirm that you are an "alien" and hence exempt from Sales Tax or whatever the rule is for "Aliens" eg reduced rate, completely exempt, otherwise the invoice might be expected to have Sales tax or whatever thr rule is.

Actually, for what it's worth, this is not quite the same thing. The W-8BEN has been around for a long time. However, pre-FATCA, there was absolutely no requirement for a non-US person receiving foreign-source income (and, for the OP, the income would be classified as foreign-source) to report anything to the IRS. What you're referring to above is actually a requirement imposed by certain financial institutions (your share broker) on their customers (you). This is not a requirement imposed by the IRS directly. Notwithstanding the link I posted above about the new requirements in the context of FATCA, there is absolutely no need or basis for a non-US person to report to the IRS on their foreign-source income (noting that both of these are technical terms).

[BlasterBates]

I too have an ITIN number I had to fill out W-8BEN-E, that's because I've bought shares registered on the US stock exchange, so I'm subject to witholding tax on divis.

Purely routine, just fill out the form and send it to the IRS.

It's to confirm that you are an "alien" and hence exempt from Sales Tax or whatever the rule is for "Aliens" eg reduced rate, completely exempt, otherwise the invoice might be expected to have Sales tax or whatever thr rule is.

[jamesbrown]

I'm not a UK taxpayer although this would affect them too. After further investigation we've discovered that I don't need one nor an EIN (Employee Identification Number) but do need to charge them sales tax for the state they are in plus I require some form of number, apparently. I've just received a special document from the tax authorities describing this plus we're talking to an accountant and the IRS here in the USA. I'll update as more information comes in as this will more than probably affect UK contractors (the US brought in new tax laws in 2013 dealing with this!)

Take a look at the link above and the W-8BEN-E. I have no idea why you'd be charging sales tax; you likely have no basis to collect and remit US sales tax. One of the keywords here is "nexus", i.e. a sufficient physical presence to determine liability to collect and remit sales tax. Admittedly, US states add another layer of complexity in dealing with US clients, but you need to be talking to the right people. I wouldn't necessarily trust what the IRS tells you or, indeed, a US accountant. This really is a situation where you need a specialist tax adviser.

Nevertheless, I'll keep an eye on this thread. I routinely deal with US clients, and I've never had a situation that's been anything other than straightforward (although, as I mentioned, it's frequently necessary to correct misinformation on reporting requirements, whether corporate or individual). In my experience, the hardest part is getting the necessary insurance or negotiating non-US jurisdiction and governing law.

[darmstadt]

As a UK taxpayer, you will have a unique reference number (HMRC will confirm subject to ID checks) so you should use that.

I'm not a UK taxpayer although this would affect them too. After further investigation we've discovered that I don't need one nor an EIN (Employee Identification Number) but do need to charge them sales tax for the state they are in plus I require some form of number, apparently. I've just received a special document from the tax authorities describing this plus we're talking to an accountant and the IRS here in the USA. I'll update as more information comes in as this will more than probably affect UK contractors (the US brought in new tax laws in 2013 dealing with this!)

[Taita]

Just been informed I should get an ITIN (Individual Taxpayer Identfcaton Number) for invoicing clients in the USA. Anyone been through this and know how to go about it? It may be only for those states where certain taxes apply and it might not apply to UK taxpayers but apparently does for those paying tax in Germany (new tax laws)

As a UK taxpayer, you will have a unique reference number (HMRC will confirm subject to ID checks) so you should use that.

[jamesbrown]

Just been informed I should get an ITIN (Individual Taxpayer Identfcaton Number) for invoicing clients in the USA. Anyone been through this and know how to go about it? It may be only for those states where certain taxes apply and it might not apply to UK taxpayers but apparently does for those paying tax in Germany (new tax laws)

In the past, it hasn't been necessary to complete any IRS forms for services performed by a foreign entity in a foreign country because the company is not a US person and the income is treated as foreign-source income. Reporting requirements only related to a "US person" (includes companies) and/or "US-source income". However, you'll need to get advice in light of FATCA. For example, see here:

International Tax Blog: Payments to Foreign Contractor Entities: Form W-8BEN-E

You need to be very careful here, as there's an enormous amount of misinformation about what is required, including among US companies (and very likely your client) and even tax specialists that are not trained on foreign compliance. The fact that you're being asked for an ITIN suggests that you're being led down a path that you should not be going. Seek professional advice, because your client may not listen to you directly, but they should listen to a suitably qualified professional. Also, remember that there are two different things here: you and YourCo. Neither of you are likely to be a US person or to have US-source income.