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Tax.appeal.168
Tax.appeal.168, Accountant
Category: US Tax
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Experience:  3+ decades of various tax experience, including ex-pat, tax prep and accounting as a business owner.
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I am a UK business and provide Architectural drawings to

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I am a UK business and provide Architectural drawings to large US homebuilders. We have a new client who has asked for our Tax ID/W9. We dont have this nor have been asked by other clients. Do we need to get a US tax ID? and if so how to do so?

Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

In brief, because your business will be receiving payments from a U.S. source, there is a special form that you need to complete in order to claim exemption from the mandatory 30% withholding requirement on foreign persons receiving payments from U.S. sources. It is one of the W8 forms, Likely the form W8-BEN, but it could be one of the other W8 forms. It depends on the circumstances. 1) Is your business incorporated in the UK? 2) Does your business have a physical location in the U.S.? The answers to these questions will determine which of the W8 forms that you need to complete.

Customer: replied 1 year ago.
Hi, thanks for the response. Yes my company is a limited company registered in the UK and we have no physical location in the US. If aTax ID is a dealbreaker, am I able to get one so we secure the workstream from this client? thanks in advance.

Hello again. You are welcome. You will not need a Tax ID, however, you will need to complete a Form W-8BEN-E in order to avoid the 30% withholding requirement.

Link to Form W-8BEN-E/instructions:

https://www.irs.gov/pub/irs-pdf/fw8bene.pdf

https://www.irs.gov/pub/irs-pdf/iw8bene.pdf

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Purpose of Form

This form is used by foreign entities to document their statuses for purposes of chapter 3 and chapter 4, as well as for certain other Code provisions as described later in these instructions.

Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of:

Interest (including certain original issue discount (OID));

Dividends;

Rents;

Royalties;

Premiums;

Annuities;

Compensation for, or in expectation of, services performed;

Substitute payments in a securities lending transaction;

or Other fixed or determinable annual or periodical gains, profits, or income.

REFERENCE SOURCE:

https://www.irs.gov/pub/irs-pdf/iw8bene.pdf

Page 1

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Giving Form W-8BEN-E to the withholding agent.

Do not send Form W-8BEN-E to the IRS. Instead, give it to the person who is requesting it from you. Generally, this will be the person from whom you receive the payment, who credits your account, or a partnership that allocates income to you. An FFI may also request this form from you to document the status of your account.

When to provide Form W-8BEN-E to the withholding agent.

Give Form W-8BEN-E to the person requesting it before the payment is made to you, credited to your account, or allocated. If you do not provide this form, the withholding agent may have to withhold at the 30% rate (as applicable under chapters 3 or 4), backup withholding rate, or the rate applicable under section 1446. If you receive more than one type of income from a single withholding agent for which you claim different benefits, the withholding agent may, at its option, require you to submit a Form W-8BEN-E for each type of income. Generally, a separate Form W-8BEN-E must be given to each withholding agent.

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Be sure to read the instructions because the entire form is not applicable to you. You only need to complete the parts of the form that apply to you. From what I can tell, Parts I, III, XIV, and XXX are the sections that appear to be applicable to you.

If you do not require further assistance with this matter, I ask that you please take the time to scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. A 5 star rating is greatly appreciated.

You will check the box 14b and then you would check the box Other (specify article and paragraph)

Article 7, Paragraph 1 of the treaty is what you would reference here.

Link to treaty:

https://www.irs.gov/pub/irs-trty/uk.pdf

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(1) The business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carried on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the business profits of the enterprise may be taxed in that other State but only so much of them as is attributable to that permanent establishment.

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