What is the W-8 (US tax form) and why is it important?

 

The W-8 form is a legal US Treasury document required by the Internal Revenue Service (IRS) that 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).

Forms and samples

For information on what forms are available and which forms CommSec accepts, please click here.

Individual and joint accounts

Please read the instructions on www.irs.gov/W8BEN before you complete the form.

 

Some key points to consider:

 

  • If you have a joint account, all owners need to complete and return a form.
  • Line 3 – This refers to the address where you claim to be a resident for income tax purposes.
  • Line 6 – If you have an ABN relevant to your CommSec account activities you should consider disclosing your ABN here. If you do not have a relevant ABN, you should refer to IRS Notice 2018-20 and, if appropriate, insert “NOT LEGALLY REQUIRED”. Please do not provide your Australian Tax File Number (TFN).

W-8BEN sample for individual and joint

356 KB

W-8BEN form

554 KB

Company

Please read the instructions on https://www.irs.gov/pub/irs-pdf/iw8bene.pdf before you complete the form.

 

Some key points to consider:

 

  • Part I (1) - Enter the name of the company not your business name.
  • Part I (2) - CommSec only opens accounts for companies incorporated in Australia. If your company was not incorporated in Australia and you were previously unaware of this please contact CommSec to discuss your situation.
  • Part I (4) - Generally, most Australian Pty Ltd companies would be considered a Corporation for US tax purposes.

In addition for Part I (4) and Part I (5), for customers required to complete a W-8BEN-E form, CommSec in general only accepts the following Chapter 3 (entity type) and Chapter 4 (FATCA) status combinations:

 

Customer Type Chapter 3 Chapter 4
SMSF (Individual or Company trustee) Complex Trust Non Reporting IGA FFI
Trust (Individual or Company trustee) Complex Trust Active NFFE
OR 
Passive NFFE
Company Corporation Active NFFE
OR 
Passive NFFE

 

Prior to completing the W-8BEN-E form, please visit the IRS website www.irs.gov/FormW8BENE or seek independent tax advice to determine the entity type and 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.

 

  • Part I (6) - Refers to the address where you claim to be a resident for income tax purposes.
  • Part I (9) (b) - If you have an ABN relevant to your Commsec Account activities you should consider disclosing your ABN here. If you do not have a relevant ABN, you should refer to IRS Notice 2018-20 and if appropriate insert “NOT LEGALLY REQUIRED”. Do NOT provide your Australian Tax File Number (TFN).
  • Part II - Applies to Disregarded Entities, this would be any entity that is treated as not separate from its single owner for income tax purposes. More specifically, only where such an entity has its own GIIN and is receiving a withholdable payment, or for a branch operating in a country other than Australia. If you believe any of these concepts are relevant to your company you should consult a tax advisor. 
  • Part III (14), Line 14a and 14b - Refer to the country where your company is resident for income tax purposes. Companies incorporated in Australia are generally tax resident in 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.

The limitation applicable to most Australian Pty Ltd companies is “Company that meets the ownership and base erosion test”. This test generally requires more than 50% of the vote and value of the company's shares be owned, directly or indirectly, by individuals, governments, tax-exempt entities, and publicly-traded corporations resident in the same country as the company, as long as all companies in the chain of ownership are resident in the same country of residence, and less than 50% of the company's gross income is accrued or paid, directly or indirectly, to persons who would not be good shareholders for purposes of the ownership test.

 

If you are uncertain about the eligibility of your company you should consult a tax advisor.

 

To assist you with your understanding of the form we have prepared a SAMPLE.  The SAMPLE should be reviewed in conjunction with the above information. The SAMPLE is not advice and may not be appropriate for your circumstances.

W-8BEN-E sample for company

791 KB

W-8BEN-E form

209 KB

Superannuation

Please read the instructions on https://www.irs.gov/pub/irs-pdf/iw8bene.pdf before you complete the form.

 

Some key points to consider:

 

  • Part I (1) - Enter the full name of super fund or trust.
  • Part I (2) -  CommSec only opens accounts for superannuation funds and trusts established in Australia. If your trust or fund was not established in Australia and you were previously unaware of this please contact CommSec to discuss your situation.
  • Part I (4) - Information in relation to the US tax definition of the different types of trusts can be found at www.irs.gov/pub/irs-pdf/i1041.pdf.

You should review the definitions to determine which definition applies to your trust deed.

 

According to the IRS document a trust may qualify as a simple trust if:
1. The trust instrument requires that all income must be distributed currently (We understand this to mean annually);
2. The trust instrument doesn't provide any amounts to be paid, permanently set aside, or used for charitable purposes; and
3. The trust doesn't distribute amounts allocated to the corpus of the trust.

 

Complex trust are generally defined to exclude both simple trusts and grantor trusts.

 

A grantor type trust is a legal trust under applicable US state law that isn't recognised as a separate taxable entity for income tax purposes because the grantor or other substantial owners have not relinquished complete dominion and control over the trust. Generally, the grantor is treated as the owner of any portion of a trust in which he or she has a reversionary interest exceeding 5% in either the income or corpus.

 

Typically, Australian family trusts are considered discretionary trusts whereby the trust deed would not typically require all income to be distributed annually. Rather, the beneficiaries are mere discretionary objects and distribution is subject to an exercise of discretion by the trustee. Moreover, the deed would typically allow for the possibility of income accumulation, even though this usually does not occur, as it could result in the imposition of tax on the trustee.

 

Similarly, typically an Australian SMSF does not require all income to be distributed annually nor does it provide for a reversionary interest.

 

Generally, most Australian family trusts and SMSF should be considered Complex Trusts for US tax purposes.  However, this area of US tax law is complicated and an entity's classification may depend on the specific terms of the trust deed.  If you are uncertain as to the classification of your trust, you should consult your tax advisor.

 

Please note CommSec can only facilitate the transactions of trusts that satisfy the US tax definition of a “Complex Trust” and are eligible to provide a W8-BEN-E.

 

In addition for Part I (4) and Part I (5), for customers required to complete a W-8BEN-E form, CommSec in general only accepts the following Chapter 3 (entity type) and Chapter 4 (FATCA) status combinations:

 

Customer Type Chapter 3 Chapter 4
SMSF (Individual or Company trustee) Complex Trust Non Reporting IGA FFI
Trust (Individual or Company trustee) Complex Trust Active NFFE
OR 
Passive NFFE
Company Corporation Active NFFE
OR 
Passive NFFE

 

Prior to completing the W-8BEN-E form, please visit the IRS website www.irs.gov/FormW8BENE or seek independent tax advice to determine the entity type and 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.

 

  • Part II - Applies to Disregarded Entities, this would be any entity that is treated as not separate from its single owner for income tax purposes. More specifically, only where such an entity has its own GIIN and is receiving a withholdable payment, or for a branch operating in a country other than Australia. If you believe any of these concepts are relevant to your trust you should consult a tax advisor. 
  • Part III (14), Line 14a and 14b - Refer to the country where your trust or fund is resident for income tax purposes. The question also requires a confirmation that the trust is entitled to the benefits of the Australia USA Double Tax Treaty, which are generally available provided the trust can satisfy Article 16 of the Treaty.

 

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 US 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) on 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 as to the applicability of the relevant definitions to your trust.

 

Most Australian trusts satisfy the Australian tax residency requirements and are entitled to the 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 assist you with your understanding of the form we have prepared a SAMPLE.  The SAMPLE should be reviewed in conjunction with the above information. The SAMPLE is not advice and may not be appropriate for your circumstances.

W-8BEN-E sample for superannuation

747 KB

W-8BEN-E form

209 KB

Trust

Please read the instructions on https://www.irs.gov/pub/irs-pdf/iw8bene.pdf before you complete the form.

 

Some key points to consider:

 

  • Part I (1) - Enter the full name of super fund or trust.
  • Part I (2)-  CommSec only opens accounts for superannuation funds and trusts established in Australia. If your trust or fund was not established in Australia and you were previously unaware of this please contact CommSec to discuss your situation.
  • Part I (4) - Information in relation to the US tax definition of the different types of trusts can be found at www.irs.gov/pub/irs-pdf/i1041.pdf.

You should review the definitions to determine which definition applies to your trust deed.

 

According to the IRS document a trust may qualify as a simple trust if:
1. The trust instrument requires that all income must be distributed currently (We understand this to mean annually);
2. The trust instrument doesn't provide any amounts to be paid, permanently set aside, or used for charitable purposes; and
3. The trust doesn't distribute amounts allocated to the corpus of the trust.

 

Complex trust are generally defined to exclude both simple trusts and grantor trusts.

 

A grantor type trust is a legal trust under applicable US state law that isn't recognised as a separate taxable entity for income tax purposes because the grantor or other substantial owners have not relinquished complete dominion and control over the trust. Generally, the grantor is treated as the owner of any portion of a trust in which he or she has a reversionary interest exceeding 5% in either the income or corpus.

 

Typically, Australian family trusts are considered discretionary trusts whereby the trust deed would not typically require all income to be distributed annually. Rather, the beneficiaries are mere discretionary objects and distribution is subject to an exercise of discretion by the trustee. Moreover, the deed would typically allow for the possibility of income accumulation, even though this usually does not occur, as it could result in the imposition of tax on the trustee.

 

Similarly, typically an Australian SMSF does not require all income to be distributed annually nor does it provide for a reversionary interest.

 

Generally, most Australian family trusts and SMSF should be considered Complex Trusts for US tax purposes.  However, this area of US tax law is complicated and an entity's classification may depend on the specific terms of the trust deed.  If you are uncertain as to the classification of your trust, you should consult your tax advisor.

 

Please note CommSec can only facilitate the transactions of trusts that satisfy the US tax definition of a “Complex Trust” and are eligible to provide a W8-BEN-E.

 

In addition for Part I (4) and Part I (5), for customers required to complete a W-8BEN-E form, CommSec in general only accepts the following Chapter 3 (entity type) and Chapter 4 (FATCA) status combinations:

 

Customer Type Chapter 3 Chapter 4
SMSF (Individual or Company trustee) Complex Trust Non Reporting IGA FFI
Trust (Individual or Company trustee) Complex Trust Active NFFE
OR 
Passive NFFE
Company Corporation Active NFFE
OR 
Passive NFFE

 

Prior to completing the W-8BEN-E form, please visit the IRS website www.irs.gov/FormW8BENE or seek independent tax advice to determine the entity type and 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.

 

  • Part II - Applies to Disregarded Entities, this would be any entity that is treated as not separate from its single owner for income tax purposes. More specifically, only where such an entity has its own GIIN and is receiving a withholdable payment, or for a branch operating in a country other than Australia. If you believe any of these concepts are relevant to your trust you should consult a tax advisor. 
  • Part III (14), Line 14a and 14b - Refer to the country where your trust or fund is resident for income tax purposes. The question also requires a confirmation that the trust is entitled to the benefits of the Australia USA Double Tax Treaty, which are generally available provided the trust can satisfy Article 16 of the Treaty.

 

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 US 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) on 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 as to the applicability of the relevant definitions to your trust.

 

Most Australian trusts satisfy the Australian tax residency requirements and are entitled to the 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 assist you with your understanding of the form we have prepared a SAMPLE.  The SAMPLE should be reviewed in conjunction with the above information. The SAMPLE is not advice and may not be appropriate for your circumstances.

W-8BEN-E sample for trust

788 KB

W-8BEN-E form

209 KB

How can I return my W-8 forms?

Once you’ve completed your forms, you can return them by email (preferred) or post them back to us. If you require further assistance, please contact us by email or phone.

International

CommSec CFDs

Email:

Postal Address:

CommSec International Trading Desk
Locked Bag 22,
Australia Square NSW 1215

CommSec CFDs Desk
Locked Bag 22,
Australia Square NSW 1215

Phone:

1300 361 170
(open 24 hours on US trading days)

1300 307 853
(open 24 hours on US trading days)

Please note, CommSec cannot provide any advice on taxation matters. Please refer to your Adviser or Accountant.

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. 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. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia and a participant of the ASX Group and Chi-X Australia. If you have a complaint, our dispute resolution process can be accessed on 1300 371 170. CommSec International Securities Trading is provided by Pershing LLC, ARBN: 108 110 149, AFSL 271837 a BNY Melon company and a member of FINRA, NYSE & SIPC.

 

Disclaimer

This site is directed and available to and for the benefit of Australian residents only. © 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 and both entities are incorporated in Australia with limited liability.

By clicking on the "Download the CommSec App" buttons above, you will be directed to itunes.apple.com or play.google.com. These sites are not affiliated with CommSec and may offer a different Privacy Policy and level of security.

Top