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Is a W8-BEN required for a foreign consultant doing work overseas for the benefit of a US company?

Assuming a W8-BEN should be obtained (and 1042 filed) when a payment to a foreign vendor is for US-Sourced income:  

Does the definition of US-sourced income apply to a UK company working in the UK that consults for a US company?  What if they are performing marketing services virtually in the US but still residing and doing business in the UK?  For clarification purposes, the payment would be made from the US to the UK.

Alternatively, is there ever a time when a W8-BEN should be collected for a payment to a foreign vendor even when the income may *not* be US-sourced?

 

Answers

Topic Expert
Marc Schwartz
Title: Partner
Company: Schwartz International
(Partner, Schwartz International) |

Anytime a US person makes a payment to a non-US person, consideration should be given as to whether any of the W-8 forms should be collected. Generally, services performed outside the US do not generate US source income and are not taxable in the US under domestic law. When we represent the payor, we recommend obtaining a W-8BEN in such situations since the IRS has made international tax and withholding such a priority. No EIN is necessary if the payee is not claiming treaty benefits related to the services, thus the importance of there being no tax under domestic law (Internal Revenue Code).

The answer to the question about "virtual marketing" depends on the specific activities, what assets are being used, who owns/operates them, etc.

If in doubt, get the appropriate W-8 form, always.

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