A Dubai-based founder's US client asks for "your tax form". She sends a W-8BEN because she is foreign. The client withholds 30% on the next invoice, as the form instructs them to for a foreign person receiving US-source income. The invoice was from her Wyoming LLC, which is a US person and should have given a W-9. The 30% is now with the IRS and takes a 1040-NR and months to recover.
What the forms are
W-9 is the certificate a US person gives a payer: name, address, taxpayer identification number, and a statement that they are not subject to backup withholding. The payer withholds nothing and reports payments on a 1099 where required.
W-8BEN (individuals) and W-8BEN-E (entities) are the certificates a non-US person gives: a statement of foreign status and, where relevant, a claim to a reduced treaty rate. Without one, a payer must withhold 30% on US-source fixed or determinable income paid to a foreign person.
Who gives which
- A US LLC, whoever owns it, is a US person. It gives a W-9 with its EIN. This includes a single-member LLC owned by a non-resident; the "disregarded" label does not change the LLC's status as a US entity for this purpose.
- You, a non-resident individual, give a W-8BEN when a US payer is paying you personally: a platform paying you directly, a US company paying you as a contractor, a bank paying interest.
- Your foreign company (an Indian private limited, a UK Ltd) gives a W-8BEN-E.
Why the 30% exists
The US cannot chase a foreign person for tax after the money has left, so it collects at source from payers on certain US-source income: dividends, interest, royalties, and payments for services performed in the US. Business income earned from services performed abroad is generally not US-source, and not subject to the withholding, but a payer who does not have the right form will withhold anyway to protect themselves. The form is what tells them they may pay gross.
Treaty claims
On a W-8BEN, a resident of a treaty country can claim a reduced rate on income types the treaty covers, citing the article and the rate. Royalties and some service payments are where this matters most. A treaty claim needs a foreign taxpayer identification number (your home-country tax ID) on the form; a US ITIN is not required for most treaty claims on a W-8BEN.
Getting withheld tax back
If a payer withheld 30% wrongly, they may refund it if the correct form is provided before they deposit it with the IRS; after that, the only route is a US return (Form 1040-NR or 1120-F) claiming a refund of tax withheld on income that was not taxable. It works, slowly.
Keeping it straight
- Invoice from the LLC, get paid to the LLC's account, give the LLC's W-9.
- Keep a signed W-8BEN ready for any payment that is personal.
- Renew W-8 forms every three years; they expire.
- When a platform's onboarding asks "are you a US person", answer for the entity that holds the account, not for yourself.
The check: look at what form is on file with your largest US payer. If it is a W-8 and the account is in the LLC's name, fix it before the next payment.