W9/W8 for an offshore (disregarded) LLC

[ronkal]

Hello,
A friend of mine has a Florida LLC, as a 'disregarded' entity as he doesn't have any ties to the US.
He started working with a US Inc. (Delaware based) and was asked to fill a W-9 Form (Request for Taxpayer Identification Number and Certification)
The form doesn't look suitable to me, and I found form W-8BEN which looks suitable for the above situation,
Can anybody confirm? Any other ideas?
This is important as there is a pretty high withholding tax in the US.

Thanks

 

[Don]

ronkal said:
Hello,
A friend of mine has a Florida LLC, as a 'disregarded' entity as he doesn't have any ties to the US.
He started working with a US Inc. (Delaware based) and was asked to fill a W-9 Form (Request for Taxpayer Identification Number and Certification)
The form doesn't look suitable to me, and I found form W-8BEN which looks suitable for the above situation,
Can anybody confirm? Any other ideas?
This is important as there is a pretty high withholding tax in the US.

Thanks
Click to expand...

Where is he based?
For U.S.-based multinationals, it is recommended to work closely with the tax advisors to evaluate anti-hybrid legislation within their global structure, and in some cases analyze restructuring alternatives to avoid costly outcomes.

 

[ronkal]

Based in Panama (Tax resident there)
Which tax advisors? what do you mean by "costly outcomes"?

 

[Au999]

In situations similar this I don't believe any of the w9 or Ben forms are required - instead you self certify as having no US operations, basically give them a signed PDF or similar saying you're a foreign owned LLC / disregarded entity with no US operations. Quite common for affiliates.

Here's an example self certificate about not having any us operations for as us LLC being run offshore:

Certification and signature of Publisher or a duly authorized representative of Publisher

Publisher represents and warrants that it does not have any employees or equipment located in the United States ("U.S. Activities") that are involved in any way with the revenue that has been or will be earned by Publisher pursuant to the Commission Junction Affiliate Marketing program. U.S. Activities include, but are not limited to, owning a web server or owning a hosting service in the U.S., or having employees in the U.S. who are involved in either:

Signature *|________________________________________|
Typing in your name acts as your signature.

* Required fields

Last edited: Jul 10, 2022

 

[cristiansilva33as]

ronkal said:
Hello,
A friend of mine has a Florida LLC, as a 'disregarded' entity as he doesn't have any ties to the US.
He started working with a US Inc. (Delaware based) and was asked to fill a W-9 Form (Request for Taxpayer Identification Number and Certification)
The form doesn't look suitable to me, and I found form W-8BEN which looks suitable for the above situation,
Can anybody confirm? Any other ideas?
This is important as there is a pretty high withholding tax in the US.

Thanks
Click to expand...

I have a similar situation. Which path did you choose? Did you fill the W8?

 

[ronkal]

Thanks for the reply @Au999
I'm still not sure about what to do - any other advice?

 

[ronkal]

I got an advice the LLC is not an entity for tax purposes.
I filled and sent the "W8-BEN" form.

 

[marioIT]

It's been some time, I am not a lawyer nor a cpa, so double check these info...

If he was using a C-corp he would've filed a W9 even as foreigner, many I know do this.
He has to file a W-8BEN-E since it's a foreign owned disregarded LLC.
The form will not go straight to the IRS.
The payer (Inc. company) will have to keep it on file and use the info on it to compile other forms like 1099 etc
The payer company must know this info as it can deduct this invoice as expense only if there's a 1099 issued.
To issue the 1099 the company must know who it's dealing with.
Since your friend is a foreigner earning U.S. income in this case, usually the payer will have to withhold 30% of the gross amount and give that to the IRS.
To reduce this amount he can use a tax treaty with his country, but he has to file all the info in the form W8, foreigner tax number included.
Is it up to him to file the form correctly if he want to pay taxes in his own country. Otherwise the payer will have to deduct that 30% that goes to the IRS.
Usually these forms were used to catch US-citizen trying to escape the US taxation.
When the IRS will get that 1099, in theory they should check if the info on it are correct.
The IRS had huge backlog of reciprocal FATCA exchanges. But things are changing with this admin, so who knows what they'll do of all of this data.
Any payment over 600$ will have to be reported to the IRS with the new law.

This is what I know/remember, if someone (CPA?) can confirm that things are still going like this, it would be great.

 

[name]

marioIT said:
Since your friend is a foreigner earning U.S. income in this case, usually the payer will have to withhold 30% of the gross amount and give that to the IRS.
Click to expand...

Source? I think this is false.
It's true for dividends, interest, royalties including Google Adsense income.

 

[fshore]

marioIT said:
It's been some time, I am not a lawyer nor a cpa, so double check these info...

If he was using a C-corp he would've filed a W9 even as foreigner, many I know do this.
He has to file a W-8BEN-E since it's a foreign owned disregarded LLC.
The form will not go straight to the IRS.
The payer (Inc. company) will have to keep it on file and use the info on it to compile other forms like 1099 etc
The payer company must know this info as it can deduct this invoice as expense only if there's a 1099 issued.
To issue the 1099 the company must know who it's dealing with.
Since your friend is a foreigner earning U.S. income in this case, usually the payer will have to withhold 30% of the gross amount and give that to the IRS.
To reduce this amount he can use a tax treaty with his country, but he has to file all the info in the form W8, foreigner tax number included.
Is it up to him to file the form correctly if he want to pay taxes in his own country. Otherwise the payer will have to deduct that 30% that goes to the IRS.
Usually these forms were used to catch US-citizen trying to escape the US taxation.
When the IRS will get that 1099, in theory they should check if the info on it are correct.
The IRS had huge backlog of reciprocal FATCA exchanges. But things are changing with this admin, so who knows what they'll do of all of this data.
Any payment over 600$ will have to be reported to the IRS with the new law.

This is what I know/remember, if someone (CPA?) can confirm that things are still going like this, it would be great.
Click to expand...

He should file w8ben as he is a person, not w8bene which is for companies.

They will not withhold 30% if they receive a w8ben, as it proved that the person is not a US tax person.
Also these forms are required only for services, not for sales of goods.

A double tax treaty is only relevant if there is US source income with etbus or dividend, royalty or interest income.

 

[marioIT]

fshore said:
He should file w8ben as he is a person, not w8bene which is for companies.
Click to expand...

you're 100% right. Here he is talking about his friend directly owning the disregarded LLC, he is a person. he should file the W8ben.
Can't correct anymore. the -E slipped through as I had just read the OP post history about panamian company owning US LLCs and that caused confusion.

name said:
Source? I think this is false.
It's true for dividends, interest, royalties including Google Adsense income.
Click to expand...

I don't know what his friends offers, if services or goods. i always think of services as is more likely these days.
If it's goods maybe I'd structure it differently...

The form's 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."

///

Also file the damn 5472 correctly and in time, two friends got the sweet $25k fine and they still cannot believe it... don't know how much time will take to fine everyone but they already hit some.

 

[name]

marioIT said:
you're 100% right. Here he is talking about his friend directly owning the disregarded LLC, he is a person. he should file the W8ben.
Can't correct anymore. the -E slipped through as I had just read the OP post history about panamian company owning US LLCs and that caused confusion.

I don't know what his friends offers, if services or goods. i always think of services as is more likely these days.
If it's goods maybe I'd structure it differently...

The form's 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."

///
Click to expand...

I think for example If you're providing services in software development, there's no tax.
I believe "U.S. sources" is the keyword here. Are you familiar with ETBUS?

https://ustax.bz/non-us-entrepreneurs/Some tax pros make the mistake of equating “US source” with “you have to pay US tax.” But that's simply not the case. A non-US person is required to pay US tax on income only if that income is “effectively connected with the conduct of a trade or business within the United States. That is the case only where the non-US person is ETBUS and the income is connected with the activity that makes the non-US person ETBUS.

Also file the damn 5472 correctly and in time, two friends got the sweet $25k fine and they still cannot believe it... don't know how much time will take to fine everyone but they already hit some.
Click to expand...

Good reminder. This is my first time hearing of someone who got fined

 

[marioIT]

It depends on how things are setup even with software.
e.g. I sold some code to a big US company and it was easier/safer to get long term royalties from it.
It was very convenient as 1) fully legal for both sides 2) paid close to 0 taxes in my country instead of the very high social contributions and personal taxation.
He said nothing on the specific situation.
If just regular software/consulting then fine, no taxes are due, just reporting, as long as he doesn't elect corp status. Not even a 1040nr.
I agree it counts where the services are perfomed not where are they paid from.

But you'll see the s**t that happens when a big company (following their big4 cpa input) will withdraw the 30% on you as they will err on their side.
Let's say you don't want to give the IRS your home country Tax Number...
In that case you can't do a single thing if they don't like your form. Better be clear from the get go with them.
Also many times it could be useful to file as corporation. It all depends on the personal situation and how legal you want it to be with your home country.

 

[name]

marioIT said:
It depends on how things are setup even with software.
Click to expand...

That makes sense

But you'll see the **** that happens when a big company (following their big4 cpa input) will withdraw the 30% on you as they will err on their side.
Click to expand...

30% (or 20% with treaty in my case) makes a huge difference imo

If you're a contractor working through your LLC, getting paid per hour or project milestone, they shouldn't ask for W8 (and withdraw 30%) as far as I know. Am I mistaken?

Can they demand W8 whenever they want? Just to err on their side? If that's the case, that sucks. Like why bother living in a tax advantageous country then, I might as well live in the US & benefit from their great real estate market and so on

 

[fshore]

name said:
If you're a contractor working through your LLC, getting paid per hour or project milestone, they shouldn't ask for W8 (and withdraw 30%) as far as I know. Am I mistaken?
Click to expand...

They should ask for w8, as they need to know if you're a US person or not. If you're a US person then they need to give you a 1099 yearly

 

[name]

fshore said:
They should ask for w8, as they need to know if you're a US person or not. If you're a US person then they need to give you a 1099 yearly
Click to expand...

They always ask for W8 if you're a non-US person? If there's no withholding tax to collect, I thought there would be no need for W8. But I guess this doesn't matter. What matters is the tax. So any thoughts on this?
> If you're a contractor working through your LLC, getting paid per hour or project milestone, they don't withdraw that withholding tax (30% or less), right?

 

[fshore]

name said:
They always ask for W8 if you're a non-US person? If there's no withholding tax to collect, I thought there would be no need for W8. But I guess this doesn't matter.
Click to expand...

They need to withhold for payment for services if they don't have a w8 or w9. For goods no need for w8, w9.

name said:
What matters is the tax. So any thoughts on this?
> If you're a contractor working through your LLC, getting paid per hour or project milestone, they don't withdraw that withholding tax (30% or less), right?
Click to expand...

In terms of taxes you don't work through your LLC, you work personally as the LLC is transparent. And you need to give them a W8-BEN to show that you are not a US resident.

 

[Asterion]

Slightly related to this, so I hope somebody has some insight.
Non-resident alien with single-member US LLC which is the legal entity used for a developing organization on the App Store.
Among the admin things to be done before publishing, Apple is asking to fill in a screen on App Store Connect titled W9, with info that presumably overlaps an actual W9 form.
But the NRA should be filling a W8-BEN (E?), not a W9.
I got in touch with Apple and awaiting their reply but I fear the worst.
Any experience or hearsay? Can they change the form on ASC? Do they accept a manual submission of a W8-BEN?

 

[Asterion]

Do the right honourable people at @startfleetio any experience with this ^

 

[ivan1911]

Asterion said:
Do the right honourable people at @startfleetio any experience with this ^
Click to expand...

Contact their telegram , they respond fast. Not sure when they will see this...