The W-8BEN form is a document from the U.S. Internal Revenue Service (IRS) that allows foreign investors to establish their foreign status, allowing them to claim beneficial ownership and access a reduced rate of withholding tax.
Do Stockspot clients need to complete the W-8BEN form?
There are two ETFs deriving their income from the U.S. in the Stockspot Model Portfolios. These include the iShares Emerging Markets ETF (IEM) and iShares Global 100 ETF (IOO). There are two ETFs in the Stockspot Sustainable Portfolios that derive income from the U.S. including the BetaShares Global Sustainability Leaders ETF (ETHI) and VanEck Vectors MSCI International Sustainable Equity ETF (ESGI). These ETFs are subject to U.S. withholding tax.
However, all these ETFs are now domiciled in Australia, so clients with Stockspot Model Portfolios and Stockspot Sustainable Portfolios don’t need to complete a W-8BEN form.
Stockspot Themes clients and the W-8BEN form
Clients who have Stockspot Themes and who hold Vanguard All World (ex US) Shares Index ETF (VEU), should complete a W-8BEN form. For individual and joint accounts, the W-8BEN form can be completed online via Computershare. Other entities like SMSFs, trusts and companies are still required to download and complete the W-8BEN-E form.
If you hold VEU as part of Stockspot Themes, we’ll provide instructions on how to complete your W-8BEN form. If you hold VEU and don’t complete a W-8BEN form, U.S. withholding tax will be deducted on your U.S. income at the full rate of 30%.
How long is a W-8BEN form valid for?
Generally a W-8BEN form will remain in effect until 31 December, three years after the date of signing. For example, a form signed on 15 June 2022 will remain in effect until 31 December 2025. However, if any details provided on the form change, an investor will need to lodge a new W-8BEN form providing the new details.
How many W-8BEN forms do I need to complete?
A W-8BEN form needs to be completed for each security an investor holds which may distribute U.S. sourced income. Where a form is not completed, U.S. withholding tax may be applied on that ETFs distributions at a higher rate.
What happens if a W-8BEN form has not been lodged?
If the W-8BEN form is not completed, U.S. withholding tax may be deducted at an applicable rate of 30% of the income distributed. However, clients may be able to claim back any U.S. withholding tax charged in the form of a foreign income tax offset (FITO) which reduces your net tax payable in Australia.
Investors who have not submitted a W-8BEN form and have been charged a higher rate of U.S. withholding tax will therefore generally be able to claim the additional withholding tax back in the form of a larger FITO.
For individuals or super funds in the accumulation phase, U.S. withholding is an allowable tax offset (that is, the Australian Taxation Office will reduce your net tax payable by any foreign tax paid).
For superannuation funds that pay no tax on their assessable income, there can be no tax offset. You should obtain independent professional taxation advice applicable to your individual facts and circumstances.
What if I’m not an Australian resident?
Where an investor is a resident for tax purposes of a country with which the U.S. has negotiated a double tax agreement (DTA), the investor may be able to claim a reduced rate of, or exemption from, U.S. withholding tax when they complete the W-8BEN form. Please refer to the IRS website for more details.
What if I’m a U.S. resident?
U.S. resident investors are required to complete a W9 Form (Request for Taxpayer Identification Number and Certification) as non-resident WHT is not applicable for these account holders. We recommend that U.S. investors seek independent taxation advice in relation to the U.S. taxation obligations.
Where can I find more information?
Further information can be found on the IRS website.
Where can I find a sample W-8BEN form?
You can obtain a sample form here.
Note: The information in this blog is of a general nature only and does not address all of the taxation issues, which may be relevant to a particular investor. Accordingly, this blog does not constitute legal, financial or tax advice and should not be relied upon. Australian taxation laws are complex and may change over time. Investors should obtain their own professional taxation advice applicable to their own individual facts and circumstances.