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Used for nonresident foreign individuals or entities, this form is required by the IRS to tell the payer, transfer agent, broker, or other middleman that an employee is a nonresident alien or foreign entity not subject to US tax-reporting or backup withholding. The failure to complete this form can result in automatic withholding of 28% on any proceeds from shares sold in a brokerage account. The completion of this form is usually part of the process of activating your brokerage account.
Form W-8BEN expires at the end of the third calendar year after its completion. When the form expires, you must complete a new form to continue the exemption from backup withholding.
You recover backup withholding by filing a tax return. Nonresident aliens can file a US tax return if they obtain a tax identification number by completing IRS Form W-7, which must be submitted with the tax return. If backup withholding is the only reason for the filing, you complete and submit Form 1040NR-EZ as your tax return.
For an example, including sample IRS forms, that shows how a non-US resident reclaims backup withholding, see a related FAQ elsewhere on this website.
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