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Lev
Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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When does one use an IRS Form W8ECI versus a Form W8BEN I

Resolved Question:

When does one use an IRS Form W8ECI versus a Form W8BEN? I understand that both are for non-U.S. taxpayers, but then what's the distinction? Is it based on whether or not the person is physically located in the U.S., or something else?
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi amd welcome to Just Answer!

LEV :

Abreviation in the form name Form W-8ECI – stands for effectively connected income (ECI) – thus this form is used if the person or entity is a recipient of U.S. source income which that is (or is deemed to be) effectively connected with the conduct of a trade or business within the United States.

LEV :

The form Form W-8BEN is used for income that is not effectively connected.

LEV :

Please see for reference instructions for these forms


http://www.irs.gov/pub/irs-pdf/iw8eci.pdf


http://www.irs.gov/pub/irs-pdf/iw8ben.pdf

LEV :

Also in instructions there is a definition of effectively connected income.

Customer :

Thank you, XXXXX XXXXX accept, whether or not you respond again. Just wondering, though, when I read the definition you pointed to, it seemed like the distinction would/could/should be whether or not the foreign person is physically located in the U.S. or not. Do you think that'd be a fair reading of the distinction between income that is "effectively connected with the conduct of a trade or business within the United States" and income that is not "effectively connected with the conduct of a trade or business within the United States"? That could mean, for example, that if the business is in the U.S., and there are two foreign people earning money in connection with that business, 1 foreign person doing it in the U.S. would have income that is "effectively connected" but the other foreign person doing the same thing from outside of the U.S. wouldn't.

LEV :

I do not think that is correct.

LEV :

A foreign person may be engaged in a trade or business in the United States regardless of his/her residency, but depending on how the business is organized. I suggest this article that provides examples and analysis of different circumstances which affect determination -


http://www.taxprophet.com/archives/Foreign_co_ETB.shtml

LEV :

Please feel free to ask for clarification. I might not be immediately available, but will surely respond.

Customer :

THANK YOU.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22704
Experience: Taxes, Immigration, Labor Relations
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