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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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does a Canadian based business require filling out a US W8

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does a Canadian based business require filling out a US W8 form to be paid by a US company?

We perform services for a US-based company with an office in Canada.
We provide the service for the Canada office but US office reports we have to complete a W8 tax form to get paid.

Is this correct? our accounting does not believe so and says:

...this is not a required form if we don't have a *physical presence in the US.
Just to make sure, he contacted the IRS.

He indicates the "US source income" mentioned in the W8 forms do not apply if you reside in a different country (such as Canada), to payments from US.
The requirement seems to be that you submit the form if you have an office in the US or own operating equipment there.
Otherwise you do not need to fill the forms and the money is not taxable.
In our case then, the US Government does not require a form, eventhough we are performing services for a US based company.

Essentially IRS say the W8 forms are for income we would earn if physically in US.
If providing Service from outside the US, we should not fill the W8 form.

Robin D :

Hello and thank you for using Just Answer,
The US company needs the W8 to keep in their files so the IRS would be able to see that the US company paid a nonUS entity. The IRS has advised US companies that for newly used foreign vendors, a valid Form W-8 should be required before any payment is made to them to avoid application of the presumption rules or the need to obtain the documentation later.
This W8 does not imply that the foreign vendor has any US tax liability but just the opposite. It allows the US company to account for the payments and the reason why no tax was withheld. Form W-8BEN should be used by the foreign vendor to certify that it has non-U.S. status.
I believe the person that answered the phone call at the IRS for you was fixed on the Fixed or Determinable, Annual or Periodic (FDAP) sourcing rules. Then the sourcing rules.
The W-8BEN is used to confirm that a vendor is a foreign entity and must be provided even if the vendor is not claiming a tax treaty reduction or exemption from withholding. Therefore, all foreign vendors must provide a W-8BEN, even if no EIN, ITIN, or SSN exists. Your company would be assisting the paying US company in their need to account to the IRS for payments made.


Robin D :

I know it seems redundant but the IRS has been charged with making sure that in an international age for business transactions, the US businesses are keeping correct records of their expenses.

Customer: Thank you so much.
Customer: So even if we don't have a US tax number we just leave that field blank on the form?
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13336
Experience: 15years with H & R Block. Divisional leader, Instructor
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Lindie
Customer: replied 3 years ago.
Yes
Would like some clarification re: the form the answer refers to.
Thanks.

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