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When does one use an IRS Form W8ECI versus a Form W8BEN?

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When does one use an...

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: 7 years ago.Category: Tax
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Answered in 5 hours by:
1/18/2011
Tax Professional: Lev, Tax Advisor replied 7 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,721
Experience: Taxes, Immigration, Labor Relations
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Hi, and welcome to JustAnswer!

Abbreviation is 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.

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

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

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

Customer: Thank you. 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 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. 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

Please feel free to ask for clarification.

Customer: Thank you for your help!

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,721
Experience: Taxes, Immigration, Labor Relations
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Tax Professional: Stephen G., Sr Income Tax Expert replied 2 years ago
Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7,246
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This question is from 2011?????
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