Douglas Olsen
International students studying in the United States may need to fill out a W-8BEN form, officially known as the Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals). This form is used by nonresident aliens to claim an exemption or reduction of US tax withholding if their home country has a tax treaty with the US. The usual rate of withholding tax is 30%, so the purpose of the W-8BEN form is to reduce or eliminate this payment. Students who are receiving non-compensatory scholarships or fellowship income from their university and want to claim a tax treaty benefit should fill out a Form 8233 instead.
Characteristics and Values of W-8BEN Form for International Students
| Characteristics | Values |
|---|---|
| Who needs to fill it out? | Nonresident aliens or Nonresident students for tax purposes |
| Purpose | Claim an exemption or reduction of US withholding tax if their home country has a tax treaty with the US |
| Default tax rate without W-8BEN | 30% |
| Information required in section 1 | Name, country of citizenship, mailing address, SSN/ITIN |
| Information required in section 2 | Tax treaty benefits with the home country |
| Submission | Submit it with your tax documents to ISS |
| Download | Download the latest form from the official IRS website |
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What You'll Learn
International students and tax treaty benefits
International students can benefit from tax treaties between their home country and the US. The US has tax treaties with 65 countries, and under these treaties, residents of foreign countries may be eligible for reduced tax rates or exemptions from US taxes.
To determine tax treaty eligibility, international students can use tools such as Sprintax Forms, which can instantly determine if they are permitted to claim a tax treaty benefit. If an international student is eligible for a tax treaty benefit, they must fill out a W-8 Form or 8233 form to claim it.
The W-8BEN form is used by non-resident aliens or non-resident international students to claim an exemption or reduction of US withholding tax if their home country has a tax treaty with the US. The usual rate of withholding tax is 30%, and the purpose of the W-8BEN form is to reduce or eliminate this withholding tax payment.
The W-8BEN form can be downloaded from the IRS website. When filling out the form, students will be asked for basic information such as their name, country of citizenship, mailing address, and SSN/ITIN. In the next section, they will be asked about their tax treaty benefits with their home country.
If an international student receives non-compensatory scholarship or fellowship income and personal services income from their university and wants to claim a tax treaty benefit for both, they will need to complete a Form 8233 and submit it to their university. This form must be provided to the withholding agent by non-resident aliens to certify their foreign status and claim a reduced rate of tax withholding under an income tax treaty.
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The Substantial Presence Test (SPT)
The SPT features a number of exemptions. Ignoring the exemptions, the criterion is as follows: the individual must have been physically present in the United States for at least 31 days in the year for which the tax return is being filed. However, an individual may choose to exempt the first 10 days if they are able to establish a closer connection to a foreign country and their tax home was in that foreign country.
To meet the SPT, an individual must be physically present in the United States on at least 183 days during the 3-year period that includes the current year and the 2 years immediately before that. This includes:
- All the days you were present in the current year
- 1/3 of the days you were present in the first year before the current year
- 1/6 of the days you were present in the second year before the current year
There are several exceptions to the SPT. Days spent in the United States in the following circumstances are not counted as days of presence for the test:
- Commuting to work in the US from a residence in Canada or Mexico
- In the US for less than 24 hours when in transit between two places outside the US
- In the US as a crew member of a foreign vessel
- Unable to leave the US because of a medical condition that developed while in the US
- Exempt individuals (see Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition)
Some aliens (i.e. people who are not US citizens) can claim exemptions from the SPT. A foreign government-related individual is someone who is temporarily present in the United States as:
- A full-time employee of an international organization
- A holder of an A or G visa, which includes people directly involved in government-related or diplomatic jobs, as well as their spouses and minor children
There is also a closer connection exception to the SPT, which is available only to students. This allows foreign students who pass the SPT to continue to be treated as nonresident aliens for tax purposes.
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Resident Alien (RA) status
An individual who is not a US citizen or US national is considered an alien. The US tax laws refer to two types of aliens: Nonresident Alien (NRA) and Resident Alien (RA).
A Resident Alien is a foreign-born, non-US citizen who resides in the United States. They must meet one of the following criteria:
- Have a green card
- Pass the Substantial Presence Test (SPT), which is a numerical formula that measures days of presence in the United States
- Be admitted to the United States as a lawful permanent resident (i.e., pass the Green Card Test)
It is important to note that some individuals may be exempt from the Green Card Test and the Substantial Presence Test. For example, students or teachers who are temporarily present in the United States may be exempt.
A Resident Alien for tax purposes is treated similarly to a US citizen when filing a tax return and paying taxes. They must report their worldwide income and can use foreign tax credits.
On the other hand, if an individual is a Nonresident Alien for tax purposes, they have a different process for tax withholding, completing tax forms, and tax documents. They are also eligible for very few and limited deductions when paying taxes.
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Non-compensatory scholarship or fellowship income
International students can fill out a W-8BEN form. Form W-8BEN is used by nonresident aliens to claim an exemption or reduction of US tax withholding if their home country has a tax treaty with the US. The usual rate of withholding tax is 30%. Form W-8BEN's purpose is to reduce or eliminate this withholding tax payment.
A nonresident alien student (including a trainee or business apprentice) or researcher who receives non-compensatory scholarship or fellowship income can use Form W-8BEN to claim benefits under a tax treaty that may apply to reduce or eliminate US tax on such income. No Form W-8BEN is required unless a treaty benefit is being claimed.
A nonresident alien student or researcher who receives compensatory scholarship or fellowship income must use Form 8233, instead of Form W-8BEN, to claim any benefits of a tax treaty that apply to that income. The student or researcher must use Form W-4 for any part of such income for which they are not claiming a tax treaty withholding exemption.
Do not use Form W-8BEN for compensatory scholarship or fellowship income. See Compensation for Dependent Personal Services in the Instructions for Form 8233. If you are a nonresident alien individual who received non-compensatory scholarship or fellowship income and personal services income (including compensatory scholarship or fellowship income) from your university and you want to claim a tax treaty benefit for both and pay a reduced amount of US tax, you will need to complete a Form 8233 and submit it to your university.
Foreign students and researchers claiming treaty benefits must complete this line. See Scholarship and fellowship grants, for more information. Generally, only a nonresident alien individual can use the terms of a tax treaty to reduce or eliminate US tax on certain types of income. However, most tax treaties contain a provision known as a "saving clause" which preserves or "saves" the right of each country to tax its own residents as if no tax treaty existed.
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Taxpayer Identification Number (TIN)
A Taxpayer Identification Number (TIN) is a unique number used by the Internal Revenue Service (IRS) to identify individuals for tax purposes in the United States. It is issued either by the Social Security Administration (SSA) or by the IRS.
There are two main types of TINs: the Social Security Number (SSN) and the Individual Taxpayer Identification Number (ITIN). An SSN is issued by the SSA, while all other TINs, including ITINs, are issued by the IRS. ITINs are specifically for certain nonresident and resident aliens, their spouses, and dependents who cannot obtain an SSN. It is a 9-digit number, starting with the digit "9", and formatted similarly to an SSN.
To obtain an ITIN, individuals must complete IRS Form W-7, Application for IRS Individual Taxpayer Identification Number, and attach a federal income tax return. Additionally, documentation supporting any exceptions to the requirement to file a tax return must be provided. This can be done by mailing the documentation along with Form W-7, presenting it at IRS offices, or processing the application through an IRS-authorized Acceptance Agent.
A TIN is required on various tax-related documents, such as tax returns, withholding certificates, and payment vouchers. It is essential for tax compliance and identification when working and earning income in the US.
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Frequently asked questions
Non-resident aliens or non-residents who earn an income in the US and want to claim tax treaty benefits need to fill out a W-8BEN form.
The W-8BEN form is used to certify an individual as a foreign status beneficial owner and to claim a reduced rate of US tax withholding under an income tax treaty.
The default tax rate for non-residents earning income in the US without a W-8BEN form is 30%.
You will need to provide basic identification information such as your name, country of citizenship, permanent residence address, mailing address, and SSN/ITIN. You will also need to specify your home country's tax treaty benefits.
You can download the W-8BEN form from the IRS website.
