SDSURF requires that foreign companies selling non-tangible goods or services complete IRS Form W-8BEN-E. This form determines if the foreign entity is subject to the default 30 percent federal withholding on payments or if the foreign entity is eligible for any reduced withholdings related to an applicable treaty. The Form W-8BEN-E contains 30 parts and although very few entities will need to complete all parts, sections 1, 2, 4 and 6 must be completed and the form dated and signed by a beneficial owner or authorized individual. The form is valid for three (3) years from the date signed by the beneficial owner or authorized individual. At the end of three years, a new updated W-8BEN-E is required before further disbursements to the foreign entity can be processed.
Anyone who is not a U.S. citizen or permanent resident alien is considered a nonresident alien. Nonresident aliens are taxed only on their U.S. source income, but generally at a higher rate of tax than U.S. citizens and permanent resident aliens.
After the completed W-8BEN-E is received, the entity’s name is entered into an online restricted party screening software program called eCustoms Visual Compliance. The advanced search engine of Visual Compliance gives instantaneous and up-to-date results of denied and restricted parties from a large variety US governmental agencies. If the search results in no matching records found, the foreign entity can be paid. If the search finds a match further investigation is required to determine if the match is a false positive. If it is determined the entity is not a match to the Visual Compliance reporting, the foreign entity can be paid. Any foreign entity that is a true match cannot be paid.
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