As a startup founder, every dollar and every decision counts. Whether you’re hiring a remote software engineer in Latin America, contracting a designer in Europe, or paying dividends to international investors, you’ll quickly come across an essential piece of paperwork: the W-8BEN form.
At its core, the W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) protects both sides of the relationship. For your company, it ensures compliance with IRS regulations and avoids penalties for improper tax reporting.
For the non-U.S. individual you’re paying, it confirms their foreign status and may allow them to benefit from reduced tax withholding rates under tax treaties, helping you build trust and maintain smooth cross-border partnerships.
Understanding the W-8BEN form is especially important for startups working with global contractors, freelancers, or advisors. Done right, it simplifies your payroll, reduces unnecessary tax burdens, and safeguards your company from compliance headaches down the road.
This guide will walk you through everything founders need to know: what the W-8BEN form is, who needs it, why it matters, and how to handle it properly, so you can focus on scaling your business without getting lost in tax forms.
What Is the W-8BEN Form?
The W-8BEN form is an official IRS document that non-U.S. individuals must complete when receiving certain types of income from a U.S. company.
For founders, think of it as a compliance safeguard. Whenever you pay an international contractor, freelancer, or advisor, you need this form on file to prove to the IRS that the person is not a U.S. taxpayer.
Without it, the default rule is harsh: your company is required to withhold 30% of their payments and send it directly to the IRS.
The W-8BEN also plays another important role. It allows the payee to claim benefits from their home country’s tax treaty with the U.S. (if one exists).
For example, a software developer in Mexico or a designer in Chile might qualify for reduced withholding rates, which makes your company more attractive to top international talent.
It’s also important to note that the W-8BEN applies only to individuals. If you’re working with a foreign company or agency, they’ll need the W-8BEN-E, a separate form for entities.
In short:
- For your startup: Keeps you compliant and avoids IRS penalties.
- For your contractors and investors abroad: Prevents over-taxation and helps maintain a fair working relationship.
Why Is the W-8BEN Form Important?
For many founders, global hiring feels like the fastest path to scale; talent is everywhere, and remote work makes it accessible.
But without the right paperwork, international payments can quickly become a compliance nightmare. That’s where the W-8BEN form is useful.
Here’s why it matters for your startup:
Compliance with U.S. tax law
The IRS requires U.S. companies to collect W-8BEN forms before paying non-U.S. individuals. If you don’t have it on file, your startup could face audits, fines, or be forced to withhold 30% of payments by default.
Keeping this form updated protects your company from legal and financial exposure.
Avoiding unnecessary withholding
Without a W-8BEN, your international contractors or investors automatically lose 30% of their income to withholding tax, even if a tax treaty says they should pay less (or none at all).
Filing the form ensures they get the correct rate. This makes your company more attractive to top global talent, who will appreciate that you’re not accidentally shrinking their paycheck.
Building trust with global partners
When you’re running lean, the last thing you want is confusion or mistrust around money. By handling tax documentation properly, you show contractors, advisors, and investors that your startup operates professionally and respects international agreements.
Keeping operations smooth
Nothing slows down a startup like payroll disputes or compliance delays. Having W-8BEN forms in order ensures payments flow smoothly and your team stays focused on building, not paperwork.
In short, the W-8BEN isn’t just a tax form; it’s a compliance tool, a cost saver, and a trust-builder for startups working across borders.
Who Needs to Fill Out the W-8BEN Form?
As a founder, you don’t need to fill out a W-8BEN yourself; it’s the responsibility of the non-U.S. individual you’re paying. Your role is to request it, review it, and keep it on file. Here are the most common cases you’ll encounter:
International contractors and freelancers
If you hire a developer in Argentina, a designer in Poland, or a marketer in Brazil, each contractor must submit a W-8BEN. This tells the IRS they’re foreign and ensures you don’t wrongly treat them as a U.S. taxpayer.
Foreign advisors and consultants
Many startups bring in advisors for strategy, fundraising, or product guidance. If those advisors live abroad and receive compensation, such as equity payouts, stipends, or fees, they need to file a W-8BEN.
Non-U.S. investors earning U.S.-sourced income
If your startup pays dividends, royalties, or interest to an international investor, they’ll need a W-8BEN to claim reduced withholding under tax treaties.
Students or digital nomads working abroad
Even if someone holds U.S. citizenship but lives abroad, the form won’t apply to them; they need a W-9 instead. The W-8BEN is strictly for non-U.S. persons.
As a rule of thumb, any non-U.S. individual receiving U.S.-sourced income from your startup needs a W-8BEN on file.
Step-by-Step Guide to Filling Out the W-8BEN Form
The W-8BEN may look intimidating at first glance, but it’s only three short sections. Here’s how to walk your international contractors, advisors, or investors through it, and what you, as a founder, should check before keeping it on file.
Step 1: Identification of Beneficial Owner
This section establishes who the person is.
- Name: Full legal name of the individual.
- Country of Citizenship: Must be a non-U.S. country.
- Permanent Residence Address: Their actual residence abroad (no P.O. boxes).
- Mailing Address: If different, can list here.
- Foreign Tax Identification Number (FTIN) or U.S. ITIN: Required in most cases to claim treaty benefits.
As a founder, double-check that the country listed matches their residency and that the form clearly establishes them as non-U.S..
Step 2: Claim of Tax Treaty Benefits
This is where the real money-saving happens.
- If their country has a tax treaty with the U.S., they’ll fill in the article and paragraph that reduces their withholding rate (e.g., 10% instead of 30%).
- They must specify the type of income (like services, royalties, or dividends).
Your role: you don’t have to validate the treaty itself, but make sure this section isn’t blank if they’re eligible. Otherwise, default withholding applies.
Step 3: Certification
This is simply a signature and date. By signing, the individual confirms everything is true.
- Signature of Beneficial Owner: Must be signed by the individual, not you.
- Date: The form is valid from this date for up to three years, unless circumstances change.
It’s a good idea to keep a signed digital copy on file and set a reminder to renew before it expires.
In summary, review each section for completeness, keep a copy in your records, and never make payments without it, because once the IRS is involved, “I didn’t know” won’t protect your startup.
Common Mistakes to Avoid
Even though the W-8BEN is only a one-page form, small mistakes can create big problems for your startup. Here are the pitfalls to watch out for:
Using the wrong form
Founders sometimes confuse the W-8BEN with the W-9 (for U.S. persons) or the W-8BEN-E (for foreign entities).
If you’re paying an individual abroad, make sure it’s the W-8BEN; otherwise, your records will be incomplete, and the IRS may treat it as noncompliance.
Leaving treaty benefits blank
If your contractor or investor’s country has a tax treaty with the U.S., failing to fill out Part II means they’ll automatically be taxed at the 30% default rate.
That can sour relationships fast, since they’ll blame your startup for shrinking their income.
Missing taxpayer numbers
The form often requires either a Foreign Tax Identification Number (FTIN) or a U.S. ITIN. Skipping this detail is one of the most common reasons forms get rejected.
Forgetting to sign and date
It sounds obvious, but unsigned forms happen more than you’d think. An unsigned W-8BEN is invalid, and the IRS will treat it as if you don’t have one at all.
Not updating expired forms
The W-8BEN is only valid for three years. Many founders forget to refresh it, only to realize during an audit or payment dispute that their forms are out of date.
Ignoring recordkeeping
Even if you collect the W-8BEN, it’s worthless if you lose track of it. Keep a secure digital copy and organize forms by contractor or investor so you can access them quickly if ever questioned.
By catching these errors early, you’ll save your startup from compliance risks, avoid unnecessary tax withholding, and keep your global partners happy.
How Often Do You Need to Update It?
The W-8BEN isn’t a one-and-done document. For compliance and smooth operations, it must be kept up to date. Here’s what you need to know as a founder:
Every three years
By default, the W-8BEN expires at the end of the third calendar year after it’s signed. For example, if a contractor submits it in June 2025, it will remain valid through December 31, 2028. After that, you must request a new one.
Whenever circumstances change
If your contractor, advisor, or investor moves to a new country, changes citizenship, or no longer qualifies for treaty benefits, they must submit a fresh form. Outdated information can invalidate the W-8BEN and expose your startup to penalties.
Best practice for founders
Don’t wait for the IRS to catch it. Build a system:
- Store all W-8BENs in a secure digital folder.
- Set calendar reminders for renewal dates.
- Review forms annually during tax season to ensure nothing has changed.
By being proactive, you’ll avoid scrambling when it’s time to pay out contractors or distribute funds to investors.
In other words, treat W-8BENs as living documents, not paperwork you collect once and forget. A little organization saves you from compliance stress later.
W-8BEN vs. Other Tax Forms
As a founder, you’ll likely encounter more than one IRS form when working with global contractors, advisors, or investors. Knowing which is which will save you from costly mix-ups.
W-8BEN (for non-U.S. individuals)
- Use when you pay an individual outside the U.S. (freelancers, consultants, investors).
- Confirms their foreign status and may reduce withholding tax through treaties.
W-8BEN-E (for non-U.S. entities)
- Similar to the W-8BEN, but for foreign companies or agencies.
- If you hire a design agency in Argentina or pay a foreign corporate investor, this is the form they complete.
W-8ECI (for income connected to U.S. trade or business)
- For foreign individuals or entities that earn income directly tied to a U.S. business presence (like operating an office in the U.S.).
- Rarely applies to startups working with overseas contractors.
W-9 (for U.S. persons)
- If you hire an American contractor, even if they live abroad, they complete a W-9, not a W-8BEN.
- This form provides a Taxpayer Identification Number (TIN) so you can issue a 1099 form at year-end.
Quick checklist for founders:
- Paying a U.S. person → W-9
- Paying a foreign individual → W-8BEN
- Paying a foreign company → W-8BEN-E
- Paying someone with U.S.-based business income → W-8ECI
Getting this right keeps your startup’s compliance clean and avoids painful IRS corrections.
The Takeaway
For founders, the W-8BEN form is more than just IRS paperwork; it’s a safeguard for your startup’s growth. Collecting it ensures compliance, prevents unnecessary withholding, and builds trust with international contractors, advisors, and investors.
Done right, it keeps your operations smooth and your global team motivated. Done wrong, it can lead to tax headaches, lost money, and potential red flags during audits or fundraising.
The good news? You don’t have to navigate this on your own.
At South, we help U.S. companies scale their teams across Latin America while taking care of the heavy lifting; contracts, payroll, and compliance included. That means you can focus on building your product and growing your business, while we ensure your startup stays compliant with forms like the W-8BEN.
Ready to simplify compliance and hire top LATAM talent without the stress? Book a call with South today!
Frequently Asked Questions (FAQs)
Do my international contractors need a U.S. tax identification number (ITIN)?
Not always. If they’re only confirming foreign status, an ITIN isn’t required. But if they want to claim tax treaty benefits, they usually need to provide either an ITIN or their home country’s Foreign Tax Identification Number (FTIN).
Can contractors or investors submit the W-8BEN online?
Yes. Many payroll and contractor management platforms (like Deel, Remote, or even your accounting software) allow electronic W-8BEN submissions. If you’re handling it directly, a scanned, signed copy is typically fine.
What happens if I don’t collect the W-8BEN?
Your startup is legally required to withhold 30% of payments to the individual and send that money to the IRS. Without the form, you’re on the hook for compliance failures; something no founder wants during a funding round or audit.
Do students or digital nomads working abroad need the W-8BEN?
If they’re U.S. citizens, no; they must complete a W-9. If they’re non-U.S. citizens earning U.S.-sourced income, yes, they need a W-8BEN.
Is the W-8BEN form the same for every country?
Yes, the form itself is standard. The treaty benefit section (Part II) is the only change, which depends on the tax treaty between the U.S. and the contractor’s country of residence.
How long should I keep W-8BEN forms on file?
At least three years after the last payment to the individual. Best practice: store them securely alongside your tax records in case of an IRS audit.
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