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W8-BEN form - HELP !!!

W8-BEN form - HELP !!!

Old Nov 2nd 2012, 5:08 pm
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Default W8-BEN form - HELP !!!

I am hoping that some kind and knowledgeable souls can help me as I am tearing my hair out!

During my time in the US I contributed to an IRA for the self-employed whose provider (Vanguard) now wants me to fill in a W-8BEN form, but is unable to tell me what I need to put in the Treaty Benefits section, in particular Line 10 (Special Rates and Conditions) which asks for "the treaty article number, treaty rate, type of income and the reason(s) that the beneficial owner meets the terms of the treaty article".

According to the instructions at http://www.irs.gov/pub/irs-pdf/iw8ben.pdf, Line 10 can be left blank: “Line 10 must be used only if you are claiming treaty benefits that require that you meet conditions not covered by the representations you make in lines 9a through 9e. … This line is generally not applicable to claiming treaty benefits under an interest or dividends (other than dividends subject to a preferential rate based on ownership) article of a treaty.”

However, Vanguard’s letter is confusing in that it states that I “must provide the treaty article number, treaty rate, type of income and the reason(s) that the beneficial owner meets the terms of the treaty article on Line 10” and goes on to say that “If you don’t complete Part II, you’ll lose any claim to applicable reduced treaty rates and be subject to 30% nonresident alien withholding”.

If I complete 9a + b of Part II, will I have satisfied the Part II completion requirement, or do I have to find the Line 10 information about the treaty benefits – which seems to be virtually impossible to find. (I have checked the IRS website http://www.irs.gov/Businesses/Intern...eaty-Documents – it’s impenetrable! My accountant has not even heard of the W-8BEN form…)

HELP!!!
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Old Nov 2nd 2012, 6:13 pm
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Default Re: W8-BEN form - HELP !!!

Sounds like they don't understand the form themselves, which is not surprising for an IRA. "If applicable" means exactly that.

The IRS publishes the applicable rates in publication 901 and the procedure I think is described in publication 515, iirc. So if you check box 9a they're supposed to then look up the applicable rate. They have to do this to get the code right on the 1042-S.

That's how it works, you can't do their job for them. I'm not totally familiar with the UK treaty but as I recall the withholding rate is 0% for anything you're likely to have in an IRA.

Is there some reason you're carrying on with an IRA, are you a US citizen?
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Old Nov 2nd 2012, 6:17 pm
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Default Re: W8-BEN form - HELP !!!

Are you taking income out of the IRA? If so and you are not a US citizen do this

Line 9a enter "United Kingdom", I assume you live in the UK.
Line 9b tick this if you have entered your SSN or TIN on line 6

Line 10 Income from pensions (which include IRAs) is covered by Article 17 and you claim 0% withholding from IRA income

Reason is "IRA income paid to a UK resident who is not a US person is not taxable under terms of the UK/US Double Taxation Treaty".

Last edited by nun; Nov 2nd 2012 at 6:22 pm.
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Old Nov 2nd 2012, 6:29 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by Steve_

Is there some reason you're carrying on with an IRA, are you a US citizen?
It's generally a good idea to leave an IRA in place even if you return to the UK because withdrawing from them before 59.5 has a 10% penalty. IRAs are covered in the UK/US treaty and strictly speaking a UK resident owner should disclosed them to HMRC and claim Article 18 to shelter any gains from UK taxation. When income is withdrawn Article 17 protects them from US taxation, but that income must be declared on your UK self assessment form as foreign pension income.
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Old Nov 2nd 2012, 6:56 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by nun
Are you taking income out of the IRA? If so and you are not a US citizen do this

Line 9a enter "United Kingdom", I assume you live in the UK.
Line 9b tick this if you have entered your SSN or TIN on line 6

Line 10 Income from pensions (which include IRAs) is covered by Article 17 and you claim 0% withholding from IRA income

Reason is "IRA income paid to a UK resident who is not a US person is not taxable under terms of the UK/US Double Taxation Treaty".
Thank you, Nun - and Steve.

I'm not taking income out of the IRA yet. I am a Brit and gave up my Green Card when I moved back to England.

So do I quote Article 17 or 18?

(I do understand that, once I start taking an income, I'll have to declare it to HMRC.)

Thanks again :-)
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Old Nov 2nd 2012, 7:07 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by Elvira
Thank you, Nun - and Steve.

I'm not taking income out of the IRA yet. I am a Brit and gave up my Green Card when I moved back to England.

So do I quote Article 17 or 18?

(I do understand that, once I start taking an income, I'll have to declare it to HMRC.)

Thanks again :-)
On the W-8BEN claim Article 17, Vanguard will file it and when you come to take income out you should have zero withholding.

Gains inside IRAs are already US tax free so you don't need to use the treaty to protect those from US taxation. But gains in an IRA are not UK tax free unless you claim the tax treaty exemption under Article 18. So you should talk to your local tax office and make sure they know about the IRA and you have satisfied them of their tax free status until income is withdrawn.
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Old Nov 2nd 2012, 7:09 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by Elvira
Thank you, Nun - and Steve.

I'm not taking income out of the IRA yet. I am a Brit and gave up my Green Card when I moved back to England.
So did you file an I-407 with immigration and an 8854 with the IRS?
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Old Nov 2nd 2012, 7:09 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by nun
On the W-8BEN claim Article 17, Vanguard will file it and when you come to take income out you should have zero withholding.

Gains inside IRAs are already US tax free so you don't need to use the treaty to protect those from US taxation. But gains in an IRA are not UK tax free unless you claim the tax treaty exemption under Article 18. So you should talk to your local tax office and make sure they know about the IRA and you have satisfied them of their tax free status until income is withdrawn.
Thanks, nun. So I should tell HMRC about this now, rather than wait until I retire? I have already filed my UK tax return, so do I need to file some kind of amendment or supplementary form?
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Old Nov 2nd 2012, 7:12 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by nun
So did you file an I-407 with immigration and an 8854 with the IRS?
I-407, yes, but my accountant said I didn't need to do anything other than file my final US tax return and pay the usual $$$$load of taxes.
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Old Nov 2nd 2012, 7:39 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by Elvira
I-407, yes, but my accountant said I didn't need to do anything other than file my final US tax return and pay the usual $$$$load of taxes.
The 8854 is only necessary if you were a long term resident, which is defined as being tax resident for 8 out of the last 15 years.
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Old Nov 2nd 2012, 7:42 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by Elvira
Thanks, nun. So I should tell HMRC about this now, rather than wait until I retire? I have already filed my UK tax return, so do I need to file some kind of amendment or supplementary form?
HMRC definitely needs to know about your IRA and that you are excluding gains from your UK tax return under Article 18 of the US/UK DTT. I would ask for advice from you local HMRC office. You generally just write a note on your self assessment form.
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Old Nov 2nd 2012, 7:49 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by nun
HMRC definitely needs to know about your IRA and that you are excluding gains from your UK tax return under Article 18 of the US/UK DTT. I would ask for advice from you local HMRC office. You generally just write a note on your self assessment form.
Glad you brought this up - it would never have occurred to me. I'll let them know. However, as a matter of interest, what would happen if I didn't inform them until I actually start to draw an income?
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Old Nov 2nd 2012, 8:13 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by Elvira
Glad you brought this up - it would never have occurred to me. I'll let them know. However, as a matter of interest, what would happen if I didn't inform them until I actually start to draw an income?
I'm not sure. Strictly speaking they could tax you on all the gains each year inside the IRA just as if it they were in any other off shore fund. HMRC might have some rule similar to the IRS that states that you don't have to explicitly claim tax treaty benefits on pensions, but I don't know the HMRC code as well as the IRS code. But unless you are explicit you leave yourself open to other people's ignorance of this obscure area. The safest approach is just to tell HMRC about the IRA and claim the treaty exemption. It's one sentence and could save you a lot of hassle
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Old Nov 2nd 2012, 10:10 pm
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Default Re: W8-BEN form - HELP !!!

You could choose not claim the treaty and pay UK tax each year on income or gains within the IRA...or you could elect into the treaty each year. You choose.
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Old Nov 2nd 2012, 10:24 pm
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Default Re: W8-BEN form - HELP !!!

Originally Posted by nun
I'm not sure. Strictly speaking they could tax you on all the gains each year inside the IRA just as if it they were in any other off shore fund. HMRC might have some rule similar to the IRS that states that you don't have to explicitly claim tax treaty benefits on pensions, but I don't know the HMRC code as well as the IRS code. But unless you are explicit you leave yourself open to other people's ignorance of this obscure area. The safest approach is just to tell HMRC about the IRA and claim the treaty exemption. It's one sentence and could save you a lot of hassle
Wow, I'm learning so much today - thank you so much!

I wonder though: do I have to re-file my entire tax return, or can I just send them a letter? I know you're going to say call them, but if there's one thing that has definitely deteriorated in Old Blighty it's the tax peeps' customer service department. You're left waiting in a queue and eventually get connected to some call-centre where they read stuff from a computer screen. <sigh>
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