W8-BEN-E as a Limited and Limitations on Benefits question

Discussion in 'International Business' started by error, Aug 3, 2019.

  1. error

    error UKBF Newcomer Free Member

    22 1
    I run a Ltd company in the UK providing services to other businesses. I am the only shareholder and resident in the UK.

    A US business wants me to sign tax form W8-BEN-E before paying me. They say this is because they would otherwise have to withhold 30% in taxes.

    I have managed to fight through most of this form (with some very helpful advice from the DIT). However I am now stuck on question 14b, which is the "Limitations on Benefits". I need to choose an option there and I have no idea which one applies.

    The options are:
    • Government
    • Tax exempt pension trust or pension fund
    • Other tax exempt organization
    • Publicly traded corporation
    • Subsidiary of a publicly traded corporation
    • Company that meets the ownership and base erosion test
    • Company that meets the derivative benefits test
    • Company with an item of income that meets active trade or business test
    • Favorable discretionary determination by the U.S. competent authority received
    Presumably it has to be one of the three "company that ..." ones.

    I tried to read the treaty to figure out which one is most applicable but the jungle of legalese is too much. My best guess would be the "active trade or business test" since I believe that just requires that I am running an active business (rather than an investment company), which would be the case. I am not sure about this though.

    I am really struggling to find any advice on this online. But surely there must be many other people in this situation.

    Does anybody here have any insight into this? Has anybody else dealt with this before?
     
    Posted: Aug 3, 2019 By: error Member since: Dec 29, 2012
    #1
  2. YourCloudAccountant

    YourCloudAccountant UKBF Contributor Full Member

    89 9
    I fill these out for our clients US suppliers. You should tick parts 14 a and b and then tick A company that meets the ownership and base erosion tests.

    For part 15 write "article 7 Business profits", then 0% in next box, next box "business profits"

    Finally in the explain the conditions "The company is a resident in the UK and does not carry on business in the US nor does it have a permanent establishment in the US."
     
    Posted: Aug 4, 2019 By: YourCloudAccountant Member since: May 4, 2019
    #2
  3. error

    error UKBF Newcomer Free Member

    22 1
    That's very helpful, thank you! Can you give me any insight into why this one is the correct option? And what does "does not carry on business in the US" actually mean? I am providing services to US companies, is that not considered carrying out business?

    Sorry about all the questions, I just want to make sure I understand what I'm filling in there.
     
    Posted: Aug 5, 2019 By: error Member since: Dec 29, 2012
    #3
  4. YourCloudAccountant

    YourCloudAccountant UKBF Contributor Full Member

    89 9
    So you do not operate in the US but from the UK and happen to have us customers. They are trying to make sure that you don't have a branch in the US and you have effectively said you operate from the UK and will be taxed here.
     
    Posted: Aug 5, 2019 By: YourCloudAccountant Member since: May 4, 2019
    #4