What is a W-8BEN Form and Why Does It Matter?

A W-8BEN form is a tax document used to certify that your country of residence for tax purposes is outside of the United States. It is required because of an intergovernmental agreement between Canada and the U.S. which obligates Canadian Financial Institutions to provide this information.

A completed W-8BEN form confirms that:

1) You are not a resident of the U.S.

2) You are the owner of the income for which the form relates to.

3) You are claiming a reduced withholding tax rate because you're a resident of a foreign country with which the U.S. has an income tax treaty.

Why do I have to file a W-8BEN form?

As a result of agreements between the Canadian and U.S. governments, a W-8BEN is required for holders of all non-registered accounts – even if you don't hold any U.S. investments. The U.S. Internal Revenue Service (IRS) also requires brokers of U.S. securities to collect a W-8BEN for all holders of Tax-Free Savings Accounts (TFSA), as well as for holders of Registered Education Savings Plans (RESPs) who wish to trade in U.S. securities.

Note: If you are a U.S. citizen or resident (or if you have opened your account as a U.S. partnership, corporation, estate or trust), you must submit form W-9 Request for Taxpayer Identification Number and Certification.

What's in it for me?

If you are a certified resident of Canada, a W-8BEN form allows you to make a claim (a tax treaty benefit) for a reduction on the tax withheld from U.S. income you may receive in your account. This covers dividends from U.S. companies or interest income from U.S. fixed-income investments.

It's a material benefit because the withholding tax is normally 30 per cent. With a current W-8BEN in place, you may qualify for the reduced rate of 15 per cent tax on dividends, or zero tax on interest.

I've received notice that my W-8BEN is expiring, do I need to do something?

Yes — as part of your RBC Direct Investing account documentation and to meet the IRS requirement, you must update and complete the W-8BEN form every three years, even if there is no change in your personal information. Without an up-to-date W-8BEN, account restrictions could prevent you from trading.

The form remains in effect from the date of signing it until the end of the third calendar year. So, for example, if your form was signed on any date in 2017, it will expire on Dec. 31, 2020.

What happens if I let the W-8BEN form expire?

If your W-8BEN expires and you do not provide an updated one, any U.S. source income received will be subject to 30 per cent withholding tax. Some account restrictions may also apply.

Can I fill out my W-8BEN online?

You can update your expiring W-8BEN online by logging in to your account and selecting "Forms and Agreements" from the Person icon. Select the W-8BEN & Tax Residency Self-Certification Substitute form and follow the steps on screen to complete and submit electronically.

Some tips with the form:

• The Tax Identification Number (TIN) for a personal account in Canada is the same as your Social Insurance Number (SIN)
• Part II of the form helps determine if you are eligible for reduced tax withholding rates. For example, since Canada has a treaty with the U.S., a Canadian tax resident may determine they are eligible to claim tax treaty benefits and would enter "Canada" in this section.
• If you have specific questions about completing your W-8BEN, you should speak to a professional tax advisor for specific guidance about your personal circumstances and exposure to U.S. withholding tax.

If you are unable to complete the form online, you can visit www.rbcdirectinvesting.com/forms and look for “QI, FATCA and CRS Forms.” Download and complete the W-8BEN form, then submit it at any RBC Royal Bank branch, or mail it to:

RBC Direct Investing Inc.

Royal Bank Plaza

200 Bay Street, North Tower

P.O. Box 75

Toronto, ON M5J 2Z5

The information provided in this article is for general purposes only and does not constitute personal financial advice. Please consult with your own professional advisor to discuss your specific financial and tax needs.