W-8BEN Form: What, Why and How for Affiliate Marketers
After sharing top Indian affiliate programs and the ultimate guide to affiliate marketing, I got several requests from readers regarding their confusion about W-8BEN form.
In this article, I’ll resolve all your queries by touching three important questions:
- What is W-8BEN form?
- Why do you need to submit this form to affiliate networks?
- How to fill the form to receive a commission directly to your Indian bank account?
If you are new in the affiliate marketing space and can’t figure out the right source of income generation, web hosting affiliate programs are your best bet. You get a monthly payout of $2625 for sending 21 signups for Hostgator account. BlueHost has already paid $5 Million in commission last year alone to the affiliates. Now, I’m sure you won’t doubt the high-paying opportunities from hosting companies.
No matter how much potential you have to convert your website readers into web hosting clients, these companies don’t pay the commission unless you fill a particular form.
The form name is W-8BEN, issued by Income Revenue Service (IRS).
What is W-8BEN form?
The form helps non-U.S. residents to confirm their foreign individual status for receiving income from U.S. corporations. Companies, incorporated in the United States of America, ask foreign nationals to fill up this form.
If you either meet the requirement of Green Card Test or Substantial Presence test, you are a U.S. citizen. Otherwise, you become a non-U.S. resident or a nonresident alien. There are two different tax rates for nonresident aliens on their U.S. source income. One is Effectively connected income (ECI), and another one is fixed or determinable, annual or periodic (FDAP) income.
The affiliate income falls under the FDAP income category. For this, non-U.S. residents are legally responsible for paying 30% flat income tax rate (or a lower rate based on the tax treaty between two countries) on revenue generated from U.S. source.
Let’s consider two main parties involved:
1. You: A Non-U.S. resident
2. Source of Income: A Web Hosting Company in U.S.
When you generate a sale, the company provides commission. As the company is U.S. based, the commission becomes a earned income in U.S. Now, you have to pay 30% income tax to the web hosting company. The company collects tax by holding back 30% of your payment. After collection, they submit the tax collection amount to IRS.
Reason for Filling the Form
As companies operate their business from the United States, every commission earned is subjected to U.S. tax laws. Being a non-U.S. citizen, you are answerable for the tax payment based on the fee received from affiliate sales. For tax collection and submission, the company asks you to fill the W-8BEN form.
Therefore, the form becomes mandatory for receiving income as an affiliate. It helps the web hosting company to confirm the commission receiver is a non-U.S. resident.
How to Fill the W-8BEN form?
At the top, you’ll notice American citizens, and resident alien individuals have to use the W-9 form for complying with the U.S. taxation rules.
According to Investopedia, ‘A resident alien is a foreign person who is a permanent resident of the country in which he or she resides, but does not have citizenship.’ To fall under this classification in the United States, a person needs to either have a current green card or have had one in the previous calendar year. People can also fall under the U.S. classification of resident alien if they have been in the United States for more than 31 days during the current year, along with having been in the United States for at least 183 days over a three-year period, including the current year.’
Make sure you don’t fall into the above category before filling the form. Let’s break the three parts of the form and take them one-by-one. I have provided the images for better clarity.
Part I: Fill the Name, Address, Country of Citizenship details. In line 5, enter nine zeros for the SSN or ITIN number. For line 8, mention your date of birth in the same format specified in the form.
Part II: Add ‘India’ in line 9. Do not fill any information in line 10.
Part III: Fill your name, date of birth and add a signature. There are two ways for adding your signature:
- Include your digital signature.
- Take the printout of the form. Add signature on the hard copy. Scan the copy and submit it.
Once you fill and submit the form, the commission transfer to your Indian bank account in accordance with the tax regulations.
I hope it solves all your confusion regarding the W-8BEN form. If you have any queries in mind, share them in the comment section.