This memorandum is intended to provide a summary of the various U.S. Internal Revenue Service (IRS) tax forms and is not intended as advice on which form or forms you should complete. Consult your tax advisor if you have any questions about which form or forms you need to complete or how to complete the forms.
Under U.S. IRS law and regulations, Cisco is required to back up withholding on payments to U.S. vendors if the vendor does not provide Cisco with a U.S. taxpayer identification number and is not otherwise exempt from withholding. The current backup withholding rate is 28 percent. Cisco requires the tax identification to be submitted on a completed IRS Form W-9.
Payments to non-U.S. vendors are generally subject to U.S. withholding tax requirements on U.S. source income (that is, payment for services performed inside the United States). The current statutory withholding rate is 30 percent of the gross payments. The withholding rate may be reduced or the payment may be exempt from withholding under an applicable tax treaty between the United States and the vendor’s country of residence. The purpose of completing the Form W-8 or Form 8233 is to help Cisco determine whether payments to the vendor are subject to U.S. reporting and withholding and, if so, to determine the rate of withholding.
The specific IRS tax form or forms that a vendor must provide to Cisco depends on whether the vendor is a U.S. vendor or a non-U.S. vendor. A U.S. vendor is generally a corporation, partnership, company, or association that has been created or organized in the United States or under the laws of the United States, and individuals who are residents or citizens of the United States. A non-U.S. vendor is any corporation, partnership, company, or association that has been created or organized outside the United States or under the laws of a country other than the United States, or individuals who are not residents or citizens of the United States.
Additional information can be found in IRS Publication 515, “Withholding of Tax on Nonresident Aliens and Foreign Entities.” Publication 515 and the forms and form instructions can be found on the following IRS website: http://www.irs.gov.
U.S. vendors must provide Cisco with a Form W-9 that sets forth the vendor’s name, address, U.S. tax identification number (“TIN,” either a social security number or employer identification number), entity classification, and date. In addition, the Form W-9 includes a certification regarding the accuracy of the vendor’s TIN, inapplicability of backup withholding, and status as a U.S. organization or person. The Form W-9 may be signed only by those authorized to sign tax documents (for example, corporate officers if it is a corporate entity, partners if it is a partnership, etc.). Non-U.S. vendors (discussed below) are not permitted to submit a Form W-9.
Non-U.S. vendors must provide Cisco with an IRS Form W-8 or 8233 (individuals). There are four types of Form W-8 (Form W-8BEN, Form W-8ECI, Form W-8IMY, and Form W-8EXP) that may be used by non-U.S. vendors. The appropriate Form W-8 is determined based upon various factors, including whether the form is being submitted solely to establish the vendor’s identity and non-U.S. status, or the form supports a treaty-based claim for reduced withholding. Much of the information required on the Form W-8 is identifying information. In other words, the information required relates to the vendor’s name, location, and entity status. Failure to provide Cisco with a properly completed Form W-8 may result in the withholding of tax on payments made by Cisco.
Importantly, all Forms W-8 and 8233 provided to Cisco must be submitted as original documents with an original signature. U.S. law provides that non-originals (for example, faxes or scans) are not effective, and receipt of such copies may require Cisco to withhold U.S. tax from payments to non-U.S. vendors. Non-U.S. vendors should consult the form instructions for additional information, although a description of the various forms is set forth in the following sections.
Form W-8BEN-E may be provided by a vendor to establish its status as a non-U.S. Vendor (i.e., to establish foreign status) or to claim treaty benefits. When a vendor provides a Form W-8BEN-E solely to establish status as a non-U.S. Vendor, the vendor completes only parts I and XXIX of the form. This claim is also valid for no tax withholding on income that is charged for service renders outside of the US. When a vendor provides a Form W-8BEN-E to claim tax treaty benefits for reduced/exempt from tax withholding on income that is charged for service renders in the US, the vendor completes parts I, III of the form with either a US Tax ID or Foreign TIN, and part XXIX for Certification. Without having the valid claim of tax treaty benefits there is a 30% tax withholding on this US source of income and the supplier will receive the form 1042-S around early March of the following year for their income tax filling with the IRS.
If you are a foreign individual receiving payments subject to reporting under section 6050W (payment card transactions and third-party network transactions) as a participating payee.
If you are a nonresident alien who is the beneficial owner of an amount subject to withholding, or if you are an account holder of an FFI documenting yourself as a nonresident alien. If you are the single owner of a disregarded entity, you are considered the beneficial owner of income received by the disregarded entity.
Form W-8ECI is used when a vendor receives income from Cisco that is income effectively connected with the vendor’s U.S. trade or business, and for which the vendor has no basis to claim treaty relief. A U.S. tax identification number (TIN) must be provided when a Form W-8ECI is submitted to Cisco. All vendors who submit a Form W-8ECI must also complete line 9, which requires that the types of income effectively connected with a U.S. trade or business be specifically listed.
Form W-8EXP is used by non-U.S. governments, international organizations, foreign central banks of issue, non-U.S. tax-exempt organizations, non-U.S. private foundations, or governments of U.S. possessions to establish foreign status, claim beneficial ownership of the income for which the form is furnished, and claim exemption from (or a reduced rate of) withholding based upon the favorable status of the entity.
Form W-8 IMY
Form W-8IMY might be required for a vendor who is a non-U.S. flow-through entity. If the flow-through entity is not a qualified intermediary, a withholding non-U.S. partnership, or a withholding foreign trust, a Form W 8IMY provided by a non-U.S. flow-through entity must be accompanied with additional information, including a withholding statement and certificates (for example, Form W-8BEN or Form W-9) for the beneficial owners of the income.