Does your Bermuda, BVI or Cayman Company need to complete a W8 form? We can help

Some of our clients have recently been informed by their US bank (or withholding agent) that a new IRS W8 requires them to provide a Tax Identification Number (TIN) for their Bermuda, BVI or Cayman Company. However, in many cases a TIN is actually not required, as we explain in this legal update.

Background

The US Department of the Treasury Internal Revenue Service (the IRS) has changed the requirements for completion of its Form W8-BEN-E (the W8) with effect from 1 January 2018.

Foreign persons that are the beneficial owner of an amount subject to withholding tax in the US and wish to claim a reduced rate or exemption from withholding tax are required to complete and submit a W8. For many of our non-US clients this will relate to any financial account held with a US financial institution through their Bermuda, BVI or Cayman Company (foreign client account holders).

Many of our foreign client account holders have been informed by their US bank (or withholding agent) that the new W8 requires them to provide a Tax Identification Number (TIN) for their Bermuda, BVI or Cayman Company. Two issues arise in relation to that information: (a) Bermuda, BVI and Cayman Companies do not have a TIN; and (b) the requirement that a TIN must be provided is not correct.

The IRS’s Instructions for completion of the Form W-8BEN-E (Rev. July 2017) state that you do not have to provide a TIN if the jurisdiction of incorporation of your company does not issue TINs. However, if you cannot provide a TIN, the completed W8 must include a statement that explains that your Bermuda, BVI or Cayman Company is not legally required to obtain a TIN in Bermuda, BVI or Cayman. That explanation may be written on a separate attached statement associated with the W8. We are currently assisting many foreign client account holders through the issuance of a BVI legal opinion for their BVI Company that explains and clarifies tax matters under BVI law (including why their BVI Company does not have a TIN). Our opinion is then submitted by foreign client account holders with their W8. We consider such an opinion will constitute an unequivocal explanation and will satisfy the requirements of the IRS as regards completion of the W8.

Please contact us to discuss whether you should be getting a tax opinion from us for your Bermuda, BVI or Cayman Company and related W8.