If you own a UK limited company and move to the US as a corporation, you may seem inundated by all the complex tax laws to follow and forms to fill out. Here is a brief guide that should help clarify the purpose of these forms and how to properly complete them.
· W-8BEN-E: The purpose of this form is to acknowledge that the business intends to take advantage of a tax treaty between the US and a foreign country. It allows the taxpayer to avoid the 30% US withholding tax payments to your business from another US company. It requires you to get an employer identification number for your business so the IRS can correctly identify and subsequently tax you.
· 1120F: Form 1120 is the main form that US corporations use to figure out their tax liability. The “F” designates that this is the same thing but for foreign corporations now operating in the US. One must fill this out for each tax year that you conduct business in the US. The form is due by April 15th. In-depth instructions are available on the IRS website. You must report all US income including business income as well as dividends, interest, royalties and rental income.
· 8833: This form should be attached to form 1120F, as it allows the taxpayer to claim relief from US income tax under the UK/US tax treaty. To correctly complete form 8833, the filer should reference the UK/US tax treaty, as the form will ask the taxpayer to refer to specific articles in the treaty. You should look for two pieces of information in this treaty: the paragraph in the limitation of benefits section that shows the taxpayer is a “qualified person”, and the paragraph in the business income section that shows the filer is not subject to tax in the place they are doing business (in this situation, the US). Finally, you must list items of gross income on form 8833 to effectively show the income that will not be taxed.
Be sure that you fully understand how to properly fill out these forms before completing them and sending them to the IRS. The IRS website has instructions for each form, which give line-by-line instructions on how to fill out each of these forms. If you are still confused, get in contact with a tax accountant to help complete the process.