With the many complex brokerage challenges servicing international participants - foreign jurisdictional restrictions, FATCA compliance, IRS guidelines and many more, having an understanding of the shared ownership between you and your broker can help navigate the difficulties of ensuring your participants’ compliance with tax regulations. In this presentation, Andrea Kagan, Solium, will be joined by Brian Burke of TD Ameritrade and Andrew Gerwirtz of KPMG. The trio will discuss their views on the shared ownership of understanding the in and outs of the W-8 and how it impacts international employees and a mobile workforce.

1. Brian Burke, Director, TD Ameritrade
Andrew Gewirtz, Managing Director, KPMG
Andrea Kagan, U.S. Lead Regulatory and Tax, Solium
Karen Needham,CEP, Senior Manager, ARIAD Pharmaceuticals
Exploring the Challenges of Tax
Compliance and the W-8BEN

2. KPMG Notice
The following information is not intended to be “written advice concerning one or more
Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury
Department Circular 230.
The information contained herein is of a general nature and based on authorities that are
subject to change. Applicability of the information to specific situations should be
determined through consultation with your tax adviser.
These materials are copyrighted to the company of the presenter presenting them.
KPMG LLP does not provide legal services.

3. Discussion Topics
• W-8BEN vs W9 Overview
• Who must file a W-8BEN
• Non-wage income tax withholdings
• Globally mobile employees
• FATCA and its impact on your employees
• Common questions from non-U.S. employees
• Best Practices

4. W9 vs W8 at a glance
W9
Form
W-­‐8BEN
Form
Filed
by
U.S.
Persons
Cer2fies
the
individual
is
the
beneficial
owner
of
the
account
Provides
broker
with
SSN/TIN
for
repor2ng
purposes
Cer2fies
that
the
individual
a
non-­‐U.S
person
Does
not
expire
unless
individual
has
a
change
in
circumstance
Expires
on
the
last
day
of
the
third
succeeding
calendar
year
aHer
it
is
signed
Ex:
Form
W-­‐8BEN
signed
on
September
30,
2015,
remains
valid
through
December
31,
2018

5. U.S Person Definition
• U.S Citizen (regardless of residency)
• Resident Aliens (satisfy one of the following
criteria)
– Hold a green card
– Meet the substantial presence test
• All others should file a W-8BEN form

6. Consequences of failing to file
• Broker is required to apply 28% backup
withholding to all sales
• Non U.S. persons may lose preferential
treaty rates on dividends

7. TAX WITHHOLDING AND FORM
W-8BEN
MORE THAN JUST A FORM TO DOCUMENT TAX STATUS

8. Substantiating US Nonresident Status of an Individual
• Submit signed Form W-8BEN, Certificate of Foreign Status of
Beneficial Owner for United States Withholding and Reporting
(Individuals)
• Used by foreign individuals to:
– Establish foreign status,
– Claim to be beneficial owner of the income,
– Claim tax treaty to reduce or exempt income from withholding
– Provide a TIN when beneficial owner holds an account at a US
office of a financial institution
– Avoid backup withholding on income not subject to 30%
withholding

9. Substantiating US Nonresident Status of an Individual
• Given to withholding agent; not IRS
• Must submit W-8BEN to withholding agent upon request if you
are a NRA who is the beneficial owner of an amount subject to
withholding whether or not claiming a reduced rate of, or
exemption from, withholding

10. Do Not Use Form W-8BEN if…
• You are a US citizen even if residing outside the US
– US citizens on international assignment or employed
and living in outside the US always use Form W-9
• You are a foreign national who meets the definition of a US
tax resident under IRC section 7701(b) and are not a
resident of another country under a treaty provision
– Foreign nationals on international assignment in the US
need to update filing (W-8BEN or W-9) based on annual
US tax status determination if tax status changes

11. Do Not Use Form W-8BEN if…
• You are an NRA claiming an exemption from withholding on
compensation
– For exemptions on compensation use Form 8233 or
Form W-4
• You are a foreign entity (e.g., trust, corporation,
partnership, estate) documenting your foreign status (use
Form W-8BEN-E)
• You are receiving income effectively connected with the
conduct of a trade or business in the US (other than
personal services) (use Form W-ECI)

12. Form W-8BEN and US Tax Withholding
• Withholding and reporting obligations depend on the US tax residency
status of the taxpayer
• Physical residence or mailing address does not determine tax status!
Have to follow federal and state tax laws
• State tax resident rules may be different

13. How Tax Status Affects Federal Withholding
Taxpayer’s
Status
US
Nonresident
Alien
Non-­‐wage
income:
30%
withholding
(absent
an
excep2on
or
treaty
relief)
Wage
income:
Graduated
rates
(unless
exempt
under
treaty
or
flat
rate
for
certain
supplemental
wages)
US
Ci8zen
or
Resident
Alien
Non-­‐wage
income:
No
withholding
Wage
income:
Graduated
rates
(or
flat
rate
for
certain
supplemental
wages)

14. How Tax Status Affects Federal Withholding
Taxpayer’s
Status
Documenta8on
is
used
to:
1. Establish
individual
taxpayer’s
status
(Form
W-­‐8BEN
or
Form
W-­‐9)
2. Claim
reduced
rate
of,
or
exemp2on
from,
withholding
(Form
W-­‐8BEN
(non-­‐wage
income),
Form
8233
(compensa2on)
and
Form
W-­‐4)
3. Report
income
and
withholding
to
IRS
/
taxpayer
(Form
1042/1042S,
Form
1099
and
Form
W-­‐2)

15. Nonresident Alien 30% Withholding
• NRA is subject to tax on US-source income
– 30% rate on non-wage income
– Graduated rates on wages paid by an employer
• Withholding agent responsibilities (non-wage income)
– Withhold at 30% on gross amount of non-wage
income (unless an exception applies or a treaty
provides for a reduced rate)
– Deposit amounts withheld with IRS
– File information returns (Form 1042 and 1042-S)

16. Nonresident Alien 30% Withholding
• Employer responsibilities (wage income)
– Withhold at graduated rates (unless an
exception or treaty applies)
– Deposit amounts withheld with IRS
– File Form W-2

17. Non-wage Income Subject to 30% Withholding
• Interest (e.g., bonds, notes, government obligations)
– Exception for portfolio interest
• Dividends
• Royalties
• Rents
• Pensions and Annuities
– Special rule for modified withholding
• Alimony

18. Non-wage Income Subject to 30% Withholding
(cont’d)
• Withholding at 30% required
• Withholding may be reduced if NRA completes and submits to
withholding agent Form W-8BEN
– Part I – NRA identified as beneficial owner of the income
– Part II – Completed when NRA is claiming treaty benefits
• Withholding agent reporting
– Completes Form 1042 / 1402-S
– Due date – March 15

19. Persons Subject to 30% Withholding
• Foreign person only
– Includes NRA, foreign corporation, foreign partnership, foreign trust or
estate, or any other person that is not a US person
• NRA includes:
– Non-US citizen or resident
– Resident of a foreign country under a treaty residence article (i.e., treaty
tie-breaker)
– IRC section 6013 election (election to treat a nonresident alien individual
as a resident of the US)
• Subject to NRA withholding for all income except wages

20. Backup Withholding
• Backup withholding rules require income tax withholding of 28% from certain
payments if the payee is not exempt from backup withholding and fails to
furnish correct taxpayer identification number (TIN)
• The IRS may also notify a payer to begin backup withholding because of payee
underreporting
• Backup withholding can apply to rents, non-employee compensation for
services, royalties, reportable gross proceeds paid to attorneys, and other
fixed or determinable gains, profits, or income payments that are reportable
on Form 1099-MISC
• Backup withholding does not apply to wages or pension payments

21. Backup Withholding
• Payers of US-source, non-wage income to US persons generally must report
that income on Form 1099
• US persons must provide Form W-9 with TIN to the payer
• If payment subject to reporting and no Form W-9 provided and the recipient is
not exempt from W-9 requirement then payer must impose backup
withholding
• Foreign person generally not subject to US reporting and backup withholding
unless foreign person treated as US nonexempt recipient under “presumption
rule” of IRC sec. 1441 regulations

22. Backup Withholding
• Under “presumption rule” an undocumented payee is treated as a US person
subject to backup withholding – so…
• Foreign person must provide documentation of foreign status (e.g., Form
W-8BEN) to be exempt from US reporting and backup withholding
• Failure to follow the backup withholding rules can result in penalties to the
payer for filing incorrect information returns. The payer may also become
liable for any uncollected amounts

23. FATCA IMPACT

24. What is FATCA?
• Foreign Account Tax Compliance Act
• Signed into law as part of the HIRE (Hiring
Incentives to Restore Employment) Act
• January 17, 2013, US Treasury and IRS
released final regulations for FATCA
• US policy to address underreporting of US
taxable income related to assets held
outside the US

25. FATCA (continued)
• Increase enforcement of US taxable income
reporting:
– Requiring Foreign Financial Institutions (FFI) to
find and disclose US taxpayers holding assets in
non-US funds
– Requiring individuals to report foreign financial
assets

26. Impact on FFI
• Acquire appropriate due diligence
information and documentation for
accountholders/investors/payees (W8/W9)
– US indicta (7)
• Report as required (Form 8966, Foreign
Account Tax Compliance Act (FATCA) Report)
• Operate withholding as necessary

27. US Indicta
• Identification of an account holder as a U.S. resident or citizen;
• U.S. place of birth;
• U.S. resident address or U.S. mailing address (including a U.S. post
office box);
• U.S. telephone number;
• Standing instructions to transfer funds to an account maintained in
the United States;
• Power of attorney or signatory authority granted to a person with a
U.S. address; or
• An “in-care-of” address or “hold mail” address that is the sole
address the FFI has identified for the account holder.

28. Impact on Participant
• Where not a US Citizen/resident, may be
asked to prove that W9 is not correct form
– Particularly where participant has no connection
to US other than account with share plan
administrator, this can be difficult to understand
• US taxpayers – Form 8938, Statement of
Specified Foreign Financial Assets

29. Common Questions
• What happens if I do not complete the W-8BEN form?
• So if taxes are deducted – I can get them back pretty easy?
• If I move from Spain to Switzerland do I have to file a new
W-8BEN?
• How do I find out if there is a tax treaty between my country
and the U.S.?
• I changed jobs but the new employer uses the same broker –
why do I have to complete new forms?

30. Thank You
Brian Burke
Director, Stock Plan Services
TD Ameritrade
Brian.Burke@tdameritrade.com
Andrew Gewirtz
Managing Director
KPMG
agewirtz@kpmg.com
Andrea Kagan
U.S. Lead Regulatory and Tax
Solium
andrea.kagan@solium.com
Karen Needham, CEP
Senior Manager
ARIAD Pharmaceuticals
Karen.Needham@ariad.com