Form W-8BEN-E: A Complete Overview of Chapter 3 Statuses

When filling out Form W-8BEN-E, the first major step after providing the name and country is selecting your organization's status in Part I, Line 4, "Chapter 3 Status." This choice is fundamental as it defines the basic classification of your company for U.S. tax purposes and affects the subsequent steps of filling out the form.

In simple terms, this line answers the question: "What is your organization from a legal and tax perspective?".

Why are there two types of statuses: Chapter 3 and Chapter 4?

The form's complexity stems from its collection of information for two different tax regimes, reflected in its structure:

• Chapter 3 Status: This answers the question 'Who are you?'. Here you specify the basic type of your organization—corporation, partnership, trust, etc. This part is related to standard tax withholding on income of foreign persons.
• Chapter 4 Status: This answers the question 'How is your company related to finance?'. This part pertains to the FATCA law and requires a detailed classification of your company as a financial or non-financial institution.

Detailed Breakdown of Main Chapter 3 Statuses

Let's take a closer look at each of the possible options in Line 4.

Corporation

This is the most common and straightforward status. A corporation is a legal entity that is separate from its owners (shareholders). If your company is registered as a corporation, joint-stock company, or a limited liability company (LLC) that is taxed as a corporation, this is your choice.

Disregarded Entity

This is a term specific to the U.S. tax system. A "disregarded entity" is a legal entity that is separate from its owner but is "ignored" for U.S. tax purposes. Its income and tax status are attributed directly to its sole owner. A classic example is a Single-Member LLC.

Important: If you choose this status, you must answer the question in Line 5 about whether your organization is a hybrid structure claiming tax treaty benefits. You may also need to complete Part II of the form.

Partnership

This is a business owned by two or more partners. The profits and losses of the partnership are usually passed through to the partners, who then pay taxes on them. This choice also requires an answer to the question in Line 5.

Simple Trust / Complex Trust / Grantor Trust

A trust is an agreement where a trustee holds and manages assets for the benefit of beneficiaries. A simple trust must distribute all its income annually. A complex trust can accumulate income. A grantor trust is a type of trust where the founder (grantor) retains certain control, and the trust's income is taxed as the grantor's income.

All these statuses require an answer to the question in Line 5.

Other Statuses

Other statuses include: Estate (for managing a deceased person's assets), Government and Related Entities (ministries, central banks), Tax-Exempt Organization / Private Foundation (for non-profits and charities), and International Organization (like the UN or World Bank).

Conclusion

Choosing the correct Chapter 3 status is the first and most crucial step towards correctly filling out the entire W-8BEN-E form. It determines how the U.S. withholding agent will classify your business and what further questions you will need to answer.