W-8BEN for Spanish contractor - Do I need to withhold 30% of their payments?

Hey everyone, I'm running into some confusion with international contractor paperwork. I recently started my own digital marketing LLC (just me, single-member) and I'm about to hire a graphic designer from Spain as an independent contractor. I know they need to complete a W-8BEN form, but I'm not clear on the process. Does the contractor need to get an ITIN and foreign tax ID number before they can fill out the W-8BEN? And the big question - does the W-8BEN actually *exempt* them from the 30% withholding, or am I supposed to be withholding 30% from each invoice they send me? Also wondering what else I should know about working with international contractors? And will I still categorize their payments as contract labor on my Schedule C when I file? Thanks in advance for any help! Feeling a bit lost in all these tax rules.

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23 comments

Summer Green

•8M

The W-8BEN is actually used to claim tax treaty benefits and establish that the contractor is a foreign person. Spain has a tax treaty with the US that can reduce or eliminate withholding in many cases. Your Spanish contractor should already have their Spanish tax ID number (called an NIE or NIF) which they'll include on the W-8BEN. They typically don't need an ITIN if they're not filing US tax returns. The properly completed W-8BEN generally exempts them from the 30% withholding if they qualify under the US-Spain tax treaty. For your business records, you'll need to keep the W-8BEN on file for 3 years after the last payment. You'll still report these payments on your Schedule C as contract labor expenses, but you won't need to issue them a 1099-NEC since they're foreign contractors.

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Summer Green

•8M

You need to review the W-8BEN to ensure it's reasonably complete and accurate based on your knowledge. If there are obvious errors or inconsistencies, you should request corrections. If you accept a form you know is incorrect, you could potentially be liable. You don't submit the W-8BEN to the IRS - you just keep it in your records. The form stays valid for three years from the date it's signed, or until there's a change in circumstances that makes the information on the form incorrect.

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Edward McBride

•8M

Just want to share my experience with this exact situation. I hired a web developer from Spain last year and got so confused with all the paperwork. I found this tool called taxr.ai (https://taxr.ai) that really helped me understand the W-8BEN process. You upload the form and it analyzes everything to make sure it's filled out correctly and tells you whether you need to withhold anything. It saved me a ton of time figuring out the US-Spain tax treaty details and confirmed that I didn't need to withhold the 30% since my contractor qualified for exemption under the treaty. The tool also generates a compliance report you can keep with the W-8BEN in your records.

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Edward McBride

•8M

Yes, it absolutely works for contractors from other countries including the Philippines. The system knows the tax treaty details for each country, which is super helpful since they're all different. The pricing depends on how many forms you need to process, but it's very reasonable for what you get. And it doesn't just give general advice - it points out specific issues with the form like missing information, incorrect tax ID formats, or inconsistent country codes. It even explains which sections qualify for treaty benefits based on the specific work being performed.

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Darcy Moore

•8M

Just wanted to update everyone - I went ahead and tried taxr.ai after seeing it mentioned here. It was incredibly helpful for my situation with my Filipino contractor! The system flagged that the Philippines has different treaty provisions than Spain, and it caught that my contractor had filled out Section 9 incorrectly. Saved me from a potential headache with the IRS down the road. Definitely recommend if you're working with international contractors and aren't 100% confident about the withholding requirements.

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Liam Duke

•8M

If you're struggling to get answers from the IRS about international contractor questions (which I definitely was), I highly recommend using Claimyr (https://claimyr.com). They have a service that gets you connected with an actual IRS agent, usually within 15-45 minutes instead of waiting on hold for hours. I had specific questions about the W-8BEN requirements that weren't answered clearly online, and they got me through to someone who could explain everything. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. It was so much better than the endless hold music and disconnects I was dealing with before.

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Liam Duke

•8M

They use an automated system that navigates the IRS phone tree and waits on hold for you. When an agent actually picks up, you get a call connecting you directly to that agent. It's completely legitimate - they're not "jumping the queue" but rather waiting in it for you so you don't have to. They can't guarantee you'll get through since it depends on IRS availability, but their system keeps trying even when the IRS says they're too busy and hanging up on regular callers. That's why it works better than calling yourself - their system can keep redialing automatically when disconnected.

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Rita Jacobs

•8M

I need to eat my words about Claimyr. After posting my skeptical comment, I was desperate enough to try it. Honestly, it worked exactly as described. Got connected to an IRS agent in about 35 minutes who explained that for my Spanish contractor situation, I needed to look at Article 12 of the US-Spain tax treaty, which covers royalties and includes software development. The agent walked me through the W-8BEN requirements and confirmed I didn't need to withhold if the form was completed correctly. Saved me from potentially withholding 30% unnecessarily, which would have caused problems with my contractor. Worth every penny for the stress relief alone.

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Khalid Howes

•8M

Something important to consider that hasn't been mentioned yet - make sure your contract with the Spanish contractor is very clear about who's responsible for taxes. Even with a W-8BEN, they still have to pay taxes in Spain. I've had situations where foreign contractors didn't understand this and came back months later unhappy because they thought working with a US company meant they were somehow exempt from their home country taxes. Now I always include a clause stating they're responsible for all taxes in their country.

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Khalid Howes

•8M

I use something like this: "Contractor acknowledges and agrees that they are solely responsible for all tax obligations in their country of residence and any other applicable jurisdictions. Payments made by Company to Contractor are gross amounts, and Company will not withhold any taxes unless required by applicable law. Contractor will indemnify Company against any claims related to Contractor's tax obligations." I'm not a lawyer, but this basic language has helped prevent misunderstandings. I also recommend having the contract reviewed by someone familiar with international contracting if possible.

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GalacticGuardian

•5M

The payment method you choose (PayPal, Wise, bank transfer, etc.) doesn't change the W-8BEN requirements or any other tax documentation needs. You still need the properly completed W-8BEN form regardless of how you send the money. However, keep good records of all payments regardless of the method. For your business records, you'll want to track the USD amount of each payment (even if sent in euros), the date, and what services were provided. Most payment platforms provide detailed transaction records that make this easier. One thing to note - some contractors prefer to be paid in their local currency to avoid exchange rate fluctuations on their end, while others are fine with USD. It's worth discussing with your Spanish contractor what works best for them.

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