Tax
Withholding tax
Withholding tax is tax deducted at source from a payment and remitted to the tax authority by the payer rather than the recipient. The United States generally requires 30% withholding on FDAP income paid to non-residents, subject to reduction under an applicable tax treaty.
In plain terms: Tax taken out before the money reaches you.
Why it matters
The reason Form W-8BEN matters: providing it lets a payer apply a lower treaty rate rather than the default 30%. Not providing it, or providing it late, means over-withholding that you must then reclaim by filing a return.
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