Hi In this post I am going to state how and why I filled in this form as I am sure that there are likely to be many other traders in a similar position who are going to be tearing their hair out trying to make heads and tails of this bureaucratic nightmare. I am just in the process of opening an account with Trade Station and they asked me to fill in a W8-BEN-E. I have a small UK Ltd Company which I use for futures trading along with some other business. I am the sole director, and my wife and myself are share holders. This form enables the broker not to have to retain with-holding tax for several foreign entities. I initially found some blogs about filling this in which said do not fill in para 5 of section 1, eg http://blog.draknek.org/post/94112319182/form-w-8ben-e-for-uk-limited-companies. (I didn't apply for an EIN number as section 8 of part 1 now says "US Tax Payer Id No (TIN), if required" so maybe they have changed the form recently). But Trade Station rejected my form, saying that I needed to fill in this para and said that they could not assist me in determining my company's legal US status but did point me to www.irs.gov/pub/irs-pdf/iw8bene.pdf. I found this guidance singularly unhelpful. Fortunately I found the HMRC (the UK's tax authority's guidance) much better: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/357542/uk-us-fatca-guidance-notes.pdf (All my references are to this guidance unless otherwise stated). I guess that the situation for corporations based in other countries is going to be much the same as they will have agreed similar treaties with the IRS, but you might wish to check this. The first question is whether or not my company is an FFI (Foreign Financial Institution). HMRC s2.1 p. 10 lists five different types of which the only potentially relevant type is Investment Entity. To be an investment entity a company has to satisfy either one of two tests: a) it can be "An investment entity within the meaning of the Agreement" s2.2.8(I) p.43. Although my company "conducts business" in the various trading activities detailed here, eg commodities futures trading, it does not do it "for or on behalf of a customer (for example an account holder)" - it does it on its own behalf, or b) if "it meets the financial assets test AND is managed by a Financial Institution." s2.28(II) p.44. Although more than 50% of its gross income might be from trading, it fails the second criterion as "where an entity is managed by an individual the managed entity will not be an Investment Entity because an individual cannot be an Investment Entity" and it is managed by myself. As my company is not a FFI - it is automatically a Non-Financial Foreign Entity (NFFE) (s2.6 p17 second line). But unfortunately there are different types of NFFE boxes to tick on the W8-BENE form. The next question is whether it is an Active or Passive NFFE. The best explanation of this I could find was on the Canadian Tax Authority's guidance note "Passive income is generally understood to include income from the mere holding of investment property, such as interest, dividends, and rent." (http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ntts-eng.html). "Excluded from any calculation of Passive Income" is "in the case of an NFFE that regularly acts as a dealer in property described in item 6 above of this section (referring to the sale or exchange of property that gives rise to passive income), forward contracts, option contracts, or similar financial instruments (including notional principal contracts and all instruments referenced to commodities)" this is excluded from "passive income" (s2.6 of HMRC pp 20-21). So as long as I don't just watch my screens but regularly trade, my company is an Active NFFE. I hope that this analysis proves helpful to others. Naturally it comes with caveats that I am not a professional tax accountant or lawyer, and so you must make your own analysis and judgements.
Thanks for providing this information. I had to complete similar documentation with my bank and the information and links you provided were most helpful.