W-8BEN-E Line 5: Active NFFE or Passive NFFE? How to Choose

Active NFFE or passive NFFE: which should my company check on Form W-8BEN-E?

If your company is not a financial institution, the two line 5 statuses that fit an ordinary trading company on Form W-8BEN-E are active NFFE and passive NFFE. Certify the one your company can support. An active NFFE certifies two 50% tests on its passive income and passive assets. A passive NFFE certifies no income or asset test, only who its U.S. owners are, and the instructions allow a company that may qualify as active to check passive instead.

NFFE means non-financial foreign entity. The rest of this page sets out, from the form and its instructions, what each box certifies and how to tell which one fits. If you are not yet sure W-8BEN-E is the right form at all, start with W-8BEN vs W-8BEN-E.

What does line 5 ask?

Your company’s status under chapter 4 (FATCA), with a supporting certification later in the form. The instructions: “You are only required to provide a chapter 4 status on this form if you are the payee of a withholdable payment or are documenting the status of a financial account you hold with an FFI requesting this form. By checking a box on this line, you are representing that you qualify for this classification in your country of residence” (Instructions for Form W-8BEN-E).

Each status box sends you to a part of the form where the company certifies that it meets the conditions. Active NFFE sends you to Part XXV; passive NFFE to Part XXVI. Everything is signed under penalties of perjury in Part XXX, so what you certify there has to be true.

What does an active NFFE certify?

Three things, on line 39 (Form W-8BEN-E (Rev. October 2021)):

• “The entity identified in Part I is a foreign entity that is not a financial institution;”
• “Less than 50% of such entity’s gross income for the preceding calendar year is passive income; and”
• “Less than 50% of the assets held by such entity are assets that produce or are held for the production of passive income (calculated as a weighted average of the percentage of passive assets measured quarterly).”

For the test, “passive income includes dividends, interest, rents, royalties, annuities, and certain other forms of passive income,” with the full definition and its exceptions in Treas. Reg. §1.1472-1(c)(1)(iv).

Two practical points follow from the wording. The income test looks at the preceding calendar year, not the current one. And the asset test is a quarterly weighted average, so you need the company’s balance sheet at each quarter end to show it.

What does a passive NFFE certify?

Line 40a, then either 40b or 40c (Form W-8BEN-E):

• 40a: the entity “is a foreign entity that is not a financial institution (other than an investment entity organized in a possession of the United States) and is not certifying its status as a publicly traded NFFE (or affiliate), excepted territory NFFE, active NFFE, direct reporting NFFE, or sponsored direct reporting NFFE.”
• 40b: it “has no substantial U.S. owners (or, if applicable, no controlling U.S. persons)”; or
• 40c: it “has provided the name, address, and TIN of each substantial U.S. owner … in Part XXIX.”

The form says to “check box 40b or 40c, whichever applies.” There is no income test and no asset test on this route.

Can my company check passive NFFE if it might qualify as active?

Yes. The instructions say so directly: “If you are an NFFE that may qualify as an active NFFE (or other NFFE described in another part of this form), you may still check line 40a and disclose your substantial U.S. owners or certify that you have no substantial U.S. owners” (Instructions for Form W-8BEN-E).

That matters because the active certification asks for two percentages you must be able to stand behind, measured on last year’s income and on quarterly asset figures. If the company cannot show both from its accounts, the passive route asks only about its U.S. owners, a fact you can check against its share register.

What counts as a substantial U.S. owner?

For a foreign corporation, any specified U.S. person that “owns, directly or indirectly, more than 10 percent (by vote or value) of the stock” (Instructions for Form W-8BEN-E, quoting Treas. Reg. §1.1473-1(b)). The same definition covers more than 10% of the profits or capital of a foreign partnership, and owners and beneficiaries of foreign trusts.

The words “directly or indirectly” are the ones people skip. If one of your shareholders is itself a company or a trust, you need to know who stands behind it before you can certify 40b. A U.S. person holding 15% through a holding company is a substantial U.S. owner.

What if my company is new, or had no income last year?

The start-up status is narrow. Part XIX, “excepted nonfinancial start-up company,” requires that the entity was formed less than 24 months before the date of payment (or, for a new line of business, that the board resolution approving it was less than 24 months before the payment), and that it “is not yet operating a business and has no prior operating history or is investing capital in assets with the intent to operate a new line of business other than that of a financial institution or passive NFFE” (Form W-8BEN-E). A company that is already trading generally does not fit, unless it is starting a new line of business, which has its own conditions on line 33.

The passive route does not depend on income at all.

Example: a non-financial trading company with no U.S. shareholders

A company limited by shares, incorporated outside the United States, sells goods to U.S. customers through a marketplace. It is not a bank, fund or other financial institution. Its only shareholder is a non-U.S. individual, and no U.S. person holds any interest in it, directly or indirectly. A U.S. payer has asked for Form W-8BEN-E.

• Line 4 (chapter 3 status): Corporation.
• Line 5 (chapter 4 status): Passive NFFE.
• Part XXVI: 40a, and 40b (no substantial U.S. owners). Part XXIX stays blank.
• Part XXX: signed by an authorized person.

Whether it also needs a U.S. taxpayer identification number on line 8 depends on whether it claims treaty benefits and gives its home-country tax number on line 9b. How a foreign company gets a U.S. EIN covers that question.

Common mistakes

• Checking active NFFE without the numbers to show it. Line 39 is a certification of two percentages; if asked, you need the figures.
• Checking 40a and stopping. You must also check 40b or 40c.
• Ignoring indirect owners. A U.S. person behind a holding company counts toward the 10%.
• Using the start-up status for a company that is already trading (unless it is starting a new line of business that meets the line 33 conditions), or for a payment that comes more than 24 months after formation or the new-line resolution.
• Sending the form to the IRS. Form W-8BEN-E goes to the payer or financial institution that asked for it, not to the IRS.

Sources

• IRS — Form W-8BEN-E (Rev. October 2021), Parts XIX, XXV, XXVI, XXIX (accessed 2026-10-11)
• IRS — Instructions for Form W-8BEN-E (Rev. October 2021): line 5, Parts XXV and XXVI, definition of substantial U.S. owner (accessed 2026-10-11)
• Treas. Reg. §1.1472-1(c)(1)(iv) — passive income (accessed 2026-10-11)
• Treas. Reg. §1.1473-1(b) — substantial U.S. owner (accessed 2026-10-11)

This article is general information, not tax or legal advice. FATCA status depends on the company’s facts; confirm them before you sign the form.