Payments to International Visitors, Vendors and Students
Effective Date: July 1, 2015
Purpose
The purpose of this policy is to provide guidance for payments made to international visitors and vendors.
Policy
Payments to international visitors, vendors, or students, are subject to various Internal Revenue Service (IRS) reporting requirements. The requirements for reporting the transactions vary with the specific circumstances of each situation.
The procedures below outline the process for requesting a payment. The required forms are attached.
In all cases, payments are subject to the documentation review by the Finance Office before payment can be made.
Procedures
Determine if the payment is taxable
|
Payment for: |
Taxable |
Non-Taxable |
|---|---|---|
|
Services performed outside the US |
X |
|
|
Services performed inside the US |
X |
|
|
Goods/Products |
X |
|
|
Non-compensatory income (scholarships, prizes, awards) |
X |
Taxable Payments
Taxable payments to individuals
If the request for payment is for non-compensatory income (scholarships, prizes or awards) the individual is required to complete Form W-8BEN. (These payments are subject to withholding of tax.) The individual is required to include their date of birth or foreign tax identification number.
If the request for payment is for services performed inside the US the individual is required to complete Form W-8BEN, unless they are requesting exemption from withholding of tax. If an exemption is requested the individual is required to complete Form 8233. An international visitor cannot be paid for more than 9 days of activity and cannot have provided services to more than 5 institutions within a 6 month period. The Declaration of International Visitors in “B” Visa Classification, click here for form.
Click here for form W8-BEN. Click here for W8-BEN instructions.
Click here for Form 8233. Click here for Form 8233 instructions.
Both forms are valid for three consecutive calendar years.*
Special information regarding the Form 8233:
The individual must report an SSN or ITIN (Individual Taxpayer Identification Number) for the IRS Form 8233. If the individual does not have an ITIN, and is requesting the treaty exemption from withholding, the hosting department or program may assist the individual by accompanying them to the Social Security Office in Crawfordsville, IN to apply for an ITIN. If the individual does not have, or chooses not to obtain, an ITIN DePauw is required to withhold and remit to the IRS 30% of the payment for services, assuming the individual is otherwise qualified - based on their responses on the Declaration Form - to receive payment. Departments, at their discretion, may wish to increase the gross payment in order to offset the withholding. This additional amount will be charged to the department’s budget. Once completed and signed, DePauw must submit the Form 8233 to the IRS within five days. The IRS then has ten days to notify DePauw of any objections to the form.
Taxable payments to companies or other legal entities
If the request for payment is for non-compensatory income (scholarships, prizes or awards), or services performed inside the US the entity is required to complete Form W-8BEN-E. (These payments are subject to withholding of tax.) The company "is required" to include their foreign tax identification number.
Click here for form W-8BEN-E. Click here for W8-BEN-E instructions.
Non-Taxable Payments
Non-Taxable payments to individuals
If the request for payment is non-taxable the individual is required to complete Form W-8BEN. (These payments are not subject to withholding of tax.)
Non-Taxable payments to companies or other legal entities
If the request for payment is non-taxable the entity is required to complete Form W-8BEN-E. (These payments are not subject to withholding of tax.)
Tax Reporting
All taxable payments made to international visitors or vendors will be reported annually, on a calendar year basis, on the IRS form 1042-S. All payments will be reported regardless of the amount.
Taxable payments made to international students are subject to withholding at a rate of 14%, unless treaty benefits are claimed and approved.
Taxable payments made to international vendors and visitors are subject to withholding at a rate of 30%, unless treaty benefits are claimed and approved.
International Bank Wiring Instructions
In order to process payment to a vendor with an international bank wire, please complete the Wire Transfer Request Form found here.
You will need to submit the W8-BEN or W8-BEN-E, invoice, and any additional documentation regarding this payment with the request form. VP approval may be necessary following University payment processing requirements.
This information needs to be submitted to the Finance Office and given 3-5 days processing time.
*Form W-8 is valid from date signed until the last day of the third succeeding calendar year unless a change is circumstance occurs that makes any information on the form incorrect.