Paying Non-U.S. Students, Visitors, And Vendors
Withholding Requirements and Treaty Options
Foreign Payments with Purchasing Cards
The University is subject to different reporting and withholding requirements depending on whether it is making payments to a U.S. person or a foreign person or entity.
A Form W-9 is generally REQUIRED from ALL U.S. vendors—U.S. citizens, U.S. permanent residents (green card holders), and entities organized in the U.S. (such as LLCs and Corporations).
- The one exception is that a W-9 is not required for student awards under $200 with a BYU ID Number.
- Provide the vendor both a W-8 and W-9 with the request to complete which form they deem appropriate if there is reason to believe:
- The vendor may be a U.S. vendor operating abroad.
- The vendor may be a foreign vendor with a U.S. presence (e.g. U.S. payment address, phone number, or bank account).
W-8 is REQUIRED of foreign vendors (with 30% withholding unless exempt or lessened by treaty) when:
- Services will be performed in the U.S. (also includes rent, display, or use fees, etc…)
- Royalties, software licenses, broadcast rights, or other intellectual or intangible property.
W-8 is NOT REQUIRED of foreign vendors (and no withholding will be imposed) when:
- Travel, including transportation, tours, meals, lodging, etc. ... is outside the U.S.
- Goods are purchased for use either in or outside the U.S.
- Services are provided outside the U.S.
- Awards to foreign students with BYU ID (because withholding is required regardless).
- Foreign bank transfers are to BYU bank accounts or employees to fund foreign programs.
If you believe a vendor has provided a W-8 with inaccurate information, communicate with the Tax Office immediately and before payment is made.
Foreign individuals complete the IRS’ one-page W-8BEN (for non-US individuals)
Individuals complete Part I lines 1, 2, 3, and 4 (if different than 3) and sign Part III.
To claim a tax treaty, they also need to complete Part I lines 5 or 6, line 8, and Part II.
Foreign entities (companies, museums, non-profits, all entities other than banks) should provide W-8BEN-E
All foreign entities completing either Form W-8BEN-E need to complete Parts I lines 1, 2, 4, 6, and 7 (if different) and XXIX. If the foreign entity is claiming benefits of an income tax treaty, they also need to complete Part III.
To make sure the University complies with applicable withholding, remitting, and reporting to the IRS, please contact the Tax Office as soon as you are aware you might be making the payment to allow us to work with you to make a timely, compliant payment. Failure to contact us ahead of time may delay the payment, result in the paying department being charged the tax that should have been withheld to bring the University into compliance, or may preclude the department from being able to make the payment.
Because different facts can change the required tax treatment and available options to reduce or avoid it, it is important to gather complete information and to submit that to the Tax Office ahead of time. Because some IRS compliance processes can take two months or longer, please notify us at least two months before the payment is to be made.
Legality of Payments
For payments for services, of honorariums, or stipends to individuals who will be physically present in the U.S. for any amount of the time, the University first must determine if it is legal to pay the recipient based on the payment reason and the payee's visa/immigration status. This needs to be determined before the University commits to making a payment. There are some payments the University cannot make by law regardless of what may have been promised.
For verifying acceptable visa types that allow the University to make a payment, please contact the Tax Office at 2-8098 or tax@byu.edu.
For assistance in understanding how a payee can acquire a certain visa type or visa waiver, please contact International Services at 422-2695 or intloff@byu.edu.
Withholding Requirements and Treaty Options
Once the Tax Office has verified the University can legally pay a recipient, withholding and reporting requirements must be determined for all payments to foreign individuals or entities. Before case-specific considerations, the default requirement is that the University must withhold 30% of a payment to a foreign recipient and remit it to the IRS. The payment and withholding are reported at the end of a year on Form 1042-S to both the IRS and the payee, much like a 1099-MISC or W-2 to a U.S. payee.
The type of payment, the payee's country of residence, and other facts may provide options for reduced withholding. To help you understand what information is required to determine if options are available, please complete the appropriate information forms:
Type of Payment
Honorarium / Fee for Services / Stipend
Foreign Lodging / Transportation / Travel / Reimbursements
Foreign Payments with Purchasing Cards
When the University makes purchases using Fast Track or a Purchase Order, University systems and processes allow for review for international tax issues to facilitate our compliance. Because P-Card payments are not reviewed until after the payment has been made, there is not an easy way to screen P-Card payments for tax withholding. If P-Cards are used to pay foreign vendors for certain purchases, it leaves the University liable for the tax that should have been withheld.
P-Card holders and approvers should be aware that certain payments are NOT to be made to foreign vendors using P-Cards. P-Card reviewers should educate their P-Card holders not to use P-Cards for certain foreign payments as discussed below. Reviewers should look for payments made to foreign vendors in their review to reinforce and remind the holders as needed. Reviewers can look at supporting documentation, vendor address, and for foreign currency amounts to identify possible foreign payments.
P-Cards CAN be used for payments to foreign vendors for:
- The purchase of tangible (physical) goods, for example:
- scientific equipment
- a copy of a book
The payment of foreign conference registration:
- foreign hotel accommodations, meals, transportation are not taxable but should all be paid for with a Travel Card
Paying for services performed by a non US person outside of the US, for example:
- an interpreter
- tour guide
- foreign publisher (to publish content in a foreign magazine)
P-Cards CANNOT be used for payments to foreign vendors for (instead please use Fast Track or a Purchase Order):
- Software purchase, software licenses, or software maintenance
- Royalties
- Licenses
- Use fees
- Broadcast rights
- Music fees
- Online access to digital information or databases
- Honoraria/stipends/compensation/other payments for foreign persons performing services or visiting in the U.S.
- Scholarships/allowances for students attending foreign universities or programs
- Prizes or awards to foreign persons
If a payment listed above can only be made using a P-Card, please contact the contact the Tax Office before payment is made. If P-Card holders or approvers ever have a question about the propriety of making a payment to a foreign vendor, they should contact the Tax Office.
If you have any questions or need assistance in making payments to Non-U.S. recipients, please contact the Tax Office.
For additional information, you can also review the following:
Foreign Payments Presentation (3-10-2010)
Foreign Payments Presentation (2-28-2008)
IRS Publication 515 - Withholding of Tax on Nonresident Aliens and Foreign Entities
IRS Publication 519 - U.S. Tax Guide for Aliens
IRS Publication 901 - U.S. Tax Treaties
Contacts
BYU Tax Office
tax@byu.edu
801-422-8098
B-34A ASB