Paying Non-U.S. Students, Visitors, And Vendors

Legality of Payment

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 through 9 (where applicable), and sign on Part XXX. If the foreign entity is claiming benefits of an income tax treaty, they also need to complete Part III, lines 14a, 14b, and 15.

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.

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 2-7100 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 2-2695 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

Royalty / License / User Fee

Foreign Lodging, Transportation, Travel Payments, and Reimbursements

Tangible Products /Goods

Scholarship / Grant

Employee / Payroll

Prize / Award

Foreign Payments with Purchasing Cards

When the University makes a purchase from a foreign company, it may be subject to a withholding tax. If P-Cards are used to pay foreign vendors for certain purchases, the University is liable for the tax that should have been withheld.

P-Card holders and approvers should be aware that certain P-Card purchases will incur an additional cost equal to 42.86% of the original amount ($100 becomes $142.86).

The following purchases will NOT incur an additional tax:

• 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)

The following purchases WILL incur an additional tax:

• 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 you have questions or concerns regarding the tax implications of a P-Card purchase from a foreign vendor, please contact the Tax Office.