Handbook for Payments to International Visitors
Office of Accounting
Office of International Services
Updated June 25, 2002
Payments to Nonresident Aliens for
Independent Personal Services and Participation in Clinical Studies
(Revised May 2005)
Summary – Independent Personal Services:
A payment to a nonresident alien (NRA) for independent personal services is authorized by a Prior Approval form (payment request form for approval of payments to consultants or for services performed by persons other than employees). The local voucher requesting payment to the NRA must be approved by the Office of International Services for all visa types except B and W visa types as to the eligibility of the NRA for payment under U.S. Immigration law. The Office of Accounting will address the eligibility requirements for B and W visa types. IRS withholding at a rate of 30% is required on any payment in excess of documented travel and living expenses, unless specifically exempted by a tax treaty between the United States and the country of tax residence of the NRA. Payments in excess of documented travel and living expenses and related withholding, if any, will be reported annually to the NRA and the IRS on IRS Form 1042s.
1. Upon preparation of the Prior Approval Form, the department should consult with the Office of International Services if an international visitor will be at UTHSCSA and if a payment will be made to the international visitor for services as an independent contractor
Considering the individual facts, the Office of International Services will advise the department as to the type of Visa and other entry credentials which are required in order for the international visitor to be eligible for payment for services and/or travel and living expenses under US Immigration laws.
2. The following documentation must be obtained from the international visitor and attached to the voucher requesting payment. This information is in addition to the normal documentation requirements (Prior Approval Form, etc.) for payments to residents of the United States.
· Foreign National Information Form (FNIF) questionnaire completed and signed by the NRA. (Note: The FNIF is not required if the only expenses to the institution are reimbursement for documented travel expenses, airline fares paid through the institution’s business travel account (BTA), and/or payments made directly to hotels by the institution).
· Taxpayer Identification Number, if any: Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) OR a statement stating that a TIN was requested from but was not provided by the individual.
· IRS Form W-8 BEN, Certificate of Foreign Status, (NRA) or IRS Form W-9, Request for Taxpayer Identification Number and Certification (Resident Alien).
· Completed and signed IRS Form 8233, “Exemption From Withholding...," if the NRA is claiming exemption from withholding under a tax treaty between the United States and the NRA’s country of tax residence. We need original signatures on the W-8BEN & the 8233.
· Copy of passport page(s) with biographical data and expiration date.
· Copy of Visa page with B-1/B-2 or “WB” stamp or the NRA’s Form I-94, Arrival/Departure Record, if she/he is from a visa waiver country.
· Copy of Form I-94, Arrival/Departure record, US Immigration.
· Copy of Form DS-2019 (J-1 visa); copy of Form I-20 (F-1 visa); or copy of Form I-797 (H-1 visa).
· Actual receipts for reimbursable expenses.
· Honorarium Certification, if applicable (see below).
3. TAXPAYER IDENTIFICATION NUMBERS – The IRS requires nonresident aliens to have a taxpayer identification number (TIN) in order to file a U.S. tax return and to claim an exemption from withholding under a tax treaty. A TIN is either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). All employees of the UTHSCSA are required to have a SSN.
If the non-employee, Nonresident Alien wishes to obtain an identification number, determine if they qualify for a SSN by contacting the local Social Security Office. If the individual qualifies for a SSN (eligible to be employed), have them process a SS-5, Application for a Social Security Number, in person at the local Social Security Office. If the individual does not qualify for a SSN, they may apply for a ITIN by processing Form W-7, Application for Individual Taxpayer identification Number through the local IRS Taxpayer Assistance Office (see Form W-7 and instructions in the Forms section of this handbook).
Please note that nonresident alien employees are required to obtain a Social Security Number.
4. The department prepares a local voucher for payment for services and/or reimbursement of expenses following the same procedures for residents of the United States. The approved voucher together with supporting documentation, including the Prior Approval Form and the required items in #2 above, should be sent to the Office of International Services (for all visa types except B & W visa types) to confirm eligibility for payment. B & W visa types should be sent to the Office of Accounting.
5. The Office of International Services/Accounting Office reviews the voucher and supporting documentation and determines that the NRA is eligible for payment for services and/or reimbursement of actual travel and living expenses as disclosed on the voucher. A “U.S. Nonresident Alien Approval Form” is completed, signed, and forwarded with the voucher and supporting documentation to the Office of Accounting .
6. The Office of Accounting reviews the voucher and supporting documentation, including verification of International Services approval as evidenced by the International Services Approval Form.
· If tax treaty benefits are claimed, the Form 8233 is reviewed for completeness, is signed by an authorized signature in the accounting office as the “paying agent”, and is mailed/faxed to the IRS. A 10-day waiting period is required by IRS regulations before a check can be issued to the NRA.
· If tax treaty benefits are not claimed, 30% of the total of any fee plus undocumented travel and living expense reimbursement will be withheld from the gross amount due the NRA. A check will be issued to the NRA for the gross amount less the 30% withholding.
7. The Accounting Office will report gross fees plus undocumented travel and living expense reimbursements, together with any amount withheld, to the NRA and the IRS annually on Form 1042S.
8. TRAVEL EXPENSES AND REIMBURSEMENTS
Accountable plan rules – No reporting and no withholding is required on documented travel reimbursements supported by receipts in accordance with Health Science Center policies and procedures for reimbursement to similar United States citizens.
Undocumented travel and living expense reimbursements – Undocumented travel and related expense reimbursements are subject to withholding at the 30% rate, unless exempted by tax treaty.
9. ANY CASH CONSIDERATION Honorariums OR SIMILAR PAYMENTS to B-1,
B-2, WB and WT visa holders – the 1998, Omnibus Appropriation Bill, which was signed by the President in October 1998, allows the Health Science Center to pay an honorarium or similar type payment, in addition to expenses, to foreign nationals in visitor status in the United States (B-1, B-2, WB, WT), who are engaged in usual academic activities for the benefit of the institution, under the following two (2) conditions:
(1) Activity must not last longer than 9 days at any single institution, AND,
(2) The individual has not accepted such payment or expenses from more than 5 institutions or organizations in the previous six-month period.
A signed “B Honoraria Eligibility Certification” (attached) must be obtained from the individual and attached to the voucher certifying that the individual qualifies for payment of an honorarium under the above conditions.
10. Account numbers utilized for payments to consultants:
Participation in Clinical Studies
Extreme care should be taken when agreeing to pay a nonresident alien for participation in a clinical study. The Office of International Services should be contacted prior to participation in order to determine that such payments are allowable in accordance with the individuals entry credentials into the United States.
The same documentation requirements as noted above for payment for independent personal services apply to vouchers submitted for payment for clinical studies, except for the Prior Approval Form. The voucher and additional documentation should be submitted to the Office of International Services. International Services will review the voucher and documentation for compliance with U.S. immigration law and will forward the voucher to Accounting, together with the International Services Approval form, for payment.
Payments to Foreign Corporations (A corporation that is located outside the United States)
A payment to a foreign corporation in exchange for services performed in the USA is considered to be U.S. –sourced income and is usually subject to withholding.
The exemption from 30% withholding tax which might otherwise be given to a foreign corporation whose income is effectively connected with a U.S. trade or business will not apply to any payment to a foreign corporation if any of the following conditions exist:
1) the foreign corporation is a personal holding company
2) the foreign corporation receives amounts under a contract for personal services of an individual himself or his agent have the sole right to contract for the personal services of the individual
3) 25% or more in value of the outstanding stock of the foreign corporation at some time during the tax year is owned, directly or indirectly, by or for an individual who has performed, is to perform, or may be designated as the one to perform, the services called under the contract
Note: Before allowing an exemption from withholding claimed by a foreign corporation on form W-8ECI for personal services rendered, the withholding agent must determine whether the three conditions named above exist. If such three conditions do exist, then the withholding exemption does not apply, and the withholding agent must withhold 30% income tax on the payments. If the foreign corporation will not give the withholding agent sufficient information about whether these three conditions exist then the withholding agent must withhold 30%. If the foreign corporation demonstrates that the three conditions named above do not exist and that the income is effectively connected with the conduct of U.S. trade or business, then a withholding exemption claimed on form W-8ECI may be allowed.
Once you have determined that a payment to a foreign corporation is taxable and subject to withholding under U.S. tax law, then you must consider the question of whether the payment might be exempt or taxable at the lower tax rate under a tax treaty. Consult with IRS Publication 901 U.S. Tax Treaties to determine whether a tax treaty exists with the country of which the foreign country is a resident.
When in doubt about whether a payment is taxable under U.S. law, or whether a tax treaty provision applies, the U.S. withholding agent should withhold the 30% tax and report the income and withholding on forms 1042 and 1042-S.
1. The department prepares a local voucher for payment for services rendered following the same procedures for U.S corporations. The approved voucher together with supporting documentation should be sent to the Office of Accounting to confirm eligibility of payment.
a) Local voucher
c) W-8 ECI form if required
2. The Office of Accounting reviews the voucher and supporting documentation and determines that the foreign corporation is eligible for payment for services rendered as disclosed on the voucher.
3. The Office of Accounting processes for payment and reports payments made to foreign corporations on Form 1042S.