413-04: NRAs Foreign Business Payments
Fiscal Operations Manual
Section 400: Expenditures
If you are paying a Stipend, Payment for Services, or Travel Reimbursement for a foreign individual then you need to use the FIS Policy 413 Non-Resident Aliens.
If your payment needs to be made to a foreign company, foreign business, foreign organization, foreign government, foreign withholding partnership, withholding foreign trust, foreign private foundation, government of a US Possession, or a foreign central bank of issue then please follow the guidelines in this section on Payments to Foreign business entities.
WARNING: Payers are responsible for requesting a Form W-8 from any of the above business entities that are presumed, or otherwise believed, to be foreign. The foreign entity is responsible for determining which of the four IRS W-8 forms is appropriate for their business situation. These forms should be completed and signed only by persons who are authorized to do so and who are knowledgeable as to the operations of their respective business, organization or other foreign entity.
For payments to be made to foreign business entities (not individuals) use the following procedure:
- Question 1: Is the payment for products, goods or foreign source services provided outside the US?
If yes, no reporting or withholding is necessary. The Business Center should collect the appropriate original W-8 form and send that form along with the copy of the vendor invoice to Vendor Maintenance for the vendor set up. The Business Center will enter payment into Banner with account code 24999.
If no, it is possible that withholding tax may be mandatory. The Business Center will collect the original appropriate IRS W-8 form plus any additional documentation required. A complete list of W8 form types is listed below including information on additional documentation for tax withholding purposes.
Original W-8BEN - Used primarily by entities and individuals to claim foreign status or treaty benefits and to establish that the payee is not a US entity.
- Is there a US reporting Tax ID number?
If yes, then is part II claiming Treaty benefits completed? If no, then payment is tax exempt if income is covered by an article In the Treaty.
All fields in line 10 must be completed to claim exemption on royalty payments.Send copy of vendor invoice/contract to Vendor Maintenance with the original W-8 form for the vendor set up. Enter payment into Banner using proper account code.
If there is no US Tax reporting ID number, payment is subject to 30% withholding. Send vendor invoice/contract to Vendor Maintenance, Business Affairs for the vendor set up. Enter payment into Banner using proper account code.
Original W-8EXP - Used primarily by the following entities to claim exemption from tax withholding:
Foreign governments, foreign tax exempt organizations, foreign private foundation, govt. of a U.S. Possession, or foreign central bank of issue.
The entity must be claiming exemption under IRS code 115(2), 501(c) , 892, 895 or 1443(b). Otherwise they need to file a W-8BEN or W-8ECI.
Original W-8IMY - Used primarily by an intermediary, a withholding foreign partnership, a withholding foreign trust, or flow through entity.
Copies of appropriate withholding certificates, documentary evidence, and withholding statements must be attached to the W-8IMY as well.
Payment for both of these forms; EXP and IMY, is usually exempt from withholding. Send copy of invoice/contract to Vendor Maintenance with the original W-8 form for vendor set up.
Original W-8ECI – Used primarily by the payee or beneficial owner indicating that all the income that is listed on the form is effectively connected with the conduct of a trade or business within the United States.
If there is a US Tax reporting ID number, the payment is subject to 30% tax withholding unless there is a services income listed on line 9. In that case payment is exempt from withholding.
Send copy of invoice/contract with Original W-8 to Vendor Maintenance for vendor set up. Enter Payment into Banner with proper account code.
If there is not a services income listed on line 9, then we are required to obtain from the entity a different type of W8 form. Send the invoice/contract with original appropriate W-8 to Vendor Maintenance for vendor set up. Enter payment into Banner withholding 30% tax using the proper account code.
If there is not a US Tax reporting ID number on the W-8ECI form, then payment is subject to 30% withholding. Send Original W8 form plus copy of invoice to vendor maintenance for vendor setup. Enter payment into Banner with proper account code.