Comptroller's Office
 Policies and Procedures Manual

Effective: 01/01/2000
Revised: 04/13/2012 

CMP 425-01: Nonresident Alien Independent Contractors and Other Foreign Entities


Purpose

To describe the policy for independent contractor payments made to nonresident alien individuals or foreign business entities.  Applies to all payments for services, rentals, royalty, and copyright made to foreign individuals and foreign business entities


Source

Internal Revenue Service (IRS)

University Policy


Background

Internal Revenue Service

The Internal Revenue Service (IRS) requires that all independent contractor payments made to nonresident alien individuals or foreign business entities be made in accordance with IRS regulations. These regulations require that, when services are provided inside the U.S., taxes be withheld from payments made to nonresident aliens (NRAs) or foreign business entities unless the income is exempt under a provision of a tax treaty between the foreign contractor’s country and the U.S. Foreign individuals must be eligible to claim a tax treaty exemption by having a social security number (SSN) or individual taxpayer identification number (ITIN) and must have submitted for certification a completed IRS Form 8233. Foreign business entities must have an employer identification number (EIN) and must have submitted for certification a completed IRS Form W-8ECI, W-8BEN, W-8EXP, or W-8IMY.

Unless the payments made to the NRA are exempt due to tax treaty or are effectively connected with the conduct of a trade or business in the U.S. (payments to foreign business entities only) or are made to a foreign entity with U.S. tax-exempt status, and the appropriate IRS forms have been filed, all payments made to the NRA or foreign business entity will be subject to U.S. federal income tax withholding of 30 percent.

Tax regulations also require that taxable payments made to NRAs or foreign business entities be reported annually on IRS Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. A copy of the form is sent to the foreign individual or entity at the time it is filed with the IRS. The IRS requires that Form 1042-S be filed by March 15 following the calendar year in which payments were made.

 


Policy

PROCEDURE:

In order to process Honorariums and other payments to Non-Resident Aliens,

IRS regulations require NAU to collect the following information:

ITIN-Ind. Taxpayer Identification Number, OR

Social Security Number

Also,

A Packet of these forms can be obtained in Purchasing Service. Contact

Susan Weaverling if you need additional information or want to request a

packet at 3-6103.

 

 


Procedures

See CMP 421-01, “Guest Lecturers, Consultants, and Other Independent Contractors,” for a description of the general procedures followed in paying independent contractors. Listed below are procedures related to paying nonresident independent contractors.

Foreign Vendor Setup

All foreign independent contractors receiving payment(s) in a calendar year must have an IRS Form W-8 on file with the university before payment will be made.


Here is a reference to  ASU's Foreign Tax Guide for your convenience.


Cross-References


For information on tax reporting for nonresident aliens, see:

 


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