Payments to Nonresident Aliens
Payments to nonresident aliens are generally subject to income tax withholding of 30 percent, unless the foreign national is eligible to receive a tax treaty benefit. Before inviting or otherwise agreeing to pay a non-U.S. citizen, departments must ensure that the individual is or will be present in the U.S. under a VISA classification that allows them to legally receive payment.
For more information, view a chart of common VISA status and payment eligibility or access the Glacier Tax Compliance Program (this is required of all foreign visitors to the U.S.)
Type of Payment
The following payment types are subject to U.S. withholding and reporting:
Compensation for independent personal service, i.e., professional service; consulting fees; and honoraria for a lecture, presentation, or speaker.
Royalty: includes passive income for use of intangible goods.
Prizes and awards
For more information, view the Explanation of Nonresident Alien Payment Types.
Income Tax Treaties
The U.S. has an agreement with many countries to exempt income tax withholding on compensation payments for independent personal services and non-compensatory scholarships, fellowships, and grants to nonresident alien individuals. This agreement also permits royalty payment taxation at a reduced rate. Other income, such as prizes and awards, is not exempt under an income tax treaty.
In order to take advantage of a tax treaty benefit, the department preparing a check request can contact the university tax department to see if there is an agreement between the U.S. and the nonresident alien payee’s country of residence.
There are two IRS forms related to nonresident aliens and one related to foreign entity, based on the type of income earned:
- Form 8233 (Form Number 8233 Instruction Sheet) For independent compensation payments, no attachment necessary. Submit original with signature via mail to the tax department at: Tax Department, Room 2W, 33 Knightsbridge Rd, Off-Campus, Piscataway, NJ 08854. See identification requirements below. If applicable, this form will be produced by Glacier.
- Form W-8BEN (Instructions for W-8BEN Form) For scholarship/fellowship grants, royalty payments. Also used to certify non-U.S. person/entity. Submit the original with signature to: Tax Department, Room 2W, 33 Knightsbridge Rd, Off-Campus, Piscataway, NJ 08854. See identification requirements below. If applicable, this form will be produced by Glacier.
- W-8BEN-E Form (Instructions for W-8BEN-E Form) Request a completed W-8BEN-E form from a foreign entity when making a payment. This form is used to certify the entity’s foreign status. It is also used to validate a tax treaty exemption from withholding on copyright, royalty, software license, patent payments, and scholarship/fellowship payments or a reduced tax rate. View additional guidelines for completing this form.
To claim the withholding exemptions on IRS Form 8233 or Form W-8BEN, nonresident aliens are required to provide a valid Social Security number (SSN) or Individual Taxpayer Identification number (ITIN) when completing these forms.
If eligible, the nonresident alien can obtain an SSN by contacting the Social Security Administration. If not eligible for an SSN, applicants may be eligible for an ITIN. To apply, complete:
- Form W-7 (Instructions for completing the W-7) For nonresident aliens who are in the United States for a short period of time and not eligible for an SSN.