Learn about Foreign Payment Basics
Learn about the basics of making payments to foreign individuals and entities at Columbia University.
Accounts Payable processes over $100M in payments to foreign individuals and entities, distributed across 11,000 vouchers and 3,000 vendors/payees per year. These payments include vendor invoices, royalties, sub awards, expense reimbursements, honoraria, prizes, and scholarships/fellowships. Some foreign payments, including financial aid awards, are also processed by CU Payroll or Student Financial Services.
Foreign Person – A foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, a foreign estate, and any other person that is not a U.S. person. A foreign payee is subject to withholding.
Nonresident Alien – A nonresident alien is an individual who is not a U.S. citizen or resident alien. A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding.
Resident Alien – A resident alien is an individual that is not a citizen or national of the United States and who meets either the “green card test” or the substantial presence test for the calendar year, and does not have special treaty status. Not subject to withholding but is subject to reporting via 1099. Must provide SSN.
You might review the websites of the following federal agencies to learn more about pertinent laws regarding non-resident aliens, visa compliance, employment authorization, length of stay authorization, tax treaties and tax reporting, sanction enforcement and more.
- Dept of Homeland Security, U.S. Citizenship & Immigration Service - Customs & Border Protection (CBP)
- Department of Treasury - Internal Revenue Service (IRS)
- Department of Treasury - Office of Foreign Assets Control (OFAC)
Questions to Ask Yourself
- What is the resident status of the foreign individual I am trying to pay?
- What activities are authorized with his/her status?
- Are any payments subject to income tax withholding?
- Can payee claim any tax exemptions?
- What tax form(s) are necessary?
- Have these been filled out prior to conducting business activity with my organization?
- Is it allowable for Columbia to conduct business with this foreign person?
- Are there any US sanctions regulations that need to be considered?
Visit International Operations for more in-depth information on administrative matters related to activities and work outside of the U.S.
Columbia University is prohibited from engaging in transactions with Specially Designated Nationals (SDNs) wherever they are located.
“Restricted Party Screening” is used to comply with U.S. sanctions regulations. Violations carry significant penalties.
Office of Foreign Assets Control (OFAC) administers regulations regarding sanctions maintained against certain countries, industries, entities, and individuals.
There are more than 6000 entities and individuals on the Specially Designated Nationals and Blocked Parties List (SDN List), which is updated frequently.
U.S. persons are prohibited from engaging in any transactions or dealings with SDNs or entities owned/controlled by SDNs
Prohibited transactions include:
- Making or receiving payments to or from SDNs
- Entering into contracts, agreements or research collaborations with SDNs
- Providing or receiving services to or from SDNs (OFAC interprets “services” broadly)
Restrictions vary among countries.
Important: A license must be obtained from OFAC prior to engaging in a transaction that otherwise would be prohibited.
See the Department of Treasury Sanctions Programs and Country Information page for current restrictions.
Making Payments to Foreign Persons and Entities
For key background information on the regulations that govern payments to foreign persons and entities —
- Please refer to the course resource: Making Payments to Foreign Persons and Entities
- Or the web-based training: Making Payments to Foreign Persons and Entities
International Students & Scholars Office (ISSO)
To view international student guidance for departments, please visit the ISSO Website for more information.
Managing Financial Needs
For guidance on financial or cash management, please visit the International Operations page.