Learn about Foreign Payment Tax Considerations

Learn about tax considerations for foreign payments at Columbia University. 

Details

Is Payment Subject to Withholding?

Almost all payments to foreign persons are potentially subject to withholding.

The only categorical exceptions are:

  • Qualified scholarships, i.e. directly tied to instruction and achieving a degree (tuition, books and course materials, lab fees)
  • Expense reimbursements
  • Payments for goods manufactured outside the U.S.

Payment types that are subject to withholding:

  • Payments for services
  • Royalties, licenses
  • Prizes, awards
  • Non-qualified scholarship, fellowship, stipends
  • Rent

Most payments subject to withholding have a withholding rate of 30%. The withholding rate for a non-qualified scholarship, non-qualified fellowship, or stipend payments is 13% - 15%. AP must withhold at the time of payment and submit withheld amount to IRS.

For a foreign person/entity to successfully claim an exemption from all or part of the withholding, the payee must:

  • Claim an existing tax treaty with the U.S. and
  • Provide an acceptable Tax ID
  • The tax treaty is claimed via Form W8-BEN or 8233

Certain other statuses may allow for exemption.

Only certain countries have a tax treaty with the U.S. under tax treaties.  Residents (not necessarily citizens) of foreign countries are exempt from US income tax or are taxed at a reduced rate on certain types of income received from a US source.

Length of Stay

For certain payments (mostly managed by Payroll), if a foreign person has spent over a certain number of days in the U.S. (see Substantial Presence Test), they are not able to claim a tax treaty.

Acceptable Tax ID Numbers Issued By IRS & SSA

  • Social Security Number (SSN)
  • Employer Identification Number (EIN)
  • Individual Taxpayer Identification Number (ITIN)

Unacceptable Numbers for Claiming a Tax Treaty

  • Passport Number
  • Visa Number
  • Foreign Tax ID Number
Complete Foreign-Related Tax Forms

For accessing common foreign-related tax forms for individuals: Form W8-BEN or 8233.

Find a Tax Form (Suppliers / Payees)

Visit Find a Tax Form for a list of frequently used supplier/payee tax forms.

Making Payments to Foreign Persons and Entities

For key background information on the regulations that govern payments to foreign persons and entities —

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