1. Payments to Nonresident Aliens
Presenter:
Lisa McLaughlin, Office Supervisor

2. Introductions
Name
Department
Years with UA
Reason for attending-what you would like to get out of this class

3. Overview
Policy 9.16
Foreign Individual Payments
Required Documentation
Taxation

4. Policy 9.16 Identifies payment allowed to foreign visitors
Provides details about how to request payment
Identifies Federal income tax consequences
Complies with U.S. Citizenship and Immigration Services (USCIS) regulations
NOTE: The University will not make any payment to a foreign visitor unless specifically allowed by policy 9.16

5. Who qualifies as a “Foreign Visitor”?
A “foreign visitor” is:
Anyone other than a US citizen or Permanent Resident (Green Card holder)
“Foreign Visitors” can also be called:
Nonresident Aliens (NRA)
Foreign Nationals
International visitors

6. What is not covered by policy 9.16?
Policy 9.16 does not cover:
Employee payments (Human Resources Recruitment Policy)
Student payments through the financial aid office (Financial Policies and Procedures Manual 9.13)
Processing a Disbursement Voucher or Requisitions (see UITS training or tutorials)

7. Foreign Individual Payments

8. Best Method of Payment Disbursement Voucher Purchase Order/Requisition
After the fact for services provided
To reimburse allowable expenses
Stipends (non-service scholarship/fellowship)
Purchase Order/Requisition
Prepay for merchandise
Prepay expenses (directly to a third party vendor)
Payments over $5000 or multiple payments

9. Paying a 3rd Party (via a PO)
Payment to a third party vendor on a foreign visitor’s behalf is considered a payment to the foreign visitor directly
Note on the requisition:
This Purchase Order is for a payment on behalf of [visitor] who is a nonresident alien from [country]
Visitor’s visa type
Length of time staying at the UA
Purpose of the visit

10. Determining if payment can be made
Things to know first:
Visa type
Visa sponsor (UA, Another institution, No sponsor)
Purpose/Activities (Speaker, student, attending conference, etc.)
Payment type (expense reimbursement, service fee, royalty, etc.)
Allowable under Policy 9.16?
Activities authorized based on immigration status?
Able to obtain documentation to substantiate immigration status
Note: Individuals cannot pay or pay on behalf of foreign visitors with personal funds and expect reimbursement.

11. Most common Visa types paid by UA
B1, B2, WB, WT
F1, J1 (students)
J1 (short term scholars, research scholars)
H1, O1, TN (expense reimbursements only)
Employment Authorization (F-1 OPT, J2)
Permanent Residents (Green Card holders)-treated as UA citizens

12. B1, B2, WB, WT (Business and Tourist Visas)
Visa Waiver Program-travel to US for tourism or business for stays of 90 days or less (WB/WT). No separate visa document. Often referred to as ESTA.
B1/B2 require an actual visa document
Can be paid an honorarium for academic activities (lecturing, teaching, sharing knowledge, meetings, etc.)
Subject to restrictions (9-5-6 Rule)
$600 or less

13. 9-5-6 Rule
B1/B2/WB/WT visa holders can receive honoraria payments and associated expenses on the condition that:
Academic activities do not exceed 9 days and payee has not received honoraria payments from more than 5 institutions in the past 6 months.
Payee must submit a signed Honorarium Statement (found on eforms) to confirm that this is true.

14. 9-5-6 Rule
Does not apply to B1/WB status if reimbursing only for expenses associated with the usual academic activities
Applies to B2/WT status even if reimbursing only for expenses
Only the days the individual is engaged in academic activities during the visit are counted against the 9 days
The 9 days is the time limit for academic activities for each visit
The 5 times are counted per visit, even with the same institution
Expenses for the days that are not counted against the 9 days are reimbursable if they are reasonably related to the academic activities

15. 9-5-6 Rule Example
A B1 visitor is on campus to work on a research project
The visitor arrives on Day 1 and departs on day 14
Day 1 is Sunday
He works from Days 2-9 and Days 9-12
He rests on Days 7 & 8 (weekend) and 13
Does he meet the rule?

16. F1 and J1 Students
Sponsored by the educational institution they are attending
Generally may only be compensated for services by their sponsor
Allowed to receive non-service scholarship/fellowship payments for institutions other than their sponsor

17. J1 Sponsored by Another Institution
Must obtain a Responsible Officer (RO) letter from their sponsoring institution
Letter must be signed by their RO (the person who signed form DS-2019)
With RO authorization, J1 can be reimbursed for business expenses and paid a fee for services

18. F1 & J1 Student Travel Expenses

19. Responsible Officer (RO) Letter

20. Responsible Officer (RO) Letter
An RO letter must include the following:
Letterhead from institution
Name of individual
Confirmation of visa status
Authorization for academic activities
What can be reimbursed (fee for services, expenses, both)
Signature of Responsible Officer
Responsible Officer who signs the letter must be the same as the RO listed on the DS-2019

21. H1, O1, TN: Employment-based visas
Only employer (sponsor) can pay these individuals for services
Reimbursement for business expenses for academic activities is allowable
Payment for services by someone other than their employer could jeopardize visa status

22. Employment Authorization
F1 under OPT (Optional Practical Training)
If under OPT, still considered to be in F1 student status even if graduated
May only work in the field of study related to the degree completed
Job must be appropriate to level of education
J2 (Spouse of J1)
Individuals who’ve applied for permanent residency under Adjustment of Status (AOS)

23. Honorarium and Associated Expenses
Visa types allowed to be paid an honorarium and associated expenses:
B1/B2 and WB/WT
Border Crossing Card holders (Mexico)
J-1 sponsored by another institution (RO letter required)
EAD or EAC holders (self-employed)

24. Prospective Employee Interview Expenses
Paying/Reimbursing for Interview Expenses
Immigration authorization is not required
Foreign documents are not required
Proof of interviewing must be provided
Please include the following statement on your edoc:
“(Payee’s Name) is being reimbursed for expenses associated with interviewing only and did not perform any services for the University”
If paying other than interview expenses, documentation must be collected
Payment may be reported as income
Tax may be withheld as required

25. Permanent Residents
Treated as US citizens for documentation and taxation purposes
Not appropriate to request a copy of their “green card”
W-9 is only documentation required (can be found on eforms)
Must have an SSN

26. Other Types of Payments
Royalty: payment for the right to use some type of intangible (intellectual) property
Software License Fee: fee for a license to use software without ownership rights
Subcontract Service Payment
Foreign Artist Payments: payment for a specialized performer/talent

27. Required Documentation

28. Immigration Documents
Required
Passport (photo page)
Entry stamp (in passport)
Visa (unless WB/WT)
I-94 (front and back or electronic printout)
Other Required Documents (as applicable)
I-20 ( for F1)
DS2019 (for J1)
I-797 (H1, O1, TN)
Honorarium Statement (as needed)
Responsible Officer letter (as needed)
Substantial Presence Test (as needed)
GLACIER record (as needed)

29. GLACIER Record
GLACIER is the online tax compliance software the UA uses to determine tax residency and treaty determination for foreign visitors
GLACIER is required for any type of tax reportable payment such as fees for service, royalties and scholarship/fellowship payments
GLACIER is not required if reimbursing expenses only or paying a third party vendor

30. Completing a GLACIER Record
Department contacts FSO Accounts Payable
FSO Accounts Payable will GLACIER login information to the foreign visitor, if it’s required
Once completed, foreign visitor prints and signs GLACIER reports and tax forms
Signed GLACIER forms (originals) and required documentation are submitted with a Disbursement Voucher cover sheet to FSO Accounts Payable for payment.

31. Passport
A passport is necessary to verify citizenship, and is issued by the visitor’s country of citizenship. Check issued and expiration dates

32. VISA
A visa is issued by the United States government and allows a foreign visitor to travel to a US port of entry

33. I-94 Arrival/Departure Record
If allowed to enter the US, the visitor receives a stamp in their passport or an I-94 This officially determines how long a visitor can remain in the US

34. I-94 Arrival/Departure Record
Many visitors receive an electronic I-94 only. This document can be retrieved from the following website:

35. Special Rules for visitors from Canada or Mexico
Does not need a visa to enter the US
May not be issued an I-94 or obtain an entry stamp
Deemed B1 status without the I-94
Must provide a valid passport, Canadian Permanent Resident Card or Canadian Birth Certificate
MEXICO
May have a Border Crossing Card (BCC) equivalent to a B1/B2 visa
An I-94 may not be issued to BCC holders
If staying in the US for less than 30 days deemed B1 status without the I-94

36. Border Crossing Card
Mexican citizens may have a Border Crossing Card to enter the US A BCC is equivalent to a B1/B2 visa

37. Passport with Entry Stamp
The entry stamp is very important, as it determines the individual’s status. For a visa waiver (WB/WT) this is the only stamp the individual will receive

38. DS-2019 for J1
Expiration date on I- 94 or stamp reads as D/S (Duration of Status) Status expires on the end date of the DS- 2019

39. I-20 for F1
The expiration date on I-94 for an F1 student reads as “D/S”-it is the end date on the I-20.

40. Employment Authorization Card (EAC) Employment Authorization Document (EAD)
With a valid EAC or EAD the following are not needed (if reimbursing for expenses only):
Copy of passport
Visa or I-94
SSN
If an EAC or EAD holder is receiving a fee for services:
SSN is required
GLACIER record & documentation required
Ensure that the EAC/EAD is reviewed for any restrictions
Also referred to as a Work Permit

41. EAC/EAD Card

42. US Taxpayer Identification Number (TIN)
If the foreign visitor will be paid a fee for services, they must have a US issued taxpayer ID number prior to payment:
Social Security Number (SSN)
Individual Taxpayer Identification Number (ITIN)
EXCEPTION:
If a foreign visitor receives compensation for services performed, will be working 30 or fewer days, and has no US TIN, payment can still be made. However, the individual will not be eligible for treaty benefits and the University must withhold federal income tax at a rate of 30%
A foreign visitor may qualify for treaty benefits in this situation, if they provide a foreign tax ID number (new rule)

43. US Taxpayer Identification Number
Most reimbursements for expenses only do not require an SSN or ITIN
Payments of any kind made to scholarship/fellowship recipients without an SSN or ITIN will be subject to tax withholding
For additional information, please see: Payments allowed and Disallowed Under Various Visa Classifications-Policy 9.16

44. Taxation

45. Taxes
Scholarships/Fellowships (including school related reimbursements)
14% for F, J, M or Q status
30% for any other status
Fees for Service
30% tax withholding
Expense Reimbursements (except those that qualify as scholarships)
No tax withholding
Scholarships from a foreign source
Services outside the US
Employee paychecks
Tax withholding issues unique to the employee

46. Services Performed Outside the US
Not subject to US Immigration regulations
Substantial Presence Test Form must be submitted to A/P
Nonresident Alien-payment is not reportable/taxable
Resident Alien-payment is reportable/taxable
Include this statement in the DV or PO notes section:
[Payee’s Name] is a Nonresident Alien who performed all services outside the US Taxing Jurisdiction

47. Substantial Presence Test (e-forms)

48. Foreign-sourced scholarship
Foreign-sourced scholarship payment is not subject to US tax reporting or withholding
A scholarship is foreign-sourced if:
Academic activities take place outside the US
Payer of the scholarship is located outside the US
Documentation must be provided to verify that the scholarship is foreign-sourced

49. IRS Form Changes for Non-Resident Aliens and Foreign Entities (effective 7/21/14)
Form W-8BEN
Required for all nonresident alien individuals receiving compensation for services or royalties (regardless of whether or not a tax treaty is available
If a treaty exemption is available, a foreign tax identification number may now be used in lieu of a US issued SSN or ITIN
Form W-8BEN-E
New form required for foreign entities receiving compensation for services or royalties
Used to establish foreign tax residency and potentially claim an exemption from withholding due to an income tax treaty
GLACIER record determines whether a W-8BEN-E or a W-8ECI form is needed

50. Form W-8ECI and W-8EXP Form W-8ECI Form W-8EXP
Used for entities that wish to be exempt from tax withholding based on the receipt of Effectively Connected Income
Effectively Connected Income is when a foreign entity has a permanent base of operations in the US and receive income that is effectively connected with the conduct of a trade or business in the US (i.e. income from commercial activities)
Form W-8EXP
Used by foreign governments and foreign tax-exempt organization to claim an exemption based on their status as a government or tax-exempt organization
Must include a letter of determination from the IRS that it has tax exempt status under section 501(C)(3) of the Internal Revenue Code, or an affidavit from an attorney in the US stating that such a foreign entity would qualify under this section if it applied for status
Restricted to certain types of income, not automatic because of government or tax exempt status

51. Tax Treaty Benefits
Taxable payments may be exempt from tax withholding or taxed at a reduced rate based on an income tax treaty between the US and a foreign country
A US TIN (SSN or ITIN) or a Foreign Tax ID must be provided in order to claim the treaty benefit
Certain criteria must be met in order to qualify for the treaty benefit/not all types of income are eligible
Not all countries have treaty benefits available, even if the payee has a US TIN
A list of countries that currently maintain tax treaties can be found here:

52. Tax Treaty Benefits (cont.)
Form W-8BEN is required for all independent compensation or royalty payments for individuals
UA retains the form as a record for audit; form is not submitted to the IRS
Valid for 3 years if a payment is reported on a 1042 during each of these years
Form W-8BEN-E is required for all service or royalty payments to entities
Same rules as W-8BEN
Form 8233
Required for individuals receiving compensation for services who wish to claim a tax exemption due to a treaty benefit
Original signatures are required
Sent to the IRS for acceptance
10 business day waiting period before exemption is granted and payment can be made
Valid for one year

53. Form W-8BEN

54. Form W-8BEN-E

55. Form 8233

56. Foreign Nationals-Tax Status

57. Reminders:
The University of Arizona is unable to make any payments (including expenses) to a Foreign Visitor unless specifically allowed by the FSO Financial Policies and Procedures Manual 9.16
Preauthorization for exceptions must be approved by the Financial Services Office Tax Compliance area
Payments must be paid directly to the Foreign Visitor or an appropriate third party vendor (i.e. hotel, travel agency)
UA employees may not be reimbursed
Non-employee may not be reimbursed

58. Reference and Resources
FSO Financial Policies and Procedures Manual 9.16
E-Forms
FSO Operations/Accounts Payable
Campus PO BOX
University Services Building (USB), Room 402

59. QUESTIONS?