Foreign National Terminology
A foreign national is an individual who is not a citizen of the United States. For tax purposes, a foreign national may be classified as either a resident alien or a nonresident alien. To be considered a resident alien, the individual must meet the green card test or the substantial presence test. A nonresident alien is an individual who is not a U.S. citizen and has not met the green card test or the substantial presence test.
An individual who is not a citizen of the United States but meets the green card test or substantial presence test. Resident aliens are taxed on their worldwide income. In general, resident aliens are subject to the same tax treatment as U.S. citizens.
An individual who is not a U.S. citizen and has not met the green card test or substantial presence test to be considered a resident alien
The ITIN is a tax processing number issued by the Internal Revenue Service. A foreign individual may apply for an Individual Taxpayer Identification Number when not eligible to receive a social security number for purposes of claiming a tax treaty exemption or filing a U.S. tax return.
A nonresident alien individual who is not eligible for a social security number but is required to file a U.S. tax return in order to claim a refund of tax under the provisions of a U.S. Income Tax Treaty needs an ITIN. In addition, a nonresident alien required to file a U.S. tax return or a U.S. resident alien filing a U.S. tax return will need an ITIN.
A foreign entity is an business, organization or entity that is not incorporated or organized to do business in the United States, including international organizations and offices of foreign governments. Foreign entities providing services in the United States may claim tax withholding exemption if their country of incorporation has a tax treaty with United States. They must complete and submit form W-8BEN-E to claim this exemption.
IRS Form W-7, Application for IRS Individual Taxpayer Identification Number, is used by Foreign Nationals to apply for an ITIN if the individual wishes to claim U.S. Income Tax Treaty benefits or is required to file a U.S. Income Tax Return. Individuals wishing to claim tax treaty benefits for an honorarium payment or payment for independent services must submit the W-7 Application in advance of the payment. Please see additional instruction below for completing the W-7 Application. Individuals wishing to obtain an ITIN for purposes of filing a U.S. Income Tax Return (not tax treaty benefits), may submit the W-7 Application with their annual U.S. Income Tax Return.
IRS Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual must be filled out by any nonresident wishing to claim tax treaty benefits (if eligible) for honorarium or independent service payment. The individuals must have a valid ITIN.
IRS Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, should be completed by foreign vendors to verify foreign status. This form is also completed by students receiving taxable scholarships in order to claim tax treaty benefits.
IRS Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities), must be completed by foreign entities providing services in the United States in order to claim exemption from withholding under a U.S. Income Tax Treaty. An ITIN is not required if foreign entity provides their home country foreign Tax Identification Number (TIN).
The United States has income tax treaties with a number of foreign countries under which residents of those countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain income received from within the United States.
CAAs are approved designated agencies available to certify identification documents. The CAA certification is restricted to originals or copies certified by the issuing agency for passports or birth certificates. All other identity documents must be submitted as original or a copy certified by the issuing agency with the Form W-7. CAAs are required to personally review and certify identification documents.
An identification document that the original issuing agency provides and certifies as an exact copy of the original document and contains an official stamped seal from the agency. If an original passport is submitted, no additional certification or supporting documentation is required.