Payments to Foreign Nationals
Paying a Resident Alien
A resident alien is 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.
Paying a Nonresident Alien
Payments to nonresident aliens, who are conducting activities in the United States, require additional tax guidelines. The three most common types of payments to nonresident aliens are payments of honoraria or payments for services rendered, scholarship/fellowship, and substantiated travel reimbursement. Please see the information below to learn more about the tax guidelines for each type of payment.
Honoraria/Services Rendered
Payments of honoraria or payments for services performed in the United States for nonresident aliens are subject to additional tax guidelines. Nonresident aliens who wish to claim tax treaty benefits and have a valid Individual Taxpayer Identification Number (ITIN) may complete Form 8233 for tax withholding exemption. Only those individuals who are eligible for tax treaty benefits and possess a valid ITIN need to complete this form. Individuals who do not meet the requirements for filing Form 8233 may still be paid, however taxes will be withheld from the payment at the required rate of 35% (30% federal, 5% state). An associated W-8 form, typically the W-8BEN (individual) or W-8BEN-E (corporation), must be submitted with the payment to process payment.
Scholarship/Fellowship
1. Qualified Education Expenses (tuition, fees, books, supplies)
Scholarship/fellowship grants to nonresident aliens who are a candidate for degree for qualified educational expenses are NOT subject to withholding (U.S. Source).
2. Nonqualified Education Expenses (room and board)
Scholarship/fellowship grants to nonresident aliens who are a candidate for degree for nonqualified educational expenses ARE subject to withholding unless the individual chooses to claim tax treaty benefits (if eligible).
Form W-8BEN must be submitted with the payment to process payment.
Substantiated Travel Reimbursement
Most travel expenses of international visitors are covered under KSU's accountable plan and reimbursement for these expenses are generally neither taxable nor reportable provided the expenses are substantiated with adequate documentation.
When reimbursing an international visitor for travel related expenses (airfare, lodging, meals), an ITIN is not needed. Per diem (up to the state set rate) may be reimbursed to the international visitor as a nontaxable, nonreportable reimbursement provided the visitor is covered under KSU's accountable plan, up to the amount of expense the individual incurred (not to exceed the state set rate). Any unused per diem should either be returned to KSU or should be treated as taxable compensation.
