NON-RESIDENT ALIENS - TAXATION OF PAYMENT
Last Update: 2/6/06
IRS Revenue Code Sections, Immigration and Naturalization Service Regulations
Tax reporting and withholding for these individuals is different than procedures used for United States citizens and resident aliens. Non Resident Aliens must be identified at the initial point of contact with the university if they are being considered as an employee, consultant, or scholarship recipient or being paid or reimbursed for travel expenses.
Notify the Office of International Affairs to plan for proper immigration status relevant to the purpose of the trip. Some Non Resident Aliens may be ineligible to receive payments depending on immigration status / visa type.
If a Non Resident Alien (NRA) is eligible to receive payments or benefits, to satisfy withholding and reporting requirements the proper tax forms must be completed prior to any disbursement of funds. For assistance regarding tax forms and questions, notify International Tax Director in the Administrative Services Building, 108 Pearman Blvd. in advance of an NRA's visit to Clemson University.
Examples of payments to Non Resident Aliens include:
- U.S. source scholarships, fellowships, and athletic grants in aid credited to NRA students' accounts through the Office of Student Financial Aid.
- Payroll checks issued to NRA employees.
- Personal living expenses paid by departments through department voucher, procurement card, and IDO, either directly to or on behalf of NRA students, NRA trainees, or NRA employees.
- Travel expenses, consultant / speaker fees, honoraria, personal living expenses (rent, utilities, food, furniture rental , etc.) paid to or on behalf of NRA independent contractors through department vouchers, procurement card, and IDO.
- Reimbursements through department vouchers to employees who have incurred certain expenses on behalf of NRA individuals
Payment Types, Regulatory Authority, and Withholding Tax Rates:
Payment Type : Scholarships, Fellowships, & Athletic Grants in Aid for NRA students - non compensation
Regulatory Authority: Internal Revenue Code 117, 1441, 7701, Rev. Ruling 89-67, Tax Treaties, Form W8-Ben - Certificate of Foreign Status of Beneficial Owner for US Tax Withholding.
Withholding Tax Rates: 14% of U.S. source non qualified amounts if the recipient is an enrolled NRA student present in the U.S. on an F, J, M, or Q visa. Otherwise, 30% withholding is required. Exception for withholding on per diem for subsistence if USAID training program grant and grantee training is in the U.S.
Payment Type: University business travel expenses paid for or to NRA Clemson University employees.
Regulatory Authority: Internal Revenue Code 61, 274.
Withholding Tax Rate: 0%
Payment Type: Consultant fees, or other amounts paid for services rendered, honoraria ,and travel expenses paid by Clemson University to or for NRA independent contractors.
Regulatory Authority: Internal Revenue Code 1441, 7701, Tax Treaties, W8-Ben - Certificate of Foreign Status of Beneficial Owner for US Tax Withholding, form 8843 Exempt Individual, form 8233 Exemption from Withholding, Revenue Procedures 87-9, 93-22, and 93-22A.
Withholding Tax Rate: 30% unless recipient is exempted under a tax treaty.
Payment Type: Compensation to NRA employees
Regulatory Authority: Internal Revenue Code 1441, 3121, 7701, Rev. Proc. 88-24, form 8233 Exemption from Withholding, form 8843 Exempt Individuals Statement, Rev. Proc. 87-9, 93-22, 93-22A. W8-Ben - Certificate of Foreign Status of Beneficial Owner for US Tax Withholding
Withholding Tax Rate: Graduated withholding rates unless exempted by tax treaty.
Tax can be paid in either of two methods:
(a) Total tax due is withheld from payments to the NRA. Contact the International Tax Director in the Administrative Services Building, 108 Pearman Blvd. prior to issuing disbursements or payments to or for the benefit of Non Resident Aliens.
(b) The department pays the tax based on a grossed up dollar amount of all expenses. If withholding applies, a departmental account will be charged.