U. S. Tax Information for Foreign Vendors

UC Davis uses both domestic and international companies for vendor services. There are

specific tax rules related to payments to international companies just as there are rules for

payments to foreign individuals.

The Internal Revenue Service (IRS) requires that all payments made to foreign vendors be made

in accordance with IRS regulations. These regulations require that when services are provided

inside the U.S. taxes be withheld from payments made to foreign vendors unless the income is

exempt under a provision of a tax treaty between the foreign vendor's country and the U.S.

a. Exempt due to a tax treaty

b. Are effectively connected with the conduct of a trade or business in the U.S. or

c. Made to a foreign entity with U.S. tax-exempt status.

Note: These instructions relate only to services, they do not apply to purchase of goods. There is

no tax withholding requirement for goods shipped from abroad as the ownership of the goods

would pass to the University.

Services Performed Outside the USA:

If the vendor is located outside the U.S and all services are performed outside the U.S., then this

Taxpayer Identification Number (ITIN) or Social Security Number (SSN) in order to claim an

exemption from or reduction in withholding. The specific W-8 form used by a foreign vendor

depends on the type of payment being paid and the status of the business itself.

IRS Tax Forms in the W-8 Series:

Form W-8BEN - Certification of Foreign Status of Beneficial Owner for Unites States Tax

Withholding for Individuals. Form W-8BEN is used by foreign vendors who are individuals to

confirm that they are not U.S. taxpayers. The vendor must provide form W-8BEN even if the

vendor is not claiming a tax treaty reduction or exemption from withholding. To claim a tax

vendors who are eligible for tax treaty benefits to claim exemption from U.S. federal tax

withholding.

http://www.irs.gov/pub/irs-pdf/f8233.pdf

http://www.irs.gov/pub/irs-pdf/i8233.pdf

Form W-8BEN-E - Certification of Foreign Status of Beneficial Owner for Unites States Tax

Withholding for Entities – This form is used by foreign organizations to certify their status under

the Internal Revenue Code (IRC) Chapter 3 which requires Withholding of Tax on Nonresident

Aliens and Foreign Corporations on US source income. It also enforces reporting on certain

foreign accounts under the Foreign Account Tax Compliance Act (FATCA).

Entities are required to provide their identifying information as well as FATCA classification

Form W-8ECI - Certification of Foreign Person's Claim that Income is Effectively Connected

with the Conduct of a Trade or Business in the U.S. This form is to be completed by vendors

who are claiming exemption from withholding on income that is effectively connected with a

trade or business in the United States. The form stipulates that the foreign vendor files yearly

U.S. tax returns to report all income connected with a U.S. trade or business. In order for the

form to be completed properly, a U.S. tax identification number must be provided.

The vendors must establish that:

 They are not U.S. persons

 Claim that they are the beneficial owner of the income for which Form W-8ECI is being

Form W-8EXP - Certification of Foreign Government or Other Foreign Organization for United

States Tax Withholding form. This form is used by vendors to claim and document their tax-

exempt status under U.S. tax law.

For a foreign tax-exempt organization to claim an exemption from withholding it must provide a

Form W-8EXP to the University. The Form W-8EXP must be accompanied by either: (1) a copy

of a tax exemption letter from the IRS, or (2) a letter from an attorney in the United States who

attests that the organization would likely obtain tax-exempt status from the IRS if it applied to

the IRS for such status.

Foreign entities that cannot establish their U.S. tax-exempt status will be subject to 30% U.S.

intermediary and that a qualified intermediary agrees to assume primary Non Resident Alien

withholding responsibility.

http://www.irs.gov/pub/irs-pdf/fw8imy.pdf

http://www.irs.gov/pub/irs-pdf/iw8imy.pdf

Payment to U.S. Agent

If the University makes a payment to a U.S. person or entity acting as an agent on behalf of the

foreign vendor, the University must treat the payment as being made to the foreign vendor. The

 The total payment or distribution is more than $1,500 in the calendar year.