FOREIGN NATIONAL FOREIGN NATIONAL PAYMENT GUIDE PAYMENT GUIDE May-2018 UNIVERSITY OF PENNSYLVANIA
Contents Chapter 1: Foreign National Payment Guide... 3 1.1 Visa Matrix... 3 Chapter 2: Nonresident New Hire process... 5 2.1 Non-Penn Sponsored Grid... 5 2.2 Penn Sponsored Grid... 6 2.3 Quick Reference Flowchart... 7 2.4 Required Documents... 8 Foreign National Information Form (FNIF)... 8 Most recent I-94... 11 US Visa... 12 Passport... 13 Social Security receipt of application... 14 Immigration Documentation... 15 Form W-4... 19 2.5 Treaties... 20 2.6 ERN Codes... 20 Chapter 3: Non-compensatory Payments (prizes/awards, honorariums, scholarships/fellowships, independent contractors, etc.)... 21 3.1 Form W-8... 21 W-8BEN... 21 W-8BEN-E... 22 3.2 Income Source... 25 Foreign Source... 25 Certificate of Foreign Source Income (CFSI)... 26 Taxation... 27 US Source... 27 Honoraria Eligibility Certification Form... 28 Taxation... 29 Chapter 4: Guest Travel Reimbursements... 29 4.1 Documentation... 29 4.2 Nontaxable vs. Taxable... 30 NonTaxable... 30 1 P age
Taxable... 30 4.3 Accountable Plan Rules... 30 TIO Contact Information... 31 2 P age
Chapter 1: Foreign National Payment Guide 1.1 Visa Matrix 3 P age
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Chapter 2: Nonresident New Hire process 2.1 Non-Penn Sponsored Grid 5 P age
2.2 Penn Sponsored Grid 6 P age
2.3 Quick Reference Flowchart 7 P age
2.4 Required Documents Foreign National Information Form (FNIF) I-94 Visa Passport Social Security Receipt Immigration document Foreign National Information Form (FNIF) 8 P age
All foreign national (FN) new hires must complete this form. The form is a University internal document that gathers information about the individual s current and past immigration, dates of entry/exit from the US, and foreign address. The document can be found here: http://www.finance.upenn.edu/forms/fniform.pdf Page 1, the top should be completed by the department. Questions 1-15 are to be answered by the FN. 9 P age
Page 2, the FN must answer questions 16 20. Question 20 should be completed for ALL visits to the US if they are an F, J, or H visa; this information determines if the FN will be taxed as a nonresident alien (NRA) or resident alien (RA). The form must be signed by the FN for validation. 10 P age
Most recent I-94 11 P age
All individuals entering the US will have an I-94 document. FN new hires must provide a copy of the I-94. This document can be retrieved electronically on the Department of Homeland Security website https://i94.cbp.dhs.gov/i94/#/home. US Visa 12 P age
Document used to enter the US. All FN new hires must provide a copy of the picture Visa. *Canadian individuals are not required to obtain a US Visa to enter the US. Passport An official document issued by a government, certifying the holder's identity and citizenship. All FN new hires must provide a copy of the picture passport. 13 P age
Social Security receipt of application If an FN new hire does not have a social security card, they must provide proof of application for an SSN. A receipt confirms that an individual successfully completed an application for a SSN card AND the applicant is approved to receive an SSN card. 14 P age
Immigration Documentation An FN would need to provide one of the following immigration documents. 15 P age
I-20 An F-1 student immigration document. Please copy pages 1 & 2. This document identifies the sponsoring institution and the dates of the program. If a student is on OPT, this is noted on page 2 of the document. DS-2019 An immigration document for a J-1 Student/Scholar. Identifies the sponsoring institution and the date of the program. Must be current. 16 P age
I-797 An immigration document for an H-1 visa holder. Identifies the sponsoring institution and the dates covered. Must be current. 17 P age
EAD Card Employment authorization document (EAD) proves an individual is eligible to work. The dates must be current. Please copy the front and back of the card. *Not all FN s will have an EAD card. We are specifically looking for this card when an FN on an F-1 visa that is not sponsored by Penn and does not have Penn listed on a CPT/OPT appointment on page 2 of the I-20 document. 18 P age
Permanent Resident Card (aka Green Card Holder) Card allows an individual to work and live permanently in the US. The card is typically valid for 10 years after date of issue. These individuals are taxed the same as a US citizen. Form W-4 A FN must complete sections 1,2,3,5 & sign the form. NRA individuals may only claim single on line 3 and either 0 or 1 on line 5. If the form is completed incorrectly and deemed invalid, the payroll department will automatically default to single and 0 allowance. The form can be found here https://www.irs.gov/pub/irs-pdf/fw4.pdf 19 P age
2.5 Treaties Tax treaty eligibility is determined by Tax & International Operations (TIO). To be eligible, the individual must have a valid SSN or ITIN and their visa type, income type, tax status, permanent residence country, and time base or limit base must meet the criteria for the tax treaty exemption. The requirements vary by treaty country and must be renewed on a calendar year basis. Please advise FN employees to visit the TIO office for a treaty analysis. 2.6 ERN Codes When a FN employee signs a tax treaty or is receiving a nonservice fellowship that requires tax withholding, TIO will change the ERN code of these individuals to allow the payroll system to eliminate/compute tax on their compensation. When a department makes changes to an ERN code or adds a distribution line in Pennworks, it will negatively affect the individual s compensation if a NRA ERN code is not applied. Please do not change the following ERN codes, which can only be placed on the record by TIO: Nonresident Alien ERN codes- NR3, NO4, NAO, NCO, and/or NRO GF2 = NR3 treaty or NO4 tax (14% withholding) PD4 & PD3 = NAO treaty GF6 = NCO treaty 20 P age
GF5 = NRO treaty RMO = NAO treaty If a new distribution line is added and the ERN code immediately preceding is one of the NRA ERN codes listed, please notify TIO so that we can update the ERN code. Chapter 3: Non-compensatory Payments (prizes/awards, honorariums, scholarships/fellowships, independent contractors, etc.) 3.1 Form W-8 Must be completed to certify that the recipient is foreign. W-8 forms and instructions can be found here: https://apps.irs.gov/app/picklist/list/formsinstructions.html?value=w- 8&criteria=formNumber The form expires 3 years after the year it is signed; we require an updated form when a W-8 is expired. There are many versions of the W-8 form, but the two most commonly used are: W-8BEN To be completed by a foreign individual. Guidelines for filling out form W-8BEN are provided below. If the individual is not claiming any withholding exemptions, they fill out all sections highlighted in YELLOW. If you will be claiming treaty-based withholding exemptions, you must ALSO fill out the sections highlighted in ORANGE. It is not required that you fill in any other fields. 21 P age
W-8BEN-E To be completed by a foreign entity. Please see guide below. 22 P age
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3.2 Income Source Foreign Source Documentation required: 25 P age
Certificate of Foreign Source Income (CFSI) This is a University form used to certify that a payment is for services performed outside of the US. It is important to identify the location of services on the invoice. If TIO cannot determine the location, this can delay the payment or result in tax being withheld. This form can be found here: http://www.finance.upenn.edu/forms/forscin.pdf 26 P age
Taxation Generally, all services performed outside of the US are not US source, therefore not taxable. US Source Documentation required: 27 P age
Payments made to a FN individual located in the US require a completed W-8BEN, FNIF, and a copy of their I-94, Visa, Passport, and immigration document. Please see Chapter 2 for a description of each document. Honoraria Eligibility Certification Form Any foreign visitor receiving an honoraria must complete this form to certify that they meet the 9/5/6 rule. If they do not meet the 9/5/6 rule, they cannot be paid an honorarium. This is a University form and can be found on our website here: http://www.finance.upenn.edu/forms/forvishonelcert.pdf 28 P age
Taxation Payments to foreign nationals who are considered nonresident for tax purposes are subject to a 30% NRA tax unless exempted under a tax treaty. NRAs will receive Form 1042-S at year end for these payments. Payments to US citizens, permanent residents, and NRAs who are considered to be resident aliens for tax purposes will not have federal tax withheld. Payments of $600 or more in a calendar year will be reported on Form 1099-Misc. Chapter 4: Guest Travel Reimbursements 4.1 Documentation FNIF Visa Passport I-94 29 P age
W-8BEN Immigration document (I-20, I-797, DS-2019, EAD) 4.2 Nontaxable vs. Taxable NonTaxable Any guest travel reimbursement connected to a business purpose (speaker/presenter, panelist, recruit, etc.) is generally nontaxable, as it is covered by the accountable plan rules as defined by the IRS see definition of accountable plan rules in 4.2. Taxable Any guest travel reimbursement not connected to a business purpose is generally taxable. Examples of when a guest travel reimbursement is taxable is a guest invited to merely attend a workshop on campus or sending a non-penn sponsored individual to an off-campus conference. Both instances do not directly benefit the University and do not meet the rules of accountable plan see definition of accountable plan rules in 4.2. Nonresident Alien Taxable guest travel reimbursement to foreign nationals who are considered nonresident aliens for tax purposes are subject to a 30% nonresident tax unless exempted under a tax treaty or reduced rate of 14% for F,J, or M visa holders. Payments are reported on Form 1042-S for the calendar year. US Citizen/Resident Alien/Permanent Residents Taxable guest travel reimbursement to foreign nationals who are considered resident aliens for tax purposes or who are permanent residents are not required to have tax withheld. Payments of $600 or more in a calendar year will be reported on Form 1099- Misc. 4.3 Accountable Plan Rules The requirements of the accountable plan rules are found in Treasury Regulation 1.62-2; and they require that the payee: (1) establish the business purpose and connection of the expenses; (2) substantiate the expenses claimed to the payer within a reasonable period of time; and (3) return any amounts to the payer which are over and above the substantiated business expenses within a reasonable period of time. 30 P age
TIO Contact Information Phone 215.898.6291 Helpdesk - https://www.finance.upenn.edu:44301/apps/taxhelpdesk/ 31 P age