Payments for Services Provided OUTSIDE the United States
While traveling outside of the United States for research, study-abroad, or any other purpose, UNM faculty and/or staff may often have cause to make payments via cash, personal credit card, or PCard to individuals and/or companies for services that have been provided. IRS regulations are such that U.S. persons are subject to tax on their worldwide income. This means that any income they earn, even solely within a foreign country, is subject to U.S. tax laws. Because of this, when UNM pays for services within a foreign country, documentation (typically an IRS form W-8 BEN) must be obtained to show that the beneficial owner of the income is not a U.S. person (the W-8 BEN certifies their status as a foreign person). If the payee is a U.S. person, UNM is required to obtain an IRS form W-9. When payments are made directly by UNM, through Banner, collecting a W-8 BEN from foreign persons (or a W-9 from U.S. persons) isa part of the vendor setup process. However, when UNM personnel are traveling abroad, and pay for services outside of the Banner system, the traveler is expected to obtain the applicable certification of payee status (U.S. person or foreign person).
Historically, it has been difficult for UNM travelers to get foreign payees to complete and sign a U.S. tax form, which is presented in English. Although the best documentation of payee status is obtaining a completed W-8 BEN or W-9 form, as applicable, the IRS also allows for the use of “presumption rules” in the determination of a payee’s status. If the traveler has no actual knowledge, and no reason to believe, that a payee is a U.S. person, they may certify this by completing and signing the form at this link: Foreign Source Statement. However, if there is actual knowledge, or reason to believe the payee is a U.S. person, the traveler is expected to obtain a signed IRS form W-9 from the payee, if the payment made was $600 or more.
The Certification (Foreign Source Statement) form noted above must be submitted with the Travel Reimbursement in Chrome River.
If the Certification form noted above, or the appropriate IRS tax certification form is not provided, the assumption will be that the payee IS a U.S. Person, and the payment will be subject to 28% tax withholding. As the payment would have already occurred, obviously withholding cannot be done, therefore, the department funding the payment will be charged for the appropriate tax, using the mathematical “gross up” rate of 38.89%.