Claiming Tax Treaty Benefits - Individuals
Payments to visiting foreign nationals who qualify for honoraria may require 30% foreign tax withholding unless they can ‘claim’ tax treaty benefits. Scholarship or Fellowship awards to UNM foreign national students in excess of qualifed expenses may require 14% foreign tax withholding unless they can 'claim' treaty benefits. Requirements:
- There must be a treaty existing between the US and their country of residence that allows an exemption from foreign taxation for the visa type under which they entered the US for this visit and the type of income you are going to pay them. Following is a link to the IRS web page which shows which countries have an existing tax treaty with the US. Reminder: some types of payment may not qualify for treaty benefits even though a treaty exists.
- The foreign visitor has US Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN). A Canadian social number does not qualify. And if they do not have a TIN or SSN, they cannot claim tax treaty benefits. More information on applying for a US Taxpayer Identification Number.
- If the foreign visitor has applied for but not yet received a ITIN or an SSN, UNM will still need to withhold the applicable foreign tax upfront. Once the foreign visitor receives their number, the department will need to provide it to Unrestricted Accounting, Main Taxation Issues staff and prepare an additional DPEZ payment form for the refunded foreign tax.
- If requirements 1. And 2. above are met, UNM Taxation Issues staff will prepare a 8233 form for the foreign national to review, correct and sign. This form represents the foreign visitor’s formal and legal ‘claim’ for tax treaty benefits. Once the signed form is received by Taxation Issues staff, it is sent to the IRS for approval. The IRS has 10 working days to disapprove the application. After that, treaty benefits can be granted and no foreign tax withholding is required. Your foreign visitor will be mailed a 1042-S from UNM for the calendar year they received payment. These forms are typically sent out during February of the following calendar year.
Steps for applying for treaty benefits.
- The foreign visitor will need to provide his/her valid U.S. Social Security Number (SSN) or Individual Tax Identification Number (ITIN) on his W-8BEN form to Purchasing Vendor Set-up. Failure to do so means they will not be able to apply for treaty benefits. The W-8BEN should be sent to Vendor Maintenance at email@example.com .
- Once Taxation Issues receives the request for payment a foreign national, our staff will evaluate the documents attached to see if we have everything we need. Required attachments include: 1>the Foreign visitor’s foreign address, 2>Passport, 3>US Visa (if not a visa-waiver country), 4>Oval Homeland Security stamp dated for this visit, and 5>the UNM Attestation form signed by the foreign visitor if the payment is for an honorarium..
- Based on this information and documentation, if it is determined that the visitor is eligible for treaty benefits, a scanned copy of the pre-printed Form 8233 prepared by the UNM Taxation Issues staff will be sent to the initiating department. They will then need to have the payee/foreign visitor to review, correct, sign and date both Part III and the Certification for Withholding Exemption, and return the form by fax, e-mail, or mail to Taxation Issues.
- Once the form is received by Taxation Issues staff, it will be faxed to the IRS for approval. The IRS has 10 days to disapprove the form. Once UNM has the IRS’s tacit approval, the DPEZ will be approved by Taxation Issues and sent on to the appropriate Cental Accounting Office for their approval.