Foreign Payees - FAQs

All payments to foreign payees must be reviewed and approved by SMU’s Foreign Nationals Office prior to the payment being made. SMU recommends that a department contacts the Foreign Nationals Office as soon as the engagement of, or purchase from, a foreign individual or entity is being considered. Additional information and procedures are provided on the Non-Payroll Payments page.

Refer to the information and procedures on the Non-Payroll Payments page. A payment request to a foreign individual should be supported by the following documentation (submitted with the payment request):

• SMU’s Foreign National Information Form (FNI) 
• Copy of Passport Identity Page
• Additional identification documents requested on the FNI per the foreign individual's corresponding visa type
• Form W-8BEN if the foreign payee is a new supplier (vendor) for SMU
• SMU’s Independent Contractor Determination Checklist (only required for payments for services such as honorarium payments)
• Receipts for reimbursement of travel, lodging, and business expenses

A payment request to a foreign entity should be supported by the following documentation (submitted with the payment request or invoice):

• Invoice, SMU purchase order (PO), or contract
• The applicable Form W-8 if the foreign entity is a new supplier/vendor for SMU

Form W-8BEN-E is the most common form used but there are other various W-8 Forms applicable per the entity type. Refer to the chart in Q6.

Reporting requirements differ for U.S. (domestic) and non-U.S. (foreign) payees. Form W-8 is the equivalent of Form W-9 for a foreign payee. Completion of the Form W-8 represents certification that the payee is a non-U.S. person or entity. The form contains certain payee identification information (formal name, tax identification number, address) that enables SMU to determine if tax reporting and/or tax withholding is required for the payment. There are several versions of the Form W-8 to address different payees. (See chart in Q6.)

The tax treatment of payments to foreign payees depends on what SMU is paying for and where the transaction takes place (the “source” of the income). Certain sections of the Form W-8 may be completed by the payee to claim a tax treaty exemption (if applicable) for otherwise taxable income.

An SMU employee traveling abroad on SMU business may purchase goods or services from a foreign vendor when traveling outside of the U.S. by using an SMU procurement card, a cash advance, or the employee's own personal funds. Regardless of the method of payment, the expense documentation (receipt, etc.) for legitimate business expenses should include a note that the expense pertains to goods purchased or services performed outside the U.S., while the traveler is abroad. A Form W-8 is not required in this instance.

Current Forms W-8 are available on the IRS Website. There are several versions of the Form W-8 to address different payees.

 

Type of Payee	Form W-8	Other Documentation Required	Links to IRS Website
Foreign Individual	W-8BEN	Identification documents per visa type. See the Visa Information Section on SMU’s Alien Determination of Residency Form	https://www.irs.gov/pub/irs-pdf/fw8ben.pdf
Foreign Entity	W-8BEN-E	None	https://www.irs.gov/pub/irs-pdf/fw8bene.pdf
Foreign tax-exempt institution (e.g., University)	W-8EXP	IRS exemption letter or opinion of counsel for tax exemption	https://www.irs.gov/pub/irs-pdf/fw8exp.pdf
Foreign Entity with effectively connected U.S. Income	W-8ECI	None	https://www.irs.gov/pub/irs-pdf/fw8eci.pdf
Foreign Intermediaries and Agents	W-8IMY	Form W-9, W-8BEN, or W-8BEN-E from beneficial owner	https://www.irs.gov/pub/irs-pdf/fw8imy.pdf

Generally a Form W-8 remains valid for three years unless a change in circumstance makes any information on the form incorrect or incomplete. Because the IRS updates Form W-8 frequently, SMU requests our vendors to have the most current updated version of Form W-8 on file when submitting a payment request. Submit the payee’s applicable Form W-8 with the payment request or invoice.

SMU’s Foreign Nationals Office will review the payment request within 5 business days of receiving it. If additional information is required and/or tax withholding is applicable, the Foreign Nationals Office will contact the initiator of the payment request in the department directly.

Goods are something that one can use or consume. Goods are tangible property owned by the purchaser and can be used once or repeatedly. Goods must be legitimate business expenses to be eligible for payment.

Examples of Goods include:

• Books
• Food
• Furniture
• Office supplies
• Printers, computers, and computer hardware

Services are actions performed for, or on behalf of, SMU. The purchaser of services does not receive any tangible goods.

Examples of Services include:

• Labor to install, assemble, dismantle, adjust, repair, or maintain tangible property
• Labor to install, configure, modify, or upgrade a computer program
• Maintenance contracts, contracts for service (but not the purchase of a warranty agreement itself)
• Rental of items to be used abroad only (e.g., hotel room rental, car rental fees)
• Other services (e.g., cab services, restaurant charges for meals, copying or printing services, mailing services)

The following are NOT services:

• Licenses for usage - permission to use (someone else's) property (including software licenses)
• Rental of property to be used in the U.S.
• Royalty or copyright fees
• Patent fees

Rental and royalty fees for intangible and tangible property to be used in the U.S. may require tax reporting and withholding by the University. In some cases, there may be applicable tax treaty benefits (reduced rate of withholding) for the payee, but the payee must provide additional information on the appropriate Form W-8 to claim tax treaty benefits.