Tax Issues on Payments to International Individuals & Companies

Academic and administrative departments must consider various tax issues when making payments to international individuals and companies. These sections are designed to describe the tax treatment when making payment for U.S. based activities and services. This tax treatment by GW is necessary to comply with Internal Revenue Service (IRS) rules. These sections are not intended to cover the procedures for hiring of employees, work authorization (which Human Resources and the International Services Office can provide guidance on), vendor registration, or payment processing (whether via Accounts Payable or Payroll Services).

Employees:

By default, GW salary payments to international employees working in the U.S. will have federal income tax, state income tax, and Social Security & Medicare tax withheld each pay cycle. The specific percentage of federal or state income tax is dependent upon various factors like amount or pay cycle and are based on IRS withholding tables as processed by Payroll Services. Social Security & Medicare tax is withheld at a standard rate of 7.65%.

International employees may be eligible for income tax treaty benefits that would waive all or a portion of federal or state income tax withholding from their pay. They also may be able to waive Social Security & Medicare tax withholding from their pay.

Both of these exemptions are based on individual fact patterns (ex. immigration status, length of time in the U.S., prior U.S. history, among other factors). The Tax Department will analyze an individual's circumstances for eligibility for both exemptions through use of the Foreign National Information System (email [email protected] to gain access to the system). Not everyone is ultimately eligible for the exemptions.

Students and Scholars:

Payments to international students or scholars for U.S. activities, such as scholarships, fellowships, stipends, and prizes, are subject to different rules, depending on the immigration and tax status of the student or scholar. Payment here also includes noncash items provided, such as housing.

Tuition scholarships are generally available tax-free to degree seeking students.

Non-tuition and non-service scholarships, fellowships, and stipends are generally subject to federal income tax withholding at 14% (assuming F or J visa; otherwise, the rate is 30%). Exemption from tax may be available to some depending on individual circumstances.

Awards and prizes are generally subject to federal income tax withholding at a rate of 30%. Treaty exemption claims may be available.

The Tax Department will analyze an individual’s circumstances for eligibility for exemption for the above payments through use of the Foreign National Information System (email [email protected] to gain access to the system).

For details on the tax treatment of international student or scholar employees, please visit the Employees section above.

Independent Contractors:

International individuals providing services as independent contractors to GW in the U.S. as a default rule are subject to federal withholding tax at 30%. Note that honorarium recipients are considered independent contractors, so their payments would be subject to federal withholding tax at 30%. Treaty exemptions are potentially available dependent upon individual circumstances, in which case the individual should use the Foreign National Information System to provide the necessary information for the Tax Department to analyze (email [email protected] to gain access to the system). 

Companies and Organizations:

Generally, any payments to international companies or organizations for U.S. based work for GW will be subject to federal withholding tax at 30%. International companies or organizations should submit any potential treaty claims via Form W-8BEN-E (or other applicable W-8 series form) as part of the vendor registration process with Procurement. The Tax Department will review at the time of payment if there is a potential treaty article to use.