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Bloomsburg University of Pennsylvania uses both domestic and international companies for vendor services. There are specific tax rules related to payments to international companies just as there are to transactions with international persons. The guidance in this section relates only to services; it does not relate to the purchase of goods, (supplies or other tangible property). There is no tax withholding requirement for goods shipped from abroad because ownership of the item simply passes to BU.
IRS Tax Forms in the W-8 Series (W-8BEN, W-8ECI, W-8IMY, W-8EXP):
International vendors must submit a US withholding certificate (W-8 series of forms) with a Federal Employer Identification Number (FEIN), Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN) in order to claim an exemption from or reduction in withholding. With regards to business payments, the FEIN, ITIN or SSN can only be used by the vendor for US business tax obligation and cannot be used for US personal tax obligations.
The US withholding certificate used by the international vendor, depends on the type of payment being paid and the status of the business itself.
The payment is exempt from US tax under a tax treaty and the owner has an FEIN, ITIN or SSN. The W-8BEN is used to confirm that a vendor is a foreign entity and must be provided even if the vendor is not claiming a tax treaty reduction or exemption from withholding. Therefore, all foreign vendors must provide a W-8BEN even if no FEIN, ITIN or SSN exists, unless another W-8 series form is provided. A valid W-8BEN must be provided before payment is issued by BU.
Expiration of Form W-8BEN
A W-8BEN that doesn't have an ITIN, FEIN or SSN is valid for three calendar years from the date it is signed unless a change in circumstances makes any of the information on the form incorrect. For example, a W-8BEN signed on September 1, 2011, without an ITIN, FEIN or SSN remains valid through December 31, 2013. (Calendar Year #1 is 2011; Calendar Year #2 is 2012 and Calendar Year #3 is 2013).
A W-8BEN that does have an ITIN, FEIN or SSN remains in effect until a change in circumstances makes any information on the form incorrect, provided that Vanderbilt (the withholding agent) issues at least one payment to the vendor per calendar year that is reportable on Form 1042-S. For example, an international vendor who submits a W-8BEN with a valid FEIN and requests tax treaty benefits, will not have to re-submit the W-8BEN as long as BU applies tax treaty benefits to at least one payment to the vendor each calendar year (and reports on Form 1042-S).
- W-8ECI : The income is effectively connected with a trade or business in the USA and the owner has an FEIN, ITIN or SSN. A valid W-8ECI must be provided before payment is issued by BU.
- W-8IMY (Withholding Foreign Partnership or Foreign Trust) : The recipient of the income is a withholding foreign partnership or foreign trust that has provided a valid WIMY with a WP-EIN or WT-EIN.
- W-8IMY (Qualified Intermediary Agreement) : The vendor has a qualified intermediary agreement with the IRS to accept primary responsibility for withholding. A valid W-8IMY with a QI-EIN must be provided before payment is issued by BU.
- W-8EXP : The beneficial owner of the payment is a tax-exempt organization under US tax rules. A valid W-8EXP must be provided before payment is issued by BU.
International companies with a FEIN beginning with "98" can only use this form on the W-8 forms listed above. if the FEIN begins with any other numbers, the company must use a W-9 (see below). Note, again that, the W-8BEN is also used to confirm that a vendor is a foreign entity and must be provided even if the vendor is not claiming a tax treaty reduction or exemption from withholding. Therefore, all foreign vendors must provide a W-8BEN, even if no FEIN, ITIN, or SSN exists unless another unless another W-8 series form is provided
Additional information on these forms and requirements can be found on the IRS website at http://www.irs.gov/pub/irs-pdf/iw8.pdf