Stanford Status Abroad
Under U.S. tax law, Stanford University is a tax-exempt educational institution described under section 501(c)(3) of the Internal Revenue Code. This classification is based on how Stanford’s original Founding Grant and subsequent amendments govern Stanford's operations fit within the guidelines provided by the U.S. Internal Revenue Code. Stanford’s U.S. status as a tax-exempt entity is, however, not necessarily recognized by other countries. Additionally, depending on the facts and circumstances of the activity being carried out in the foreign jurisdiction, that activity, the individual(s) conducting that activity, and/or the University may be taxable or subject to regulations in that jurisdiction.
Stanford has legal Presence in a number of foreign countries, which allow the University to operate with some flexibility in those countries. However, that flexibility has additional obligations including paying local tax and/or meeting other regulatory and administrative compliance requirements. Any activity occurring in countries where Stanford has a legal Presence may need to be disclosed.
Due to complexity and ongoing maintenance requirements, formalizing a legal presence in a foreign country is a strategic decision made by the University's senior management.
Global Business Services (GBS) strongly encourages that activity in-country, such as research fieldwork or teaching a seminar, be organized so that a legal Presence of Stanford is not triggered. One way to do this is to work with and/or leverage the relationship with a local collaborator. Besides not triggering a presence, there are other advantages to working with a collaborator.
Criteria for Triggering a Presence
In situations where working with a local collaborator is not practical or feasible, the University may need to establish a legal Presence in order for the activities to take place in the country. As establishing a Presence requires senior management approval, please contact GBS if the activities meet the following criteria for triggering a Presence:
- exceeds 183 days in-country
- requires local licensing, work and/or residence permits
- generates revenue
- rents / leases space
- engages local individuals
- requires opening a bank account
When a Legal Presence Is Required
If a determination is made that a local legal Presence is required and senior management approval is obtained, there are a number of due diligence steps to understand how the activities would be treated under local law and what legal structuring options are available. The due diligence performed usually involves working with U.S.-based and local legal counsel and/or tax consultants, identifying, reviewing, and disclosing all Stanford activities in a jurisdiction if required by local law and regulations. Depending on the jurisdiction, the nature of activities and the type of Presence established by Stanford once the due diligence process has been completed, the ensuing process of registration with local government agencies, obtaining the appropriate permits and approvals, and setting up a local bank account can be lengthy. GBS will work with you to organize your activities in-country to alleviate triggering a legal Presence. In the instances where establishing a legal Presence is appropriate, please allow at least one year for the preparation and planning necessary to establish a legal Presence –– potentially longer in some jurisdictions.
Setting Up a Legal Presence
Lastly, setting up a legal Presence also requires ongoing maintenance – such as annual financial statements audits, filing of income and employment tax returns, and other legal filings. These ongoing expenses should be considered as part of the budget.
Be reminded again that although Stanford is tax-exempt in the U.S., it does not automatically receive this exemption in foreign countries, and some foreign jurisdictions do not recognize tax-exempt status. If your activity meets any of the requirements which may trigger a Presence (described above) in a country without an existing Stanford legal Presence, contact GBS as early as possible, ideally during the planning process. GBS can help you:
- Determine whether the project activities could be structured to avoid the need to create a Stanford Presence in-country
- Determine if there is the need for Stanford to formally establish in an international jurisdiction. If there is a need, manage the creation of that presence and determine the cost and logistical impacts on your project and other Stanford activity in-country.
Additionally, please contact GBS for activity in countries where a Stanford Presence currently exists to determine how the Presence may be leveraged and/or the potential impacts the Presence may have on your activity.