Revenue received from and payments made to foreign entities may be subject to taxation, often in the form of a withholding tax. There are many types of potential withholding tax issues that may arise, the focus of this section will be on two general scenarios. The first is when Stanford is receiving a payment from a foreign institution, and the other is when Stanford is paying a foreign institution.
Stanford Receiving Payment
When Stanford is receiving a payment from a foreign institution, the foreign government may impose statutory withholding on the payment being remitted outside of that country. In instances where the U.S. has a tax treaty with the country and the payment is for income types subject to tax treaty benefits (e.g., interest, dividends, royalties), the amount of tax withheld may be reduced or eliminated. In these situations, the foreign institution would need be provided with an IRS Certification Letter / Form 6166. This document can be obtained by contacting either Global Business Services (GBS) or the Tax Department. In most cases, GBS or the Tax Department will have these on file; however, if a request needs to be made to the IRS for a particular country, it takes a minimum of 6-8 weeks for the request to be fulfilled.
In situations where another type of certification or declaration is required to either reduce or eliminate taxes, please contact GBS to assist. It should be noted that not all taxes may be reduced or eliminated, and therefore at the project planning phase, provisions should be included in the budget for this type of expenses. GBS recommends working with the payer in advance to determine whether any tax withholdings are applicable and what documentation, if any, is needed to reduce, eliminate, or waive the taxes.
Stanford Making Payment
When Stanford is making a payment to a foreign institution or vendor (supplier), U.S. and/or local law may require withholdings to be made. Withholding under local law often becomes applicable in the situations where Stanford has a local Presence.
The U.S. government also requires withholding on certain outbound payments. When setting up a supplier, please ensure the appropriate documents are included (e.g., W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) to facilitate the payment process.
Where a receipt is expected from a foreign institution to Stanford, please work with the payer to determine if the transfer is subject to local taxation and/or may benefit from U.S. treaty provisions. If U.S. treaty benefits are available, contact GBS or the Tax Department to obtain the documentation needed to reduce, eliminate, or waive the tax.
For payments to a foreign entity or vendor (supplier), please ensure that the supplier file is set-up appropriately with Stanford's Payment Services.
In all cases, it is important to plan ahead and make budgetary provisions for any applicable tax withholdings on either receipts or expenses.