Taxation of Non-Residents - Payroll Services · There is a system for U.S. Persons and ... Can be...

Taxation of Non-Residents

Presented by:

Mike Sattin and Steven Truong

Payroll Services

April 25, 2012

Payroll Services 2 4/27/2012

Today’s Agenda

Basic Withholding Concepts

Six Q’s of NRA Withholding

Tax Withholding Obligations

Maintenance


Code of Federal Regulations

Title 26 - Tax Withholding Obligations

Internal Revenue Codes Specific to Nonresidents

§ 1441. Withholding

§ 1441. Withholding of tax on nonresident aliens

§ 1442. Withholding of tax on foreign corp.

§ 1443. Foreign tax-exempt organizations

§ 1444. Withholding on Virgin Islands source income

§ 1461. Withholding Tax on Foreign Persons with U.S. Source Income


http://assembler.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00001441----000-.html



















California Law

California Code – Revenue & Taxable Code

§ 18661-18667 General Rules

§ 17951-17955 Non-resident specific rules

For employees who are nonresidents of California

and work out of California, we need to apply the

relevant state laws in which the employee works.


Contact: Jeremy Henmi 310-794-0834


The Withholding Agent

Anyone who has control, receipt, custody, disposal, or payment of income to a foreign person

Responsibilities include: Liable for any required withholdings

Required to withhold at the time the payment is being made or determined

Required to remit taxes to IRS at a particular schedule

Required to file tax returns and issue tax statement for payments to non-residents for tax purposes




Type of Tax Contact Phone Number

592B – CA income tax

for non-employees

Shirley

Sams

310-794-0197

Federal income tax

Employment tax

Aurora

Orozco

310-794-8728

At UCLA, the withholding agents for

nonresident aliens are…….



Taxes Withheld by

PPS / AP / BAR (3 paying systems)

Income tax

Federal

California

Other State

Employment tax

Social Security & Medicare


SIX Q’S OF NRA WITHHOLDING

1. What do we need to know about NRA tax?

2. Who is subject to withholding?

3. Which payment is subject to withholding?

4. When are payments subject to withholding?

5. Who is required to withhold?

6. How much tax should we withhold?


1. Why worry about taxing NRA’s?

There exists in the U.S. Two distinct tax

systems under IRC - each having it’s own

withholding and reporting rules that payers

are liable for.

There is a system for U.S. Persons and

one for Foreign Person.

NRA withholding applies only to payments

made to a “foreign person”.



2. Who is Subject to NRA Withholding?

A “foreign person” includes:

A nonresident alien for tax purpose

A foreign corporation, foreign partnership, foreign,

estate, foreign trust

And any other person who is not a US person.

A FOREIGN PERSON

For the remainder of the class, a foreign person will be referred to as a NRA



Who is a U.S. Person?

A citizen or resident of the United States

A partnership or corporation created or

organized in the United States

Any estate or trust other than a foreign

estate or foreign trust

Any other person that is not a foreign

person

(2. Who is Subject to NRA Withhold? Cont.)



3. What is subject to NRA Withholding?

Any payment is subject to NRA withholding if it is from sources within the United States, and it is either:

Fixed or determinable annual or periodical (FDAP) income

(Service Payments, Fellowship/Scholarship, Payroll, etc.)

Income from the disposition or sale of personal property



What is not subject to NRA tax?

All payments are considered taxable income

with the exception of:

I. Foreign Sourced Income – Not reported/Not taxed

II. Excluded under IRS Code – Not reported/Not taxed

III. Excluded under Tax Treaty – Not Taxed



I. Foreign Sourced Income Exemption

(Not reported/Not taxed)

Sourcing Payment is important!

A U.S. Person is subject to U.S. tax on Worldwide income.

A NRA for tax purposes is subject to U.S. tax on U.S. sourced income

A NRA for tax purposes is not subject to U.S. tax on foreign sourced income



II. IRS Code Income Exclusions

A. Section 117 – Qualified Scholarship

B. Section 125 – Cafeteria Plans

C. Section 62 – Accountable Plan

D. Section 861(a)(3) – foreign employee

E. Section 872 (b)(3) – foreign employee

F. Section 893 – employee of foreign government



II.A. IRS Code Income Exclusion

Section 117

Sec. 117 allows for exclusion from income if the payment is for a Qualified Scholarship:

A qualified scholarship is any amount received by an individual as a scholarship or fellowship grant that is used for tuition and fees required for enrollment and required books, supplies, and equipment.



II.B. IRS Code Income Exclusion

Section 125

Sec. 125 allows for exclusion from income if

the payment is made under a cafeteria

plan:

This allows the employer contributions for

health, dental, and vision benefits to be

excluded from gross income!



Accountable Plan

Can be excluded from income taxes if properly

accounted for i.e. substantiate business within

60 days and delineate expenses

Travel Expense

Employee – Business expenses

II.C. IRS Code Income Exclusion

Section 62


III. Tax Treaty Exclusion

IRC 1441

The general withholding rate of 30%

will not apply if the payment is

exempt under an income tax treaty

between the individual’s country of

residence and the U.S.


US Treasury

Tax Treaty Articles

Foreign Country


4. When are we required to withhold?

Withholding is required at the time you

make a payment of an amount subject to

withholding

A payment is made to a person whether or

not that person realizes there is an actual

transfer of cash or other similar aspect i.e.

imputed income.



5. Who is required to withhold?

At UCLA, Payroll Services acts as the withholding

agent for purposes of NRA tax reporting obligations

to the IRS.

Three central departments on campus have the

responsibility to withhold the tax and report this

information to Payroll Services.




UCLA Payment Process

ACCOUNTS PAYABLE

Process Non-Employee Payments

One Time

Payments

Lecture Fee

Honorariums For Travel Office

Travel Expenses

Relocation Costs

YEAR END FORM

1099 and 592B

PPS Withholds taxes

BAR

YEAR END FORM Informational Statement

PAYROLL 1. Process Wage Payments

to Employees 2. Charge Benefits for Post

Docs 2. Withhold Taxes 3. Report Payments/taxes

YEAR END Process

CREATES FORMS

W2 and1042S

1042S for BAR & PAC

GRADUATE DIVISION

Process Fellowship/Scholarship Awards

Includes student travel

Bruin Buy



6. How much tax is withheld for a NRA?

U.S. sourced income is usually

taxed at a rate of 30%.



Exceptions to the 30% Rule

Wages paid to a NRA employee

Fellowship/Scholarship payments to a NRA

Tax Treaty Exemptions



Tax Withholding on Specific Payments

A. Wages

B. Non-employment service payments

C. Post Doc payments

D. Fellowship/Scholarship

E. Reimbursements

F. Other payments: 1. Death Payments

2. Pension Payments

3. Awards

4. Relocation



A. Wage Payments

NRA working out of U.S.

NRA working in U.S.

NRA working out of California



UCLA employees may be subject to:

Federal Income tax At Graduated Tax Rates*

FICA Tax % of Gross Payment

OASDI Medicare

State Income Tax At Graduated Tax Rates*

* See current tax tables @ www.payroll.ucla.edu



Allowable W-4 Exemptions for

Residents for tax purposes

Residents may choose any allowances on the W-4!

Caution: As long as they meet their tax liability at year end

Resident with Tax Treaty

Federal Withholding

- None

State per DE 4

W2 and a 1042S

All Others Residents

Federal & State

Based on DE 4

W2



Required Withholding Documentation

NRA for tax purposes*

GLACIER generated W-4 and DE 4 (Payroll Services is office of record) Access to forms available @ www.online-tax.net

Residents for Tax Purposes*

GLACIER generated W-4 (Department is office of record) Access to forms available @ www.online-tax.net

UC W-4/DE 4 Fill-in Form is available @ www.ucop.edu/ucophome/cao/paycoord/ucw4-de4.pdf

Employee may update record at “At Your Service Online” *All foreign nationals are required to have a GLACIER record excluding

Permanent Residents, Refugees and Asylees.


http://www.ucop.edu/ucophome/cao/paycoord/ucw4-de4.pdf




Process for Forms W-4 and DE 4 Departments must ensure an “Initial GLACIER

Online Entry Form” is submitted then the employee will indicate the number of exemptions per IRS code and to adhere to regulations as provided by GLACIER

NRA’s who do not provide a form or provide an incomplete form must be withheld at single status, zero exemptions.

Incomplete forms include those without a SSN.

GLACIER generated withholding forms must be sent to the Payroll Office and withholding will then be updated



Restrictions on W-4 Exemptions for

NRA Employees Nonresident from:

Canada, Korea, or Mexico

Residents from American Samoa

or Northern Mariana Island

All Others

Nonresidents

Nonresident

with Tax

Treaty

Federal Withholding

- None

State per DE 4

State - W2

Federal - 1042S

Federal Withholding :

• Single Marital Status

• Can choose 1 allowance

for self, 1 for spouse, and

1 for each dependent

State per DE 4

Federal Restricted to:

• Single martial Status

• 1 allowance

State per DE 4

W2 - reports Federal and State info

Federal 1040NR or 1040NR-EZ

State 540* or 540NR or 540NREZ

Nonresident

works &

lives outside

the US

No tax

deduction

No reports,

No filing

Nonresident

Students from

India

Federal Withholding

• Single Marital Status

• Can choose additional

allowance for spouse

and dependent if

requirements are meet.

State per DE 4



Joe Bruin

Non-residents: Limited to Single Marital Status.

Non-residents: Limited to One allowance unless:

•Resident of Canada, Japan, Korea, or Mexico.

•Special Rate from Tax Treaty – India student

•Exempt per tax Treaty

State Status and Allowances – whatever will meet the tax liability

UC W-4NR/DE 4


OBSOLETE

FOR UCLA

MUST PROVIDE:

GLACIER

GENERATED

FORMS

SSN is required. Otherwise, the allowances are = 0

2010


Tax for NRA working in U.S.

Wages paid to an NRA working in the US as an employee are subject to graduated withholding in the same way as U.S. citizens/ residents unless exempted by a tax treaty.

Payment for U.S. sourced personal services is taxed as the previous chart shows.



Tax for NRA working out of U.S. Wages earned by nonresident aliens for

services performed outside of the United States are foreign sourced income.

The wages are not subject to reporting or withholding of federal or state income tax.

The wages are not subject to FICA tax

There are special codes in PPS to facilitate this.



Foreign Sourced

Income Statement

Hermione Black

www.tax.ucla.edu/

Submit Foreign Sourced Income

Statement when a nonresident

employee is working and living outside

of the United States along with a

Form UPAY 830.


4/25/12 Hermione Black Staff Researcher

http://www.tax.ucla.edu/


Withholding Form for

a NRA working out of

U.S.

Hermione Black

123 45 6789

www.payroll.ucla.edu/

Note Special Coding on allowance fields. This coding

prevents the system from withholding and reporting

to the IRS and state of California.


2012

4/25/2012

http://www.payroll.ucla.edu/


State Income Tax

There are no California imposed restrictions on the number of allowances an employee can choose on their DE 4 Form.

State withholding (for employees) is based on information from the DE 4 form.

Income earned while living and working in California is subject to withholding

Income earned outside California may also be subject to withholding in the other state.



Resident W-4 Form

The Social Security number is

a must have. If an employee

completes the form without a

SSN, the IRS considers the W-

4 to be invalid and the

employee is restricted to

marital status S and 0

allowance


Bear Brown

123 45 6789

State status and allowance – whatever will meet the tax liability

2012

4/25/12


Payments to Non-California Residents working outside of

California


Out of State Employees

at UCLA are either: 1. Employees who are residents of California and work

outside California. Their liability is based on their “worldwide income”

They are withheld based what is claimed on their W-4

2. Employees who are non-residents of California and work in California.

They are withheld tax according to what is claimed on the W-4

There is no special exemption for these employees.

3. Employees who are non-resident of California and work outside of California

They are exempt from California taxes.

There may be a requirement to withhold for the state that they are working in.



STATE INFORMATION List of States which require state tax withholding from income earned while an individual

is living and working in that particular state. It also shows the withholding certificate

requirements for each state.

STATE CODE REQUIRES

WITHHOLDING

WITHHOLDING CERTIFICATE

REQUIREMENTS

Alabama AL Yes Form A-4

Arkansas AR Yes Form AR4EC

Connecticut CT Yes Form CT W-4

District of Columbia DC Yes Form D-4

Georgia GA Yes Form G-4/G4-E

Hawaii HI Yes Form HW-4

Illinois IL Yes Form Il-W4

Indiana IN Yes Form WH-4

Kentucky KY Yes Form K-4

Louisiana LA Yes Form L-4, L-4A, or L-4E

Maryland MD Yes Form MW 507

Michigan MI Yes Form MI-W4

Mississippi MS Yes Form 62-420

Missouri MO Yes Form MO W-4

New Jersey NJ Yes Form NJ-W4

New York NY Yes Form IT-2104 or IT-2140E

North Carolina NC Yes Form NC-4 or NC-4A

Ohio OH Yes Form IT-4

Virginia VA Yes Form VA-4

West Virginia WV Yes Form IT-104

Wisconsin WI Yes Form WT-4



STATE INFORMATION List of states which require (UC Version) Federal W4 Form.

STATE CODE REQUIRES

WITHHOLDING WITHHOLDING CERTIFICATE REQUIREMENTS

Arizona AZ Yes Federal W-4, must use UC version

California CA Yes “

Colorado CO Yes “

Delaware DE Yes “

Idaho ID Yes “

Iowa IA Yes Federal W-4, must use UC version but indicate “IOWA” on form

Kansas KS Yes Federal W-4, must use UC version

Maine ME Yes “

Massachusetts MA Yes Federal W-4 must use UC version. When claiming exempt use M-4

Minnesota MN Yes Federal W-4, must use UC version but indicate “Minnesota” on form

Montana MT Yes Federal W-4, must use UC version

Nebraska NE Yes “

New Mexico NM Yes “

North Dakota ND Yes “

Oklahoma OK Yes “

Oregon OR Yes “

Pennsylvania PA Yes “

Rhode Island PR Yes “

South Carolina SC Yes “

Utah UT Yes “

Vermont VT Yes “

List of States that don’t require state tax withholding: Alaska, Florida, Nevada,

New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.



Obtain this form from the Payroll Services web site

http://www.payroll.ucla.edu/forms/f

ormsfrm.htm

Tax deduction must be cancelled

UPAY 830 –

Out of state

Income tax

withholding

form

Bea A Bizzy


–For an employee working out of CA

1

997

Sirias Black

Black, Sirias 123456789 03 16 11

67-67 Burns Street 123 45 6789 11 25 69

New York, NY 11375

http://www.ucop.edu/ucophome/cao/paycoord/taxation.html

4/25/12

Note Special Coding on state Allowance. This coding

Prevents the system from Withholding and reporting To the state of California.

There may be liability in the State work is performed

May only choose 997 If a complete UPAY830

Is submitted

2012

S

Use of the appropriate

version of the W-4 (W-4/DE

or W4NR/DE 4)depends on

the residency status of the

employee.



Remember to change slide

# for actual printing of

handouts

FICA FICA



The current rates of withholding are:

FICA TAX

All employees must contribute to FICA or participate in an employer sponsored retirement plan unless exempted by law

Full FICA

OASDI 4.2%

Medicare 1.45%

Safe Harbor

DCP CAS 7.5%

Medicare 1.45%



Exemption From FICA Tax

IRC allows for exemption from FICA if:

The employee is a NRA Has a F1 or J1 visa status And works to further the purpose for which visa was issued Student Exemption

PAYROLL OFFICE CONTACT IS Lola Espinoza @ 794-8724

UCLA does not honor Totalization Agreements*


* Exception is Canada


B. INDEPENDENT PERSONAL

SERVICES PAYMENT



Independent Personal Service

Payments

Independent Personal Services are services provided to a non-employee. Typical payments include:

Honorarium

Guest speaker fee

Lecture fee

Presentation fee

There is no required withholding form.



Withholding

Independent Personal Service Payments

Income Code 16 Federal Withholding

Independent Personnel Payments are taxed at the

rate of 30% of gross payment unless the visitor is

eligible for a tax treaty

State Withholding

Independent Personnel Payments that annually

total greater than $1500 are taxed at the rate of

7% of gross payment unless the visitor is a

nonresident of California.



C. POST DOCTORAL PAYMENTS



Post Doc Benefit Payments

APM390 was revised to mandate

departments to pay for the cost of benefits

to individuals with title codes of:

3252 - Post Doc Employee

3253 - Post Doc Fellow Recipient

3254 – Post Doc Paid Direct

The revised policy set up a taxable situation


Must have the

same paperwork

as an employee


Post Doc Benefit Payments

Employer paid benefits for post doctoral employees are not taxable because the benefits are exempted by the Code Section 125. Title codes 3252 and 3240. [Income Code 17 & 18]

Payments of benefits by the employer for the non-employee post doctoral titles however are taxable. Title Codes 3253 and 3254 [Income Code 15]

As you have learned, UCLA is only required to report and withhold for payments to NRA’s. For the NRA’s, the value of the benefits will be imputed as income.


Contact Payroll Services 310-794-0784


Post Doctoral Benefit Payments

A GLACIER generated IRS FormW-4 will be required.

Since the income is being classified as a fellowship payment, rates attributed to that income will be applied.

Federal Tax Rates:

14% to NRAs with “F,” “J,” “M,” or “Q” status.

30% to all others

0% if tax treaty eligible

California Tax Rate – no withholding required



D. Fellowship/Scholarship Grants



Scholarship/Fellowship Grants

A scholarship or fellowship grant is an amount given to an individual for study, training, or research, and does not constitute compensation for personal services.

Whether a fellowship grant from U.S. sources is subject to NRA withholding depends on the nature of the payments and whether the recipient is a candidate for a degree.

Candidate for a degree.

No withholding required from a qualified scholarship from U.S. sources – Section 117 exclusion.

A non-qualified scholarship is subject to NRA withholding.

The withholding rate is 14% paid to nonresident aliens present in the U. S. in “F,” “J,” “M,” or “Q” nonimmigrant status.

Payments made to nonresident alien individuals in any other immigration status are subject to 30% withholding.


(Gift Award) (Research Award)


Non-degree candidate (post Docs).

Must withhold on the total amount of the scholarship.

In order to use the reduced 14% rate, the following must be true: Must be present in the U.S. in “F,” “J,” “M,” or “Q” nonimmigrant status,

The grant must be for study, training, or research at an educational organization in the United States.

The grant must be made by: A tax-exempt organization operated for charitable, religious, educational, etc.

purposes,

A foreign government,

A federal, state, or local government agency, or

An international organization, or a binational or multinational educational or cultural organization created or continued by the Mutual Educational and Cultural Exchange Act of 1961 (known as the Fulbright-Hays Act).

If the grant does not meet above requirements, withholding tax rate is 30%.

Scholarship/Fellowship Grants



Recap of Tax Rates

Fellowship/Scholarship rates are as follows:

Federal tax rates are:

0%if tax treaty eligible

14% to NRAs with “F,” “J,” “M,” or “Q” status.

30% to all others

California tax withholding rate is 0.



TAX TREATMENT OF FELLOWSHIP/SCHOLARSHIP PAYMENTS

AWARD

Fellowship / Scholarship Payments

QUALIFIED

Books, Tuition, and required fees

Degree

Candidate

Non-Degree

Candidate

Not Taxable/

Not Reportable

Post Docs Undergraduates

1042S

UN-QUALIFIED

Room and Board

Travel ( for student benefit)

Equipment

Research, teaching or other service

1042S

1042S

1042S *

or W2

1042S

1042S

1042S

1042S

1042S *

or W2

*if Tax Treaty



E. Reimbursements



Generally, the following are NOT REQUIRED

when reimbursing travel expense to a

nonresident alien

Sourcing the Payment

Determining Residency for tax

purposes

Tax Payer ID

Tax Withholding

REASON: the payment is

Not subject to tax Withholding or reporting



Reimbursements

Travel Expenses

Reimbursement for the travel expenses of

a nonresident alien are not reportable to

the IRS and are not subject to NRA

withholding if the payments are made

under an accountable plan (Sec.62)

This treatment applies only to the

payment of travel and lodging expenses.



Other Payments

Death Cases Taxability depends if the payment is made in the year of

death or in the year after death.

Immigration fees Taxability depends on the type of fees being paid and

the status of the visa Not taxable: Employer related (sec.62) normal business expense

Permanent Resident fees may be taxable. It depends if the expense is critical to the mission of the University.

Retirement Taxability depends on where the pension is earned.

UCOP and Fidelity



Exemption from Federal Tax:

Tax Treaties

A tax treaty is a privilege, not a right


IRC section 1461 makes UCLA accountable for tax treaty approval or denial.


Tax Treaty Exemptions:

What is a tax treaty?

An agreement between the U.S. and another country

that allows either a reduced rate of withholdings or

complete exemption from federal withholding tax.

They are meant to avoid double taxation of income.

Each treaty is divided up by articles. The articles

describe the terms of each treaty.

The United States has tax treaties with 56 countries.

Some states honor the federal tax treaties – California does not!



Publication 901 has Tax Treaty information Country

of Resident Article Payor Description of Payment

Income Code Maximum

Presence in US

Maximum $$ Received in

Calendar Year that can be

exempt from federal taxes

China, People’s Rep Of 15 Scholarship or fellowship grant No limit Any US or foreign resident No limit 20(b) 16 Independent personal services 183 days Any contractor No limit 13 20 Public entertainment No limit Any contractor No limit 16 17 Dependent personal services 183 days Any contractor No limit 14 18 Teaching 3 years U.S. educational or research instit. No limit 19 19 Studying and Training Remittance or allowance No limit Any foreign resident No limit 20(a) Compensation during training or while gaining experience No limit Any US or foreign resident $5,000 20(c)

Available at IRS web site (www.irs.gov) - Publication Section (Pub. 901)



Current tax treaty provisions recognized at UCLA (by type of income)

Dividends – Income Codes 5, 6

Royalties - Income Codes 10, 11, 12

Fellowship/Scholarship - Income Code 15

Independent Personal Service - Income Code

16

Employment - Income Code 18

Student Employment - Income Code 19

Performer – Income Code 20

Other – Income Code 50 (death payments)



To Be Eligible for a Tax Treaty:

1. A tax treaty article must exist between the US and country of residence of the visitor and have a corresponding article.

2. The visitor must be a resident of the tax treaty country and a nonresident of US* unless otherwise allowed by tax treaty.

3. Primary purpose of visit and actual job must meet the tax treaty.

4. Time and $$$ constraints must be met.

5. Required to have a tax payer ID# - SSN, EIN, ITIN

6. Must complete appropriate paper work.



Exception to Non-Residency Requirement

Generally, only non-residents for tax purposes

are eligible for a tax treaty exemption.

Exception Clause

A visitor (who meets the provisions of their tax

treaty article) who becomes a resident for tax

purposes may continue to claim the exclusion

from income if their country’s tax treaty contains a

provision to do so

LET PAYROLL DETERMINE THIS FOR YOU



Example of Exception Clause

10/5/10 12/31/10

Non-Resident

1/1/11 12/31/11

Non-Resident

1/1/12 09/10/12

Resident for tax purposes

John Pierre entered the U.S. on October 5, 2010 for the very first time. He planned to

teach at UCLA until September 10, 2012 on a Research/ Scholar J1 visa.

10/4/11

1st year tax treaty eligibility 2nd year tax treaty eligibility

RESIDENCY

2010 -Non-resident for tax purposes

2011 - Non-resident for tax purposes

2012- Resident for tax purpose

Tax Treaty

1st year : 10/5/10 – 10/4/11

2nd year : 10/5/11 – 10/4/12



Required Paper Work

GLACIER Generated Forms:

Depends on type of Payment

Generally the following document for tax treaty

eligibility is required:

8233 or

IRS W-8BEN or W-9



PAPER WORK REQUIREMENTS

Employment

Non-Employment

Independent

Personnel

Services

Non Services

Payments:

Royalties,

Dividends

Travel Fellowship/

Scholarship

Residency

Determination

GLACIER

GLACIER

GLACIER

GLACIER

Documentation

of Visa Status

Required

unless sourced

out of US

Required

unless sourced

out of US

Required unless

sourced out of

US

Required

Tax Exemption

Form

GLACIER

generated:

8233 or

W-9

GLACIER

generated

Form 8233

GLACIER

generated

W-8BEN

GLACIER

generated

W-8BEN

Additional

Statement

GLACIER

generated Tax

Treaty Statement

based on Income

Code*

GLACIER

Honoraria

Statement

Declaration of

Immigration

Status by Non-

US Citizens


Tax Treaty – Professor or Researcher



Tax Treaty Chart - Income Code 18: This table is for individual whose

primary purpose for entering the U.S. is to teach or research.

COUNTRY CODE MAX. PRES. TREATY PRIMARY PURPOSE ARTICLE LIFE TIME LIMIT

Bangladesh BG 2 years no limit Teaching or Research 21(1)

Belgium BE 2 years no limit Teaching or Research 20

Bulgaria BE 2 years no limit Teaching or Research

China CH 3 years** no limit Teaching or Research 19

Commonwealth ̂ ^ 2 years no limit Teaching or Research VI (1)

Czech REP EZ** 2 years no limit Teaching or Research 21 2 years

Egypt EG 2 years no limit Teaching or Research 22

France** FR 2 years no limit Teaching or Research 20 2 years

Greece ` GR 3 years no limit Teaching only XII

Hungary HU 2 years no limit Teaching or Research 17

India IN 2 years***** no limit Teaching or Research 22

Indonesia ID*** 2 years no limit Teaching or Research 20 2 years

Israel IS 2 years no limit Teaching or Research 23

Italy IT 2 years no limit Teaching or Research 20

Jamaica JM *** 2 years no limit Teaching or Research 22 2 years

Japan JA 2 years no limit Teaching or Research 19

Korea (south) KS 2 years no limit Teaching or Research 20

Luxembourg**** LU 2 years no limit Teaching or Research XIII

Netherlands NL 2 years***** no limit Teaching or Research 21 (1)

Norway NO 2 years no limit Teaching or Research 15

Pakistan PK 2 years no limit Teaching only XII

Philippines RP 2 years no limit Teaching or Research 21

Poland PL 2 years no limit Teaching or Research 17

Portugal PO** 2 years no limit Teaching or Research 22 2 years

Romania RO 2 years no limit Teaching or Research 19

Slovak REP. LO** 2 years no limit Teaching or Research 21(5) 2 years

Slovenia SI 2 years no limit Teaching or Research 20(3) 5 years

Thailand TH 2 years****** no limit Teaching or Research 23

Trinidad/Tobago TD 2 years no limit Teaching or Research 18

United Kingdom UK 2 years****** no limit Teaching or Research 20

Venezuela VE 2 years no limit Teaching or Research

^^Commonwealth includes: Armenia(AM), Azerbaijan(AJ), Belarus(BO), Georgia(GG), Kyrgyzstan(KG), Moldova(MD),

Tajikistan(TI), Turkmenistan(TX), Ukraine (UP), and Uzbekistan(UZ)

In the Aggregate: Visits US in 1998 and 1999, returns to China for a year and comes back to US in 2001 can use the treaty for 2001

Residents of these countries are only allowed 1 lifetime tax treaty exemption

Retroactive treaties

***Treaty only good for payment by sponsor

Must equal purpose of visit

and appointment


BE SURE TO USE MOST

CURRENT CHART


Treaties with Special Time Limits

Income Code 18 CHINA

Tax treaty eligibility is based on 3 aggregate years.

Example: A resident of China visits the US and takes

advantage of the treaty in 2010 and 2012, returns to

China for 1 year and comes back to the US in 2012.

This visitor still has 2012 to use the treaty

GREECE – Most treaties have an eligibility period of 2

years but Greece has a 3 year eligibility period



Retroactive Treaties

Income Code 18

Allows the US to tax individuals retroactively to the

first day of the tax treaty if presence is 1 day over

the maximum period.

Countries with a retroactive clause in their treaty

are: India, Luxembourg, Netherlands, Thailand,

and United Kingdom



One Time Treaties Income Code 18

Some treaties allow only a 1 time application of

the treaty. Countries with a one time clause in

their treaty are: Czech Republic, France,

Indonesia, Jamaica, Portugal, and Slovak

Republic



Sponsor Specific Income Code 18

Luxembourg is sponsor specific which

means that only payments made by the

sponsor will be eligible for tax treaty

application.



Tax Treaty Eligibility Period –

Service Based Treaty Begins on the date of entry in eligible status and

ends base of the duration of treaty.

Can cross tax years

Example: Professor Brown enters the U.S. on

10/2/2010 and is eligible for a 2 year

treaty. The eligible period is:

10/2/10 – 10/1/11 – year 1

10/2/11 – 10/1/12 – year 2

Prof. Brown is eligible for tax treaty exemption until 10/1/12



Tax Treaty – Student Employee



Tax Treaty Chart Income Code 19

This table lists countries that have a tax treaty

with the US for students who receive income for

employment

Payroll Services determines tax treaty eligibility.

COUNTRY MAX. PRES. MAX AMT ARTICLE

Bangladesh 2 $8,000.00 21 (1)

Belgium 5 years $2,000.00 21 (1)

Bulgaria no limit $9,000.00 19 (1)(b)

China, Peo.’s Rep no limit* $5,000.00 20 (c)

Cyprus 5 years $2,000.00 21 (1)

Czech Republic 5 years $5,000.00 21(1)

Egypt 5 years $3,000.00 23 (1)

Estonia 5 years $5,000.00 20(1)

France 5 years $5,000.00 21 (1)

Germany 4 years $5000.00 20 (4)

Iceland 5 years $2,000.00 22 (1)

Indonesia 5 years $2,000.00 19 (1)

Israel 5 years $3,000.00 24 (1)

Korea 5 years $2,000.00 21 (1)

Latvia 5 years $5,000.00 20(1)

Lithuania 5 years $5,000.00 20(1)

Morocco 5 years $2,000.00 18

Netherlands ** no limit* $2000.00 22 (1)

Netherlands 3 year $2000.00 22 (1)

Norway 5 years $2,000.00 16 (1)

Pakistan no limit* $5,000.00 XIII(1)

Philippines 5 years $3,000.00 22 (1)

Poland 5 years $2,000.00 18 (1)

Portugal 5 years $5,000.00 23 (1)

Romania 5 years $2,000.00 20 (1)

Slovak Republic 5 years $5,000.00 21 (1)

Slovenia 5 years $5,000.00 20 (1)

Spain 5 years $5,000.00 22 (1)

Thailand 5 years $3,000.00 22 (1)

Tobago/Trinidad 5 years $2,000.00 19 (1)

Tobago/Trinidad** 5 years $5,000.00 19 (1)

Tunisia 5 years $4,000.00 20

Venezuela 5 years $5,000.00 21(1)

* Benefits provided extends only for such period of time as is reasonably necessary to

complete the education, training, or purpose of visit.

** Must be securing training required to qualify for a professional specialty

What happens when max level is reached?



Additional Information for Student Treaty Income Code 19

Spain –Article 22 Exemption from federal taxes up to $5,000. This amount must be reduced by the personal exemption allowance. The allowance for 2012 is $3,800.00 Therefore, the limit of this treaty would be $1,200.00 for year 2012. China – Article 20 Provides exemption for the period that is reasonably necessary to complete the education of training



How to determine duration of tax treaty eligibility

Student

Begins on the date of entry in eligible status and ends based of the maximum presence limit of treaty.

Count the taxable years

Example: Student enters the U.S. on 10/2/2008 and is eligible for a 5 year treaty. The eligible period is:

2008 – year 1

2009 - year 2 Eligibility period

2010 – year 3 10/2/08-12/31/2012

2011 – year 4

2012 – year 5



Required Documents for Employment

Residency for Tax Purposes

Work authorization document

I-94

GLACIER generated documents: W-4

W-9 Form

W-9 Attachment

NRA for tax Purposes

Work authorization document

I-94

GLACIER generated documents: W-4 and DE 4

8233 Form

Tax Treaty Statement



How to complete the form 8233

Refer to:

Class Handout

or

WWW.PAYROLL.UCLA.EDU

Payroll Forms; Alien Forms


http://www.payroll.ucla.edu/


Tax Treaty Example 8233 Form This is the completed 8233 form for the tax treaty example.

Must be a SS#

From Visa From I-94


2012


From Income Code 18 Chart

Tax Treaty Example 8233 Form Tax Withholding Obligations

Pierre Payroll 4/25/2012

PAYROLL OFFICE ONLY


Tax Treaty – Independent Personal

Services



Independent Personal Service - Income Code 16

This table is to be used for individuals who perform an independent personal service

Tax Withholding Obligations COUNTRY MAX. PRES. $ LIMIT ARTICLE Australia 183 days no limit 14 Austria no limit no limit 14 Bangladesh 183 days no limit 15 Barbados 89 days 5000.00 14 Belgium 182 days no limit 14 (2)(a)(b) Bulgaria no limit no limit 7** Canada no limit no limit XIV China* 183 days no limit 13 Commonwealth 183 days no limit VI (2) Cyprus 182 days no limit 17 Czech Republic 183 days no limit 15 Denmark no limit no limit 14(1) Egypt 89 days no limit 15 Estonia 183 days no limit 14 Finland no limit no limit 14 France 183 days no limit 14 Germany no limit no limit 14 Greece 183 days 10000.00 X Hungary 183 days no limit 13 Iceland 182 days no limit 18 India 89 days no limit 15 Indonesia 119 days no limit 15 Israel 183 days no limit 16 Italy 183 days no limit 14 Jamaica 89 days 5000.00 14 Japan no limit no limit 7** Kazakhstan 183 days no limit 14 Korea (South) 182 days 3000.00 18 Latvia 183 days no limit 14 Lithuania 183 days no limit 14 Luxembourg no limit no limit 15 Mexico 182 days no limit 14 Morocco 182 days 5000.00 14 Netherlands 183 days no limit 15 New Zealand 183 days no limit 14 Norway 182 days no limit 13 Philippines 89 days 10000.00 15 Poland 182 days no limit 15 Portugal 182 days no limit 15 Romania 182 days no limit 14 Russia 183 days no limit 13 Slovak Republic 183 days no limit 15 Slovenia no limit no limit 14 South Africa 183 days no limit 14 Spain no limit no limit 15 Sri Lanka 183 days no limit 15 Sweden no limit no lmit 14 Switzerland 183 days no limit X Thailand 89 days 10000.00 15 Tobago/Trinidad 183 days 3000.00* 17 Tunisia 183 days 7500.00 14 Turkey 183 days no limit 14 Ukraine no limit no limit 14(1) United Kingdom no limit no lmit 7*** Venezuela no limit no limit 14 ^^Commonwealth includes: Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan(, Turkmenistan, and Uzbekistan **Belgium, Bulgaria, Canada, Germany, Iceland, Japan and UK are Business Profits articles.

TAXABLE YEAR


Required Documentation for

withholding on Independent Personal

Services Payment

GLACIER Generated

8233 Tax Treaty Form for most Independent

Personal Payments

OR

W-8BEN for Royalty payments and Entities


Contact: Mike Sattin 310-267-5774


W-8 BEN

for

Non-Service

Payments

(ie, Royalties

and Entities)



Tax Treaty –Fellowship/Scholarship



Tax Treaty Chart - Income Code 15 COUNTRY MAX. PRES. $ LIMIT ARTICLE Armenia* 5 years 9999.99 VI(1) Azerbaijan* 5 years 9999.99 VI(1) Bangladesh no limit no limit 21(2) Belgium**** (pre 2008) 5 years no limit 21(1) Belarus* 5 years 9999.99 VI(1) China, People’s Rep no limit no limit 20(b) Cyprus 5 years no limit 21(1) Czech Republic 5 years no limit 21(1) Egypt 5 years no limit 23(1) Estonia 5 years no limit 20(1) France 5 years no limit 21(1) Georgia* 5 years 9999.99 VI(1) Germany no limit no limit 20(3) Iceland 5 years no limit 22(1) Indonesia 5 years no limit 19(1) Israel 5 years no limit 24(1) Kazakhstan 5 years no limit 19 Korea 5 years no limit 21(1) Kyrgyzstan* 5 years 9999.99 VI(1) Latvia 5 years no limit 20(1) Lithuania 5 years no limit 21(1) Moldova* 5 years 9999.99 VI(1) Morocco 5 years no limit 18 Netherlands 3 years no limit 22(2) Norway 5 years no limit 16(1) Philippines 5 years no limit 22(1) Poland 5 years no limit 18(1) Portugal 5 years no limit 23(1) Romania 5 years no limit 20(1) Russia 5 years no limit 18 Slovak Republic 5 years no limit 21(1) Slovenia 5 years no limit 20(1) Spain 5 years no limit 22(1) Tajikistan* 5 years 9999.99 VI(1) Thailand 5 taxable years no limit 22(1) Tobago/Trinidad 5 years no limit 19(1) Tunisia 5 years no limit 20 Turkmenistan* 5 years 9999.99 VI(1) Ukraine 5 years no limit 20(1) Uzbekistan* 5 years 9999.99 VI(1) Venezuela 5 years no limit 21(1)

* These countries are also known as the Commonwealth Countries. Students of the

Commonwealth Countries can only qualify for the IRC Section 117 Exemption or for the

Tax Treaty Exemption; whichever is more favorable.

** 5 year limit pertains only to Training or Research.

*** No limit for regular university study. 2 year limit for apprentice or business trainee.

**** Belgium income code 15 article not renewed in 2008. Only applicable if date of

entry is prior to 1/1/08.

Fellowship/Scholarship - This

table is for student who receive

fellowship/scholarship awards.

Payroll Sevices is the campus

office that determines eligibility.



Required Documents


Fellowship tax treaty documents are generated from GLACIER for individuals from a country with tax treaty eligibility with the US. The documents include an exemption for fellowship income.

Tax Summary Report cover page

GLACIER generated W-8BEN Form - to determine residency for federal tax purposes

*Forms can be obtained from GLACIER*


W-8 BEN for

Fellowship

&

Scholarship

Payments


Pierre Payroll 04-25-12


Year End Tax Documents

The statements provided by UCLA Payroll Service: W-2: Federal/State Wage & Tax Statement for Employees

1042S: Federal Wage & Tax Statement for non-resident non-employees or employees on a Tax Treaty

The IRS requires withholding agents to provide a

statement indicating any income paid to

nonresidents and corresponding withholdings.

Accounts Payable provides the 592B Form – Nonresident Withholding Tax

Statement for non-resident of California who work as independent

contractors in California.

Maintenance


W2 Reports federal and state taxable earnings and corresponding taxes for employees. Employees on tax treaty will receive a W2 with California information only. The federal information will be on a 1042S.

If you have any questions concerning the contents of any field, please call Aurora Orozco at (310)794-8728.

2011

Maintenance

Note difference between federal and state grosses. Due to pre tax parking.

98 4/27/2012

1042-S Reports federal taxable income for all non-employee payments made to non-

residents. Reports federal taxable income for non-resident employees who claim a tax

treaty. If you have any questions concerning the contents of any field, please call Michael Sattin x75774.

Maintenance

(2011)


Reports California

source income for

all non-employee

who are not-

California residents.

This form will be

issued by Accounts

Payable. Please

direct questions to

Shirley Sams at

(310) 794-0197

592B 2011

2011


Congratulations! You made it

to the end of class

You now have a general knowledge

of nonresident Alien taxation and

UCLA tax obligations

Taxation of Non-Residents - Payroll Services · There is a system for U.S. Persons and ... Can be...

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