Business Services

Service Hours

Business Services Hours:

8:00-4:30 Monday-Friday
Summer:
7:30-4:00 Monday-Friday

Cashier Hours:

8:00-4:00 Monday-Friday
Summer:
7:30-3:30 Monday-Friday

Business Serivces

[Purchasing] [Professional/Technical Contracts] Foreign Contracts

Foreign Contract Policy

The IRS requires 30% federal income tax withholding on compensation paid to a “foreign national”, which includes a foreign corporation, foreign partnership, foreign trust, foreign estate and/or any other person who is not a U.S. citizen.  This is required unless the amounts are either exempt under the terms of a tax treaty, or exempt from tax under the Internal Revenue Code.

We must secure prior approval from MnSCU before hiring a non-citizen of the United States.

The individual must have an ITIN (Individual Tax Identification Number) before they can be paid.  If they do not have an ITIN, they will need time to apply for one through the Federal System.  The individual must complete and sign the MnSCU “Vendor Tax Residency Information Form”, Form W-8BEN and the “B Honoraria Eligibility Certification Form”.  These forms must be approved by MnSCU to check tax treaty status, etc… before the contract is offered to the individual. 

Exception:  If we are paying for travel reimbursement only and the individual holds a B1 or B2 visa we do not have to collect any forms other than copies of the visa/immigration status, they do not need to have an ITIN and we do not withhold 30%.

Note:  You can access the IRS direction for forms and/or instructions at http://www.irs.gov/publications/p515/index.html

It is in everyone’s best interest to start early in your contract process.  Be sure to let those in your office who do the paperwork and deal with the payment to know early in advance when working with someone outside the country so there is time to build a successful contract.  Do not make verbal promises that you may not be able to keep.

If there are any questions or concerns, please call x83136.

Procedure and Helpful Hints for Foreign Contracts

  • First and foremost, the more lead time allowed and the more information given can be crucial to having a seamless contract situation for all parties involved.  Many times it can take a while to nail down the specifics, get forms back and forth, etc… for contracts with foreign vendors.  Be aware additional forms may be requested on an as needed basis as you go through the process.  Rarely will we have all the answers at once because decisions are based upon the information received at the time it is received.

  • In order to determine what tax forms will be needed prior to requesting a vendor number and offering a contract, complete and return the Foreign Vendor Preparation Worksheet.  Once this completed form is submitted, MnSCU tax services will be contacted for direction.  As soon as we hear back, additional instructions on how to proceed will be emailed.

  • There needs to be an SCSU003 contract done regardless of the dollar amount because we are dealing with a non-resident alien vendor which may be subject to 30% withholding and possibly another 2% for non-resident entertainer tax if there will be people in attendance other than SCSU students and/or employees.

  • All-inclusive contracts are always the easiest but not always wanted by the contractor.  It all depends upon how they take care of their tax issues.  In addition, as I mentioned, if people other than SCSU employees will be present (open to the public) we will need to withhold the 2%, that comes off of the gross amount paid even if he has an SSN.

  • That said all expenses must be paid for by the contractor for which they will request and receive reimbursement in accordance with the current Commissioner’s Plan.  Original, itemized receipts are required to be stapled to the back of the contractor’s signed invoice using the above attached form, named “Itemized List of Contractor Expenses”.

  • Please know that any meals (even at Garvey), lodging (even the Hayman suite), ground travel (even if picked up by SCSU people) are the responsibility of the contractor.  We cannot reimburse anyone else or pay for any of these items out of departmental, foundation, student fees, agency accounts or otherwise.  Faculty and/or staff cannot pick up this person, then claim mileage or other expenses due to this person’s visit.  In addition, the university cannot be direct billed by a third party vendor for anything in connection with your contractor.  All expenses need to be accounted for within the contract.

NOTE:  If there is not enough time to process contract through the mail, fax or email the contract with the Dean’s signature to the vendor to sign return electronically.  This ensures they are agreeing to the contract language and payment terms but is not yet a valid contract.  The department will hold on to the “original contract” until the vendor arrives at which time the contract should be immediately signed by the contractor and then fully executed in Business Services as usual prior to the start of work.  We will be looking for any final immigration documents that may have been required upon entry at this time as well.

Foreign Vendor Terms of Payment

It is always preferred for payments to be sent to contractors through the mail after their departure in order to allow processing time.  However, we are aware that in some countries it is next to impossible for individuals to cash these checks.  In this case, if the contractor is requesting payment prior to their departure, please see below.

  • If the contract is for compensation/honorarium only, it is possible to request the pull warrant from St. Paul.  The contract needs to reflect this information on Page 3, section III.B.1.  Also, enter this information in header page 2 of the purchase order under instructions to vendor as well as entering this information in the PO’s memo field.  We must have two weeks lead time in order to receive the check back from St. Paul prior to the contractor’s departure.  Provided that all required forms and immigration documents have been submitted and approved along with a signed additional authorization form from the inviting department, the check may be presented to the contractor after their duties are completed and prior to U.S. departure.
  • If expenses are involved a pull warrant may be possible prior to departure provided that all required forms and immigration documents have been submitted and approved along with an itemized invoice and corresponding original itemized expense receipts, all showing a zero balance due.  Again, we must have two weeks lead time in order to receive the check back from St. Paul prior to the contractor’s departure.
  • Please call ext. 3136 with any questions or concerns.
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