[Purchasing] [Professional/Technical Contracts] Foreign Contracts
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. Generally, short term international visitors requiring contracts would be those who would be paid to perform, present or facilitate for the campus community or the general public.
Note: AN ITIN, SSN or other US TIN (Taxpayer Identification Number) is required in order to claim a tax treaty benefit to reduce or eliminate the 30% tax withholding. If they do not have an ITIN and wish to be exempt from withholding if eligible, they will need time to apply for one through the Federal System.
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…
- Please be aware, additional forms may be requested on an as needed basis and the process may become more involved if new information comes in to play throughout the process.
- We must secure prior approval from MnSCU before hiring a non-citizen of the United States to determine possible eligibility and tax withholding requirements.
- If it is determined to be a contract situation, contracting with a foreign individual requires an SCSU003 contract form to be used rather than an ISA regardless of the dollar amount due to the various needs surrounding non-resident alien vendors.
- 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.
- Meals (including 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.
- In other words, 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. Itemized paid receipts are required for invoicing and are to be stapled to the back of the contractor’s signed “Itemized List of Contractor Expenses” which is found at
- Contracts containing erasures, cross-outs or white outs will be returned to the department to be redone unless the changes have been initialed and dated by all parties involved. Any alteration of the contract will require preapproval from the Attorney General’s Office.
- As always, please be careful not to make verbal promises that you may not be able to keep.
Process for Foreign Contracts
Once the requesting department has worked through the short-term international visitor process with Kristy Nelson-Ramos, Center for International Studies (CIS), http://www.stcloudstate.edu/internationalstudents/scholars/visitors.asp and completed the required International Visitor Worksheet, http://www.stcloudstate.edu/internationalstudents/scholars/documents/InternationalVisitorWorksheet.pdf she will send the completed International Visitor Worksheet to MnSCU Tax Services in order to determine their eligibility.
Business Services Contract Coordinator, Carol John will be notified by MnSCU Tax Services of any additional forms or other requirements needed in order to fulfill IRS regulations and will then contact the department.
After all required documentation and approvals have been obtained, notification will be given to the department to proceed in offering the contract. At this time, steps to follow for processing an SCSU003 contract can be found at
NOTE: If there is not enough time to process the contract through the mail, fax or email the contract with the Dean’s signature to the vendor to sign and 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.
Please do not hesitate to contact Carol at x3136 with any questions or concerns.
Foreign Contractor 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 3.b.i. 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.