Payments to Foreign Entities

Obtaining a PCardTax Exception for purchases for Intangible items such as software, subscriptions, services, conferences, images, etc.

PCS PCard Policy allows the use of the University PCard to purchase Tangible items from foreign vendors for goods, supplies, or equipment that does not include annual software subscriptions, on-campus installation, or training. It prohibits purchases of intangibles from foreign vendors because the Bank that issued the PCard is only required to tax report U.S. vendors.

Business Affairs (BA) has created a PCard Tax Exception procedure so that the PCard can also be used for intangibles purchased from foreign vendors. This allows departments the freedom to make intangible purchases while allowing the University to remain compliant with applicable federal tax regulations.

This is a Special One-time-only BA Tax PCard exception which allows for the purchase of Intangible, such as software, membership access to databases, images, database access, subscripitons, services, including purchases that do not requiring shipping. 

The PCard Tax exception is obtained from Business Affairs via emailed request to jgermack@uoregon.edu that contains 'PCard Tax exception request Vendor's name' in the Subject line. It is specific to one intangible purchase from a vendor. The purchasing Department must provide the vendor's name and UO ID number, the amount and date of the purchase, the Card Holder's Name and last four digits of the card and attach a copy of the invoice or order form. Grossed up federal taxes of 42.857% may apply requiring an index to charge. 

In general, the PCard Tax exception is obtained from Business Affairs via emailed request to jgermack@uoregon.edu that contains 

• The email subject line contains 'PCard Tax exception request" & Vendor's name' in the Subject line. 
• The PCard tax exception is one time only or if the request is for monthly payments is only applicable on a calendar year basis.

Provide:

• the vendor's name and UO ID number, 
• the amount in USD and date of the purchase (or a estimated date range), the exact U.S.Dollar amount is required.
• the Last four digits of the card 
• and attach a copy of the P.O., PSC, invoice, or order form. 
• Note: Grossed up federal taxes of 42.857% may apply requiring an index to charge.

1. The vendor is required to have a Banner Vendor Number.  If the foreign vendor is not yet set up in Banner A/P, obtain a W-8 form from them or their website, and set them up per Accounts Payable procedures. See new Vendor-setup secure transmission of W-9/8 forms
2. Once they have a Vendor Number, send an email to jgermack@uoregon.edu  with  the email subject line "Request for PCard Tax Exception -vendor's name".  The body of the email must include the a>vendor’s name, b> their Banner Vendor number, c>the (estimated) date and  amount of the payment in U.S. dollars, d>the PCard's Last four digits, and d>include a copy of the website order form, P.O., PSC, quote, or invoice attached.  If the amount requires a conversion, send the amount in U.S. dollar that was charged on the PCard Statement.
3. If it is determined there is applicable taxes on the purchase, your department will be required to provide an index to charge for the taxes.  The grossed-up tax rate is 42.857%.  A Banner JV will be created by BA to charge the expense to the purchasing department's index.  This is because there is no way to withhold taxes on a PCard purchase.   
4. If the department is unable to obtain a W-8 form, for any reason, an exception request will require, in addition to the other information, a pdf attachment of your department's email sent to the vendor requesting their W-8 form, their full name and a physical address, and an index to charge for the 42.857% grossed-up tax, if it is applicable.
5. Once approved: a PCard Foreign Vendor Intangible Exception Request Approval will be emailed back to you.   
6. You may then make the purchase with your PCard. 
7. The exception is required to be uploaded to Concur attached to the expense line in question as an additional receipt .pdf image.  
8. Note: this approval is a one-time purchase only exception, specific to vendor, specific to the date, and specific to amount of the purchase.  Any other purchases from the same vendor will require additional exception requests.  

• A W-8 form is required for vendor set up.  Follow A/P procedures.
• Payments for tangible goods or products are not subject to U.S. reporting or tax withholding.
• Payments for services provided outside the U. S. by Foreign Entities and individuals are considered foreign source, and are not subject to U.S. reporting or withholding.
• Services provided inside the U.S. are subject to U.S. Taxation which include reporting and/or tax withholding if no treaty benefits were formally claimed by the vendor.
• Payments for Royalties, Software licenses, Databse access, right to use, or licenses purchased from foreign entities and used inside the U.S. are subject to U.S. taxation.
• Awards & Prizes are subject to 30% tax withholding.  There are no treaty benefits for this type of income.
• U.S. tax regulations include tax reporting and 30% tax withholding or 42.857% additional tax gross up, unless Treaty Benefits are not available and formally claimed.  Or unless the vendor provides a valid W-8ECI or W-8EXP.

General form requirements below are per the IRS official guidance.

The University of Oregon Business Affairs department cannot give exceptions to these requirements. And will have to return the W-8 to you for correction before vendor can be set up.

~
W-8BEN Form Foreign entities that are sole proprietorships only

The only Valid version is Rev. October 2021, top left of form.

**There is space for two addresses, vendor's foreign address and a mailing address, but only their permanent address outside the U.S. is required.
The rest is REQUIRED to be filled out:
the foreign Taxpayer ID must be provided line 6a or the box checked line 6b
the DBA business name is entered on  line 7

the Date of Birth is required line 8
the box above the signature must be checked, and
the signature cannot be typed in.
Treaty Benefits are not available using this form
~~

W-8BEN-E Form (Businesses, occasionally individuals)

The only Valid version is Rev. October 2021, top left of form.

**There is space for two addresses, vendor's foreign address and a mailing address, but only their permanent address outside the U.S. is required.

The rest is REQUIRED to be filled out:
the foreign Taxpayer ID must be provided on Line 9b . If the vendor is from Germany, this would be their Germany Tax ID Number.
W-8BEN-E requires one box be checked on BOTH Lines 4 and 5
the box above the signature must be checked, and
the signature cannot be typed in.
Treaty Benefits Part III, please TEAMS me or email Joy Germack jgermack@uoregon.edu to set up an appointment before sending W-8BENE to A/P so we can discuss applicable treaty article and its unique requirements.

Payment Process for International Individuals

Tax Rates when the Purchase is from a Foreign Vendor who has provided a W-8 form
Being Purchased	A W-8 Form sent to A/P is required-	Pcard usage- a W-8 Form sent to A/P is required
	Tax Rate
Any tangible items that require shipping. Such as goods,equipment w/o on-site installation or training	0%	If Pcard, BA exception not required, tax rate 0%. This is the only time purchases from foreign vendors using a PCard does not require a BA Tax Exception.
Software, Rentals, Licenses, Images, DB access, Services inside the U.S., this includes Virtual presentations where the presenter is anywhere inside the U.S. (not necessarily on campus)	30% withheld tax or 42.857% grossed up tax, unless Formal Treaty Benefits claimed	If Pcard-tax gross up rate is 42.857%, and requires a BA Pcard Tax exception.
Services outside the U.S.inside the U.S. this include virtual presentations where the presenter is outside the U.S., which must be re-affirmed after the fact	0%	If Pcard-tax rate 0%, still requires a BA Pcard Tax exception.
Software, Rentals, Licenses, Images, Services inside the U.S., this includes Virtual presentations where the presenter is inside the U.S. (not necessarily on campus)	If vendor is an Entity with establishment in a country that has a tax treaty with the U.S. and Formal Treaty Benefits claimed on their  W-8 form, 0%.  Individuals generally 8233 form also required	If Pcard-tax rate 0%, requires a BA Pcard Tax exception.
Please contact jgermack@uoregon.edu with questions.

Setting up a Foreign Vendor in Banner

Collect the appropriate W8 form from the organization and send to Business Affairs Accounts Payable. There are four W8 forms available for foreign entities (non-individuals). Note: a sole proprietor, not a corporation or partnership, must use the W-8BEN or W-8ECI form.  The vendor may determine the appropriate form by following the criteria outlined at the top of each of the forms or their instructions. The W-8BEN-E form is most commonly used by foreign entities to claim foreign status and treaty benefits. 

W-8BEN: Individuals only See Payment Process for International Individuals

W-8BEN-E: Used primarily by entities to claim foreign status and to claim treaty benefits.

• Entities not eligible for the other W8 forms should use the W-8BEN-E.
• A foreign entity from a country that has negotiated a tax treaty with the U.S. that has an article contained that exempts the type of income they are providing, will need to complete a W-8BEN-E to claim treaty benefits.
• A Foreign or a U.S. tax identification number is required for exemption from tax withholding.
• All fields in line 14-15 must be completed to claim treaty benefits exemption.

W-8ECI: Used primarily by the payee or beneficial owner that all the income that is listed on the form is effectively connected with the conduct of a trade or business located within the United States.

• The type of income must be identified on Line 9 of the form to qualify for exemption. If it is not listed we are required to obtain from the entity a different type of W8 form.
• A U.S. tax identification number is required for exemption from tax withholding.

W-8EXP: Used by the following entities to claim exemption from tax withholding, foreign governments, foreign tax exempt organization, foreign private foundation, govt. of a U.S. possession, or foreign central bank of issue.

• The entity must be claiming exemption under IRS code 115(2), 501 (c), 892, 895 or 1443(b). Otherwise they need to file a W-8BEN or W-8ECI.

W-8IMY: Used by an intermediary, a withholding foreign partnership, a withholding foreign trust, or flow through entity.

• Copies of appropriate withholding certificates, documentary evidence, and withholding statements must be attached to the W-8IMY as well.

The IRS 1042-s form will be issued to any international individuals or foreign entities that either had federal taxes withheld or claimed Treaty Benefits during a calendar year. The University of Oregon is required to mail the 1042-s form to both the IRS and to the Recipients by March 15 of the year following the calendar year in which the income subject to reporting was paid. If March 15 falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.  The University will make every effort to have these forms in the mail sooner than the due date. 

1042-s forms are issued by Business Affairs Tax Services for non-payroll payments and by the Payroll Department to employees for payroll treaty benefits. An individual may receive more than one type of 1042-s form for the same calendar year.

All taxes withheld are sent to the IRS in the name of the beneficial owner of the payment.  The 1042-S form is used to tax report the gross amounts paid to and taxes withheld from foreign persons or foreign entities that are subject to income tax reporting, even if no amount is deducted and withheld from the payment due to a treaty benefit.

The recipient may use the information on the 1042-s form to fill out a U.S. tax return and request a tax refund from the IRS.    https://www.irs.gov/forms-pubs/about-form-1042-s

Last updated 09/28/2023

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