Tax Withholding for Payments to Foreign Nationals or Nonresident Aliens (NRA)

Directive Statement

This directive establishes the proper methods of withholding tax for payments to foreign nationals or nonresident aliens (NRAs), as these payments are subject to withholding tax requirements on their U.S. source income.  All payments made to foreign nationals or NRAs must be approved by Payroll Services, based on the directive Requirements for Payments to Foreign Nationals, Nonresident Aliens (NRAs) and Foreign Organizations.

Reason for Directive

The purpose of this directive is to comply with IRS regulations 1441, 1442, and 1443 that require federal NRA withholding taxes made to foreign persons.

Generally, the NRA withholding requirement is 30% unless the Internal Revenue Code stipulates a reduced rate or exemption based on U.S. tax treaty benefits. In addition, these regulations provide for the following:

• 14% Federal withholding tax on the portion of scholarships paid for living expenses
• 30% Federal withholding tax on honoraria payments made to foreign visitors and scholars
• 30% Federal withholding taxes paid to NRA independent contractors

Who must comply?

All departments processing a payment to a foreign national, resident alien or nonresident alien.

Procedures

Follow all information in the Requirements for Payments to Foreign Nationals, Nonresident Aliens (NRAs) and Foreign Organizations prior to making any payment

Nonresident aliens may not claim “exempt” for the withholding status on IRS Form W-4

Definitions

Nonresident Alien

A nonresident alien (NRA) is an individual who is not a U.S. citizen or a resident alien.  A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding.

In general:

• F and J student visa holders are considered non-residents during their first five full or partial calendar years in the U.S.
• J professors and researchers are considered non-residents during their first two full or partial calendar years in the U.S.
• H-1, TN and O-1 visa holders are considered non-residents until they meet the substantial presence test.

Resident Alien

A resident alien is an individual that is not a U.S. citizen or national of the United States and who meets either the green card test or the IRS substantial presence test for the calendar year.

In general:

• F and J student visa holders are considered residents after five full or partial calendar years in the U.S.
• J researchers and professors are generally considered residents after two full or partial calendar years in the U.S.
• H-1, TN, and O-1 visa holders are considered residents once they meet the substantial presence test.

Last Reviewed

05/01/2020: reviewed content

Resources

IRS Publication 901, U.S. Tax Treaties

IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities

IRS Publication 519, U.S. Tax Guide for Aliens

U.S. Tax Treaties Website

Toolkits

UF HR Toolkit – Foreign Nationals

Contacts

Payroll Services: (352) 392-1231

UF Help Desk: (352) 392-HELP

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