Knowledge Base Spotlight

Why does a supplier need to complete a W-8 form?

By Finance Division Communications

Written by Andrew Coats.

This month’s Finance Division Knowledge Base spotlight is on the following article: Why does a supplier need to complete a W-8 form?

NC State’s Controller’s Office requires an Internal Revenue Service (IRS) W-8 form to be completed for payments to nonresidents of the U.S., individuals and entities (AKA nonresident aliens), for amounts subject to withholding. The W-8 is required to document the payee’s nonresident tax status. IRS tax reporting and withholding requirements for nonresident taxpayers is different from the requirements for U.S. taxpayers.

Other reasons to complete a W-8 form include:

  • Claiming tax treaty benefits to reduce or eliminate U.S. tax withholding on various types of income
  • Claiming tax-exempt status as a foreign government or other foreign organization
  • Reporting U.S. tax filing obligations for income effectively connected to U.S. trade or business

All payments made to foreign nationals are considered immediately subject to U.S. tax withholding. While there are some exceptions to this general rule, university departments, colleges, administrators and foreign nationals must understand that taxes may have to be deducted from honoraria, speaker fees, non-qualified scholarships or fellowships, travel reimbursements, royalty payments, awards, stipends, service payments and other miscellaneous payments. 

W-8 forms are IRS forms that foreign individuals and businesses must file to verify their country of residence for tax purposes, certifying that they qualify for a lower rate of tax withholding. Although the W-8 forms are issued by the IRS, they are submitted only to payers or withholding agents (university), not to the IRS. Failure to submit the form may result in a withholding at the full 30% rate that applies to foreign persons or entities.

Nonresident aliens generally refers to any person who is not a U.S. citizen, U.S. national, U.S. resident, asylee, refugee or permanent resident. Nonresident aliens are also called “international persons” or “foreign nationals.”

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