DOCUMENTS PAGE |
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| TO: | University Administrators and
Faculty Sponsors |
| FROM: | Office of the General Counsel
International Office Tax Operations Office |
| RE: | Foreign Speakers |
| DATE: | December 13, 1999 |
This Memorandum discusses generally the tax and immigration rules involved in inviting foreign individuals for brief visits to speak at Harvard. Recent legislative changes have prompted requests for a summary of the applicable rules. These rules originate in federal statutes and regulations and are not specific to Harvard.
The Immigration and Nationality Act (the "INA") is the basic statute governing the ability of foreign individuals to travel to the United States and to engage in commercial activities here. References to alphabetical visa classifications derive from the subsections of Section 101(a)(15) of the INA under which the individuals are admitted to the United States.
In most instances, foreign speakers on short visits to the United States will be admitted in B visa status. This would include those in B-1 status (business visitors) and B-2 status (tourist visitors), and those from designated countries who would be similarly classified as B visitors, but for whom the visa requirement has been waived (WB or WT, respectively). Other routinely encountered visa classifications are the J-1 (exchange visitors) and H-1B (speciality occupations).
Separate rules govern the ability of individuals in each of these visa classes to receive compensation and expense reimbursements from U.S. entities. Prior to 1998, the University could not provide compensation to individuals in B status. The University could only reimburse travel expenses for foreign scholars in B-1 (or WB) status and could make no payments to those in B-2 (or WT) status. Legislation enacted in 1998 liberalized the rules to additionally permit the payment of honoraria and associated incidental expenses to individuals in B visa status "for a usual academic activity or activities" lasting no longer than nine (9) days, provided the individual hasn't received similar payments from more than five (5) other institutions during the previous six (6) months. This applies to all individuals in B visa status, whether B-1, B-2, B-1/B-2, WB or WT. Where the honorarium rule is not applicable, such as where the activity exceeds nine (9) days, the old rules continue to apply.
An individual in J-1 status may be paid for a lecture or other academic activity provided that the written permission of the J-1 sponsor (where other than Harvard) has been obtained. Harvard is not permitted to pay an honorarium to those in H-1B status, who may only be engaged by the employer sponsoring their H petition.
An honorarium paid to a foreign speaker will be treated as compensation for services and will be subject to income tax withholding and reporting. An expense payment made to a foreign speaker will not be considered to be income and will not be reportable, provided that the amount is paid or reimbursed under the general accountable plan rules requiring (i) a business connection for the expense, (ii) substantiation of the expense, and (iii) return of any excess payments.
Compensation payments will be reported on Form 1042-S, Foreign Persons U.S. Source Income Subject to Withholding, under Income Code 16 as "Compensation for independent personal services."
Withholding on the compensation payment will generally be at a 30% rate, although this rate may be reduced or eliminated under an income tax treaty between the United States and the foreign individual's country of residence. To reduce withholding, an eligible nonresident individual must file a form with the University (Form 8233) which requires the foreign individual to provide a taxpayer identification number and identify the treaty article providing the exemption. This process is often found to be too cumbersome where relatively minor amounts are involved. In any event, the Tax Operations Office should be consulted should a treaty exemption be sought.
The individual will be required to file an income tax return to report the honorarium income from the speaking engagement. Nonresident individuals file a Form 1040 NR (U.S. Nonresident Alien Income Tax Return) or the simplified 1040 NR-EZ to declare the compensation income set forth on the Form 1042-S. The filing is generally required by April 15th of the calendar year succeeding the year of payment. Filing often results in the refund of withheld amounts, through the application of a treaty exemption, the personal exemption or certain limited deductions. The Form 1040 NR (or 1040 NR-EZ) and instructions can be obtained from the IRS Website or by writing to the IRS at the Eastern Area Distribution Center, P.O. Box 85627, Richmond, VA 23285-5627, U.S.A.
The foregoing is intended to be only a general discussion of issues arising in inviting foreign individuals to speak at the University. Should you have more specific questions, the International Office can assist with visa questions, the Tax Operations Office with tax and reporting issues, and the Office of the General Counsel with both types of questions.
