We understand how important it is that payments to foreign suppliers be made in a timely manner. Our goal is to make this complex process as seamless as possible. If you would rather call us to walk you through this process or settle any questions you have, one of our supplier management experts will be happy to help you. Call us: 734-615-2000, press 3, press 1 or email us.
To get you started, here is a high level overview of the process of paying a foreign supplier from start to finish:
- Add supplier
Add supplier in M-Pathways with W8 attached.
- Submit invoice
- Approval process
Department approves, then Shared Services Center approves, ensuring that the appropriate supplier tax information and forms are obtained if needed.
We want to call attention to the approval process in the overview. After departmental approvals take place, we are responsible for ensuring that government tax and withholding requirements are met. Rather than front load you with the burden of figuring out if you need additional forms, we take care of this during our approval process.
This also means we may reach out to you during the approval process to gather additional tax withholding information, or to request additional forms from you such as the Royalty Foreign Transaction Form or the Foreign Transaction Form. Once we have completed this approval process the payment will be made.
Each foreign payment is unique, and therefore may not be processed in the same timeframe as other foreign payments you have requested. In addition, we rely heavily on information we need from the supplier to process payments, but are proactively working with them to process payments quickly and efficiently.
If you are paying a foreign individual for services, royalties, or gift/prizes/awards, please use the PeoplePay Decision Tool to pay the individual. Once you find the appropriate PeoplePay form, follow the routing instructions at the bottom to pay a foreign individual. This will not require a Supplier ID or ePro Requisition.
1. Getting Started
To prevent roadblocks when paying a foreign supplier, ensure you have completed two important steps before you submit the invoice. Not completing these steps may result in delays in payments. We recommend you start this process a month in advance of the anticipated payment date.
- Ensure the supplier is added in M-Pathways
- Ensure the correct W-8 series tax form for this supplier is on file
Task 1: Add a foreign supplier in M-Pathways
The Supplier eForm:
- provides a secure method to attach the supplier’s W-8 series form (listed below).
Payments that do not require a W-8 Form include payment for conferences outside the U.S. (including conference fees, hotel stay, travel outside the U.S., etc.), payment for books, refunds, reimbursements to a foreign individual, membership fees/subscriptions, and DPIF payments (Donor Pool Income Fund ).
Task 2: Ensure the right tax form is on file for a foreign supplier
Below we have provided guidelines to help you understand expectations on tax forms to be completed by suppliers as well as answers to common questions to help you understand the forms and clear expectations on where to find information.
Which W-8 series tax form should the supplier complete?
This will depend on the foreign entity itself. We cannot advise the supplier on which form to complete, nor how they fill it out. We highly recommend that the supplier review this letter (doc) from the U-M Tax Department that may answer some of their questions. It is also recommended that the supplier consult with their tax advisor when selecting the correct W-8 series form.
Here are descriptions of each of the W-8 series forms with links and instructions:
W-8EXP foreign (non-US) foreign governments or foreign organizations claiming applicability of section(s) 115(2), 501(c), 892, 895, or 1443(b). An IRS determination or U.S. counsel opinion letter may be required to verify the entity’s status as a tax-exempt organization. An IRS determination or U.S. counsel opinion letter may be required to verify the entity’s status as a tax-exempt organization.
Form | Instructions
2. Invoice is Submitted for Foreign Supplier
Invoices submitted with a foreign remit address (except for Canada or the Virgin Islands) will be routed for draft payment or wire transfer. The requester (who submitted the invoice) will receive an email containing a link to enter the wire information. Please note that only the requester may enter banking information for draft payment or wire transfer. This is done individually for each voucher to be paid via draft or wire. If you need help filling out this information please contact Treasury at 734-763-1299.
Making payment by wire does incur a $15 charge for the requesting department. If you do not wish to make payment by wire and would like to send payment via check, please email us or reply directly to the system generated email requesting the wire information.
I’m Ready to Request a Foreign Payment
3. Approval Process
After departmental approvals take place, we are responsible for ensuring that government tax and withholding requirements are met. Rather than front-load you with the burden of figuring out if you need additional forms or tax withholdings, we take care of this during our approval process. During our approval process we may ask you for a Foreign Transaction Form, a Royalty Foreign Transaction Form, and/or additional information on the W-8 form to claim treaty benefits. The descriptions below will help you understand what situations may require these additional forms for your specific transaction.
Foreign Transaction Form
A Foreign Transaction Form is needed each time a foreign company supplier is paid for services or rent, or when a foreign company is invoicing for travel expenses. It may also be requested if the purpose of payment is not clear on the invoice.
Royalty Foreign Transaction Form
A Royalty Foreign Transaction Form is needed each time a foreign company supplier is paid for royalties (payment for film screening fees, payment for “use of…,” etc.).
Certain types of foreign payments require IRS reporting on a 1042-S. The specific type of payments are listed below to help you identify which payments require this reporting:
- Payment for services rendered inside the U.S.
- Payment for rental property inside the U.S. or rental equipment that is used inside the U.S.
- Payment for travel expenses incurred inside the U.S.
Payments falling under these categories will be taxed at 30%, unless the supplier’s nation of incorporation has a tax treaty with the US. In that case, they need to provide an Employer Identification Number (EIN) on their W-8 form, and complete the claim of tax treaty benefits on the form as well. This will allow for reduced withholding or exemption from withholding.
If you have any questions about these forms, or withholdings, one of our supplier management experts will be happy to help you. Call us: 734-615-2000, press 3 or email us.