**INACTIVE POLICY**

For Current Policies:
Policy Table of Contents

 

                      UNIVERSITY OF VIRGINIA
           FINANCIAL AND ADMINISTRATIVE POLICIES MANUAL



TITLE:  PAYROLL:  FOREIGN NATIONAL INDIVIDUALS     POLICY:  XII.F.3x
                                                 

The Internal Revenue Service (IRS) separates Foreign Nationals into
two taxation categories: 

                       RESIDENT ALIENS, and

                       NONRESIDENT ALIENS.  

Tax regulations differ for each of these categories.

Resident Aliens

      The IRS defines RESIDENT ALIENS as individuals who possess a
"Green" card (Alien Registration Receipt Card, permanent resident
card, or Form I-151 or I-551), or who have been present in the U.S.
a minimum number of days based on the Substantial Presence Test. 
Resident aliens are taxed on their world-wide income.  

NOTE: The term "Resident Alien" as defined here, denotes a type of
tax status, and is not necessarily consistent with the Immigration
and Naturalization Service definition.  Resident aliens are taxed
in the same manner U.S. citizens are taxed.

Individuals may claim Resident Alien status for tax purposes if: 

      They possess a "Green" Card (Alien Registration Receipt Card,
      permanent resident card, or Form I-151 or I-551), or 

      They pass the Substantial Presence Test.   

Resident Alien status will grant individuals tax treatment
identical to that of U.S. citizens.  Compensation is subject to
federal and state taxes and FICA at U.S. citizen tax rates. 
Compensation and taxes will be reported on Form W-2.  

To claim this status at UVa, please follow these instructions:
 
      To claim Resident Alien status at UVa, because of
      documentation from the Immigration and Naturalization Service
      attesting to this status, please complete the Alien
      Information Request Form and attach a copy of this
      documentation.

      To claim Resident Alien status because one passes the
      Substantial Presence Test, complete the Alien Information
      Request Form (with the accompanying Substantial Presence Test
      on the back) and Form 1078, Certificate of Alien Claiming     
      U.S. Residence.  Attach a copy of the visa and Form I-94 (the
      arrival and departure record).  Holders of J-1 visas should
      also attach a copy of the IAP-66.

                                                                   
      See also Procedure 12-60,
      "Completing Alien Information Request Form (Side 1) and
      Substantial Presence Test (Side 2)."

      See also Procedure 12-64,
      "Completing IRS Form 1078 For Foreign National Individuals."

      Please send completed forms to our Foreign National Tax
Specialist at the following address:

                Foreign National Tax Specialist
                Carruthers Hall
                University of Virginia
                P.O. Box 9002
                Charlottesville, Virginia 22906-9002.

These forms will be reviewed and the proper tax treatment for your
payments will be established depending on these forms.

Resident Alien Payroll Instructions 

      Resident aliens are taxed like U.S. citizens.  Thus, resident
aliens may complete their W-4 and VA-4 forms by following the
instructions provided. They are entitled to the same number of
personal exemptions as U.S. citizens, and the standard deduction. 
Resident aliens are taxed at graduated withholding rates, and they
must pay FICA. (NOTE: Enrolled students are FICA exempt.)
 
      "GREEN" CARD HOLDERS (Alien Registration Receipt Card,
      permanent resident card, or Form I-151 or I-551) are treated
      identically to U.S. citizens.  They may complete their W-4
      and VA-4 following the instructions provided on these forms.

      OTHER VISA HOLDERS, who believe they are resident aliens
      because they have passed the Substantial Presence Test,
      should their W-4 and VA-4 forms following the instructions
      provided on these forms.  To claim resident alien status,
      these individuals must come to either the Payroll department
      or Foreign National Tax office, in-person, with their
      passport and other identification (Form IAP-66 or I-20) to
      complete the Alien Information Request Form, the Substantial
      Presence Test, and Form 1078, Certificate of Alien Claiming
      Residence in the United States. 

See also Procedure 12-61,
"Completing IRS Form W-4 For Foreign National Individuals." 

Procedure 12-62, "Virginia
Department of Taxation Form VA-4 for Foreign National Individuals."
See also Procedure 12-64,
"Completing IRS Form 1078 for Foreign National Individuals."

Nonresident Aliens

      The IRS defines NONRESIDENT ALIENS as individuals who are
temporarily in the U.S. who have a closer connection to another
country than to the U.S.  Nonresident aliens are taxed on their
U.S. source income only.  Nonresident aliens may be entitled to
receive tax treaty benefits, if they are from one of the countries
mentioned below.

Residents or citizens of countries with whom the United States has
treaties may apply for treaty benefits.  Treaty benefits may reduce
their liability or totally exempt them from paying taxes, depending
on the treaty and provision.  They may be entitled to claim treaty
benefits, if they are from one of the following countries:

      Australia, Austria, Belgium, People's Republic of China,
      Commonwealth of Independent States (includes Armenia,
      Azerbaijan, Belarus, Krygyzstan, Moldova, Tajikistan,
      Turkmenistan, Ukraine, and Uzbekistan), Cyprus, Czech
      Republic, Egypt, France, Germany, Iceland, Indonesia,
      Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Republic
      of Korea, Luxembourg, Mexico, Morocco, Netherlands, New
      Zealand, Norway, Pakistan, Philippines, Poland, Romania,
      Russia, Slovak Republic, Spain, Sweden, Switzerland, Trinidad
      and Tobago, and Tunisia, and the United Kingdom.

In order to claim treaty benefits, they must come in-person to
Carruthers Hall to complete a number of forms.  These forms may be
completed at the Payroll counter anytime during regular business
hours (8-5), or by appointment with the Foreign National Tax
Specialist (924-1377).  The international person must bring with
them the following items:  passport, I-94 card, and either their
IAP-66 or I-20, or other official documentation for their visa.

NOTE: NONRESIDENT ALIENS ON PAYROLL need to notify the I-9
Specialist in Human Resources (924-7831) when they begin their
employment with UVa, and if either their visa status changes or
they become resident aliens.  NONRESIDENT ALIENS on the student
information system, ISIS, need to notify International Student and
Scholar Program (982-3010), if their visa status changes or they
become resident aliens.
                                                                   
Nonresident Alien Payroll Instructions

Nonresident aliens will be taxed only on their U.S. source income
at graduated withholding rates.  All nonresident aliens must pay
FICA, except for F-1 and J-1 visa holders during their exemption
period.  

Unlike U.S. citizens and residents, nonresident aliens are not
entitled to receive the standard deduction when they file their tax
returns.  To compensate for this, the W-4 instructions have been
modified for nonresident aliens.  Therefore, nonresident aliens
MUST DISREGARD ALL INSTRUCTIONS PROVIDED ON THE W-4.  Following
those instructions will result in underwithholding, and a tax
liability at the end of the year.

Nonresident aliens may be entitled to receive tax treaty benefits,
if they are from one of the countries mentioned above.

If the nonresident alien's country is listed above, they should
obtain a copy of Publication 901, U.S. Tax Treaties, or Publication
515, Withholding Tax on Nonresident Aliens and Foreign
Corporations, from the IRS by calling 1-800-TAX-FORM, or from the
IRS' web address: http://www.irs.ustreas.gov .  

Payroll must, nevertheless, obtain completed W-4 and VA-4 forms
from nonresident aliens during the Employee Orientation or in the
departments at the time of hire. (NOTE: Nonresident aliens MAY NOT
claim "Exempt" on their W-4 or VA-4 forms.)  These forms should be
completed  according to Procedure 12-61 and 12-62.   The W-4 and
VA-4 forms must be obtained whether or not the individual intends
to claim treaty benefits, to ensure the proper level of taxes are
withheld until the individual actively claims treaty benefits.  To
claim treaty benefits, the nonresident alien must come in-person to
the Payroll department, with his/her passport and other official
papers, to complete the Alien Information Request Form, Form 8233
and associated revenue procedures.  


Related Topics

See also Policy IV.G.2, "Taxation Instructions
for Foreign National Recipients of Scholarships/Fellowships."

See also Policy VI.A.5x, "Payments To
Individuals," related to payments to foreign national visitors'
visa status.  (Many restrictions apply to payments to foreign
nationals, depending on the visa type.)
                                                                   
ISSUED BY:                                                 06/23/97
Assistant Comptroller for
Accounting Operations          12.6.3.1