Q. We have a speaker coming to our campus (in the U.S.) for one day who is a citizen of the UK and a resident of Italy, and will be paid an honorarium for the speaking engagement. He has a U.S. ITIN. He will be in the U.S. for 12 days and will also visit two other campuses. Without any direction from us, he has forwarded a completed and signed Form W-8 that indicated a permanent residence address in Italy (line 3), and also indicated on line 9 that he, as the beneficial owner, is a resident of Italy within the meaning of the income tax treaty between the U.S. and that country.
Based on this information. we believe he is eligible for the U.S./Italy tax treaty that exempts income earned in the U.S. as an independent contractor from tax, because he is a resident of Italy and he has confirmed that he does not have a fixed base regularly available to him in the U.S. for performing services.
We believe he would need to complete Form 8233 in order to claim an exemption of tax on his honorarium payment under the U.S./Italy tax treaty, but the speaker has said that the other campuses he is visiting have accepted the Form W-8 for this purpose. Are we able to use Form W-8 instead?
Assuming Form 8233 is the correct form to use, I have a follow-up question. I’ve recently read that there is an additional statement required to be attached to Form 8233, and Publication 519 was referenced as the place to find the required language. When I researched this in Publication 519, I found Appendices A (tax treaty exemption procedure for students) and B (tax treaty exemption procedure for teachers and researchers). It doesn’t seem like either of these apply to our scenario, but looking at Appendix B, there are five choices for Italy. Out of the options, the first one seems to be the most applicable, since the others reference services performed for teaching or research. The first option states: “I was a resident of Italy on the date of my arrival in the U.S. I am not a U.S. citizen. I have not been accorded the privilege of residing permanently in the U.S. as an immigrant.” Based on the information provided, is this the best choice of statement to attach to the Form 8233?
A. You are correct: non-resident alien individuals who wish to claim a tax treaty in connection to payment for independent personal services (U.S.-source income) must use Form 8233 to do so. (You are also correct in this case, that the treaty to be claimed would be that with Italy.) Recipients of scholarships or fellowships claim treaty benefits on the W-8BEN, but when payment is for services, the recipient must use 8233 to claim treaty benefit. (If recipient is paid both a scholarship and income for services, the 8233 will suffice; they do not need to submit both the 8233 and a W-8BEN.) See Instructions for Form 8233, and Instruction for Form W-8BEN (page 2 – “Do not use form W-8BEN if …”).
Note that form 8233 must be submitted to the IRS within five business days of receipt, for verification; the IRS must respond within 10 business days if the claim is not valid. If you do not hear from the IRS in 10 business days, you may presume the treaty claim is valid.
With regard to your follow-up question, we do not have certain knowledge in this area. However, it appears to us according to IRS Publication 519, page 42, that the individual is to attach a statement to the 8233 to give to you as per Appendix B (in this case), and that the statement should approximate each of the points listed there. In other words, we do not believe the five statements are different options, but all potentially part of the statement that the payee should include. However, the wording can be adjusted to meet the specific situation. So the individual would include the language in point 1, and then for point 2, the individual may state his professional position and indicate something like: “…visiting the United States for the purpose of speaking at SUNY New Paltz, which is a recognized educational institution. I will receive compensation for my speaking activities.” Point 3 makes the specific treaty claim; point 4, again substitute “speaking” for “research” and indicate the scope/audience of the speaking, and include point 5.
We reason this based on a reading of the five points under the consistent statement examples for all the countries (the points cover different aspects of the individual’s situation, with point 3 making the specific treaty claim), and the statement on page 42 that instructs the filer: “For treaties not listed in the appendices, attach a statement in a form similar to those for other treaties.”) We understand these instructions to mean that the statement should cover the points mentioned, modified to the specifics of the individual and his circumstances.
We are not tax attorneys, and do not assert our interpretation as correct under the complex tax laws. We therefore offer the same recommendation that IRS personnel have often told us: you may wish to consult a tax attorney.