Determining Tax on P-Card Transactions to Foreign Suppliers
All payments to foreign suppliers may be subject to tax. The department is responsible for maintaining compliance with this tax law. All foreign supplier payments have a potential 30% withholding. A detailed explanation of goods or services purchased is required in order to provide substantiation for IRS purposes.
Please review Tax Standard Operating Procedure (TSOP) 2.04 for full reporting requirements related to foreing P-Card purchases.
- The P-Cardholder's department is responsible for any tax owing on a P-Card transaction to a foreign supplier.
- Contact University Tax Services prior to using the P-Card as payment to a foreign supplier to determine whether the 30% withholding is applicable to your purchase. Use the NRA Calculator for a better estimate of taxability.
- University Tax Services conducts a monthly audit process on all P-Card transactions to foreign supplier.
- You may be asked for follow up justification in addition to information you may have already provided.
Non-Taxable Payments
- Payment for:
- Services performed outside the U.S.
- Internet access used outside the U.S.
- Royalty used outside the U.S.
- Goods
Any of these type of payments performed or used outside of the U.S. will not be subject to U.S. income tax. University Tax Services will only need a current W-8BEN to approve any payment fitting this description.
Taxable Payments
- Services or Honorarium
- Online use of foreign libraries
- Royalty
- Software and Internet access
When any of the above actions are performed or used within the U.S. the payment will be subject to income tax and IU is required to withhold 30% or grant Treaty - See the Tax Treaty Benefits page on the UCO website for a listing of treaties available by type and by country.
U.S. Sanction Programs
The U.S. Treasury Department's Office of Foreign Asset Control (OFAC) maintains a list of countries with which economic trade sanctions have been imposed. Under no circumstances should a shipment or purchase be made to or from a country that appears on the sanctioned list regardless of funding source. For information on current OFAC Sanction Programs, please contact Purchasing.