Income Tax Withholding for Foreign Payments

Independent Services (including honorarium)

• Federal income tax is withheld at 30% unless the foreign person is exempt under a tax treaty
• California State income tax will be withheld at the rate of 7% from any payment over $1500.00
• The statutory federal and California state tax withholding rates listed for services performed in the U.S. and the State of California, and any available treaty benefit, is applicable to all foreign persons, including both individuals as well as entities.
• The State of California does not conform to federal law relating to income protected by U.S. tax treaties. California income is taxable and subject to withholding.

Student Payments

• Federal income tax is withheld from student fellowship, scholarship, and grant payments at the rate of 14% unless the student is exempt under a tax treaty
• Federal income tax will be withheld from student service payments at the 30% rate
• California State income tax will not be withheld from student payments; however, the student is responsible for filing a California State income tax return

Non-Student Fellowships

• Federal income tax is withheld from non-student fellowships at the rate of 14% unless the recipient is exempt under a tax treaty
• California State income tax will be withheld from non-resident fellowship recipients at the rate of 7%

Foreign Employees

• Federal tax withholding is restricted to Single with 0 allowances unless the employee is exempt under a tax treaty or is a resident for tax purposes.
• State tax withholding has no restrictions.

Non-Employee Fellowships in the Payroll System (Title Code 3253 and 3254)

• Federal tax is withheld at 14% unless exempt under a tax treaty or is a resident for tax purposes.
• No state tax is withheld.