Alien - Royalty Payments

A royalty is a payment for the right to use a copyright on a book, periodical, articles, etc. The royalty can also be for the use of patents, trademarks, formulas and goodwill.

Sourcing Income 

Sourcing a payment is essential to the tax withholding obligations of a nonresident alien. A royalty payment is sourced by its type:

  • Industrial Royalty - for use of natural resource it is where the property is located.
  • Copyright Royalty/Motion Picture and Television Royalty - for use of copyright, etc. it is where the property is used.

Tax Reporting and Withholding 

  • U.S. sourced Royalty payments to nonresidents are subject to 30% Federal Tax withholding, unless exempted, or reduced under a Tax Treaty.
  • U.S. sourced Royalty payments are reported at year end on Form 1042-S. Form 1042-S is issued by Payroll Services through the GLACIER on line tax reporting system.
  • A foreign sourced royalty payment is not subject to withholding or reporting.

Tax Treaty Exclusion 

  • Industrial royalties (Income Code 10)
  • Motion Picture and Television Royalties (Income Code 11)
  • Copyright Royalties (Income Code 12)

Under certain tax treaties, different rates may apply to royalties for information concerning industrial, commercial and scientific expertise.

Steps to Process a Royalty Payment to a Foreign Individual 

  • Step 1: Determine Correct Classification of Royalty
    This is important to note for any tax treaty consideration.
    • Industrial Royalty Payment: Payment for the right to use items such as patents, trademarks, formulas or goodwill.
    • Copyright Royalty Payment: Payment for the right to use copyrighted materials, such as books, periodicals, articles and plays.
  • Step 2: Determine if a GLACIER record is required
    • If foreign individual is a United States Permanent Resident, Refugee or has Asylee status: Individual must complete IRS Form W-9. Submit to Accounts Payable with any other documents required by BruinBuy. No GLACIER record is required.
    • All other foreign individuals must complete a GLACIER Record. 
  • Step 3: Determine if individual has a U.S. Tax ID Number
    If individual does not have a SSN or ITIN, and is present at UCLA: Contact UCLA Tax Services (310-794-0538) to set up an ITIN appointment during the time that the visitor is at UCLA. Please refer to ITIN Guidelines in related information for more detail.
  • Step 4:  Complete the Initial GLACIER© Online Entry Form
    • A GLACIER record can be requested, no more than 30 days in advance.  
    • Initial GLACIER© Online Entry Form will begin the GLACIER process by instructing for Payroll Services to set up a GLACIER record for the individual.
  • Step 5:  Provide the following information to the foreign individual 
    • An email from support@online-tax.net with GLACIER logon information will be sent to them. This email is not spam or phish so that they should not ignore it or delete it.
    • They must complete their GLACIER Tax Record in a timely manner in order to receive payment. Enter the Relationship Type and Income Type as follows:
      • Relationship Type: Royalty Recipient. 
      • Income type based upon the type of Royalty being paid.
        • Industrial Royalties or
        • Copyright royalties
    • Once completed: print, sign, date and submit the required tax forms and supporting information indicated on their GLACIER Tax Summary Report to Payroll Services.
  • Step 6:  Process a BruinBuy Order
    Be sure to:
    • Note in BruinBuy comments that “The Initial GLACIER Information Form was submitted to Payroll Services on [Insert Date]”
    • Add Michael Sattin in Payroll Services as a reviewer on the BruinBuy order
    • Enter “I” in the DOC TO AP field on your BruinBuy order

Additional Recommendations

  • Appointments can be scheduled with Payroll Services to assist foreign individuals with any GLACIER issues and/or to review GLACIER forms and documentation.
  • Contact Payroll Services Nonresident Tax Compliance Administrator for more information.

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