- Generally, the location of the activity would be where a service is being performed, property is being rented, or the location where fellowship income is expected to be utilized in support of one’s scholarship or research.
- Royalties, copyrights, and patents, such as those paid for the use of intellectual properties (i.e., industrial properties and software licenses), are considered U.S.-sourced if utilized by Harvard due to our U.S. location. This income could be taxable up to 30% if a tax exemption or reduction claim has not been previously facilitated before the payment was issued.
- Payments issued for the purchase of goods are not taxable or reportable if considered necessary for Harvard business and are not intended as a support item for benefit of a student or scholar.
- Harvard is required to indicate the “location of activity”, particularly when paying income to foreign individuals and foreign entities, to comply with IRS tax withholding and reporting regulations. A clear indication of the location of the activity (such as the country) is necessary on all supporting documentation for the payment to be correctly classified for tax purposes. This applies to both service and non-service income.
- If the source of income cannot be determined at the time of payment because the location of the activity is not clearly indicated, the payment must be treated as U.S. sourced under IRS Regulations. Incorrect or missing information may also result in payment delays or incorrect tax withholding.
Please review additional information and scenarios commonly seen at Harvard https://nratax.oc.finance.harvard.edu/usor-foreign-source-income.