Frequently Asked Questions

I am planning an international project/program involving activities in a foreign country that are expected to exceed 90 days. Where do I start?

See Initiating a Program Over 90 Days for information about how to obtain legal-entity status in a non-U.S. country and on institutional compliance with domestic and foreign-country reporting and regulatory requirements.

Also, contact your institution's central administrative department(s) responsible for supporting international activities. That function is commonly housed within the president's or provost's office. The general counsel's office should also be made aware of potential activities, as well as other applicable internal teams such as human resources, the chief financial officer/controller, cash management, sponsored research, and others.

Since our university is a nonprofit in the United States, is it necessary to register and pay taxes in the foreign country?

While much of an institution's educational and research-related income derived in the United States is exempt from U.S. and state taxes, an institution may be required to register in the host country and may not be exempt from taxes there, even if the institution does not generate any income in that country. Registration is often necessary for activities lasting six months or more, regardless of whether the activity generates revenue. With regard to taxation, unless there is a specific exemption granted by the host country, or an exemption afforded by an income tax treaty between the United States and the host country, the institution could be treated as a for-profit entity and taxed on income.

See Assessing the Need for Legal Status When Planning to Operate or Operating in a Host Country section of the IRC Web site for more information.

Can I open a bank account in a country without being legally registered there?

Generally, an institution must initiate the registration process in a foreign country before it will be allowed to open a bank account in the institution's name. In some countries, the registration must be completed before you can open a bank account in the institution's name. See the Cash Management with International Activities section of the IRC Web site for more information.

Why would a university register in a foreign country?

Host-country laws define and set forth the procedures for when and how universities should conduct their activities in that country. Many countries require foreign organizations to register (seek permission) their presence and declare the nature of their activities to appropriate ministry(ies) in that country. This is especially true when the activity will exceed six months in duration. There also may be additional host-country requirements.  For example, if the university will be hiring local employees or independent contractors, opening bank accounts, or leasing or using real property (i.e., facilities) in the host country, the institution may be required to register. 

In some instances, the U.S. government may have a bilateral agreement with the host country allowing U.S. institutions/entities who are receiving U.S. government grants/awards to operate in that country without going through the formal process of registration. Generally, however, these bilateral agreements provide certain exemptions from paying income and social security taxes for expat and third-country national employees, customs and duty taxes, and so forth. Local counsel in the host country should be contacted to consider all of these options before deciding whether registration is required or necessary to operate in a foreign country.

See Assessing the Need for Legal Status When Planning to Operate or Operating in a Host Country section of the IRC Web site for more information.

What are the recommended steps for a university to register in a country, and what does the process involve?

It is good practice to hire a local law firm to advise the institution of the legal and financial requirements of registering in a foreign country. Depending on the country, there may be several registration options such as a Memorandum of Understanding with a government ministry(ies), liaison, or branch office, or a local subsidiary. The institution should decide the best option for registration depending on the type of activity, sponsor, duration of activity, and the host-country laws. Once registration is complete, your institution will likely be required to register with the local tax and social security authorities so that you can legally hire local employees, withhold and remit taxes for those employees, and provide locally mandated benefits.

See Assessing the Need for Legal Status When Planning to Operate or Operating in a Host Country section of the IRC Web site for more information.

How much does registration cost?

The cost of registration varies widely, from a few hundred dollars to several thousand. In addition to fees charged by the host-country government, the total costs may include the cost of consularization, international couriers, processing fees, and fees to obtain advice from a local law firm. The institution may also need to renew its license on an annual basis, including the requirement to have statutory audits of its local financial statements to be filed with the local authorities to maintain good standing under host-country laws as well as for the renewal process.

How long does it take to register in a country?

The time it takes to complete the process varies from country to country, from a few months to over a year.

Do institutions have to wait until registration is complete to begin work in a country?

It varies by country, but in many cases institutions do operate while the registration process is being completed. In some countries, the ministry where the registration application is pending will issue a provisional certificate to conduct activities in that country.  In some instances, the institution may be able to engage a third party to temporarily hire staff or pay vendors while the registration process is pending.  Local counsel and accounting firms may be able to provide this service or provide contact information for third parties who may be able to provide such services on a temporary basis.

Does it make sense to retain a lawyer in a foreign country prior to establishing a program or project abroad, including a study abroad or research project? 

Generally it is advisable to seek host-country legal advice regarding the corporate, tax, labor, and sometimes criminal laws of a foreign country before starting any programs, including starting or conducting a study abroad program.

Other than registration requirements, what are the most common legal or compliance-related obligations associated with international activities?

When hiring and/or sending workers overseas, institutions must ensure that they are in compliance with host-country employment-classification laws. Hiring a worker as an independent contractor rather than as an employee can be cheaper in the short term for a university, but if host-country authorities determine that a worker has been misclassified, the institution could be subject to severe fines and reputational damage in addition to paying back wages, severance pay, and taxes for the employees.  Institutions sending employees abroad must also understand individual immigration requirements, such as visa and work-permit requirements. In addition, these individuals may be obligated to pay income and social security taxes to host-country authorities, even if they remain on a U.S. payroll and even if they are working in the country for just a short time. 

To what extent should we conduct due diligence on our prospective foreign partners?

Conducting some degree of due diligence on a proposed partner before entering into a Memorandum of Understanding (MOU) or other agreement is critical to a successful collaboration.  The extent of the due diligence will vary based on the partner's organization type, the need for the partner organization to represent the university in the host country, and other factors. It is best practice to conduct legal and other diligence on prospective foreign partners such as foreign schools, foreign governments, foreign vendors, foreign individuals, and certain foreign "middlemen." Due diligence may yield precious information on the counterpart's reputation, motivations, business experience, finances, and litigation outlook. In completing these steps it is also important to understand the market for your program and for recruiting qualified students into the program.  See the Collaborating with Institutions Abroad section of the IRC Web site for more information.

What does an institution need to be aware of when budgeting for an international program?

It is important to understand that proper legal setup and ongoing support of an international program may require additional resources beyond the base cost of the program itself, and that these costs must be budgeted for before committing to the activity. Items such as payroll administration, legal fees, registration/tax fees, and social insurances can increase program costs. Also, sending an employee abroad may cost as much as three times the employee's salary when factoring in tax equalization, compensation, benefits, allowances, and international tax and tax services.

 What are some implications for the individual when an institution sends an employee abroad?

The institution should consider the foreign country's immigration and individual income tax laws and whether a tax treaty and/or totalization agreement exists between the home and host countries. It is important to note that tax liability is assessed based on the country where the employee is located, not the country where payments are made. This means that an employee in the host country who remains on a U.S. payroll may be required to pay income and social security taxes to host country authorities. It's also important to note that a tourist visa is not a legal form of entry into most countries when traveling on university business or planning to work in a foreign country.

 What are three common mistakes universities make when embarking on global programs?

Administrators should also be aware that gauging the reliability of personnel abroad, and obtaining reliable information from overseas advisers, is an ongoing challenge. Many institutions have learned the hard lesson of operating under inaccurate assumptions. Administrators should work closely with university counsel and other relevant offices to obtain and assess overseas information and attendant risks.

What's something we could do on our campus to improve administrative support for international activities?

Identify one person to be the central contact for international administrative questions. This individual should report directly to a decisionmaker in the university (e.g., controller or vice provost for international affairs). Also, identify one person in each of the main administrative units (e.g., sponsored research, general counsel, human resources, or purchasing) to be the international contact for that unit. The central contact should work with school-level administrators to identify and solve problems facing specific campus constituencies.  See the Home Campus section for more information on supporting international activities. 

Campus administrators most closely dealing with global operations can routinely share information to build awareness of the issues faced in conducting activities overseas to raise the visibility of them for  faculty members and fellow administrators.

How do administrative staff learn about the common risks of international programs?

Administrative staff have a number of options for keeping apprised of international issues, such as:

How can business officers gain the support of senior leadership for the commitment of resources to international programs and activities?

Each institution must decide for itself the amount of resources it should devote to supporting international activities, depending on budgets, the number and nature of activities abroad, host countries of operation, and other factors.  Senior leaders of the institution should be fully informed of the financial and reputational risks of operating international activities.

Here are some strategies to help administrators prepare for discussions with the institutional leadership: