US Based Entities - Explanations for Non-US Vendor Validations 

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In last week’s Blog Post entitled: “Table:  Non-US vs US Vendors for US Based Entities” I listed a table that showed the different forms, tax numbers as well as the different validations for the address, banking and watch lists.  Below you can find more detail about validations for Non-US Vendors for US Based Entities.  

IRS:  Legal Name and Tax ID 

Note:  Under certain scenarios for a foreign vendor that is an individual, the IRS could require a birthdate.  

 

  • Disclaimer:   I am not a Tax professional.  W-8’s can be very complex, seek advice as needed from an Accounting and/or Tax professional.  

  • Reason to Validate:  Confirms that vendor is registered with the IRS and is not fraudulent and will not result in B-Notices from the IRS due to Legal Name and Tax ID mismatches.  

  • Required Document:  IRS W-8(X) 

  • How to Validate:   

 

Other Tax Registration Numbers 

 

  • VAT (Value Added Tax) 

  • Reason to Validate:  VAT is an International Country level sales tax that your company’s tax team may need to use to reclaim VAT that is added to invoices paid.   

  • Required Document:  Invoice or Request from Vendor 

  • How to Validate:   

 

Office of Foreign Assets Control (OFAC)/Specially Designated Nationals (SDN) List 

 

  • Reason to Validate:  Vendors that appear on this list should not be setup in your vendor master file. If there is a vendor match, please notify your leadership for further action. Compliance with OFAC regulations is required for all US individuals and entities.  Failure to comply can result in both civil and criminal penalties. 

  • Required Document:  IRS W-8(X) 

  • How to Validate:   

 

Banking Details 

 

Note: The Early Warning program to verify the Bank Account Name and the Bank Account Number is not available outside of the United States as of the publish date of this blog post.  

 

  • Required Document:  Vendor Letterhead, Bank Letter or Company Branded Banking Setup Form (recommended).  I know that many International companies will have their banking included on their invoice. I do not recommend using the invoice for this purpose, but if you do, to ensure that you are not taking that information from a fictitious invoice, validate that the bank account number is the same across multiple vendor invoices.   

 

  • SWIFT/BIC Code 

  • Reason to Validate: Ensure that International ACH or Wire payments are processed successfully. Countries that do not require an IBAN will have a BIC Code or SWIFT code along with a bank account number. 

  • How to Validate:   

 

  • IBAN  

  • Reason to Validate: Ensure that International ACH or Wire payments are processed successfully. The IBAN is required for all bank accounts in the EU countries plus Norway, Switzerland, Liechtenstein and Hungary. The IBAN is made up of a code that identifies the country the account belongs to, the account holder's bank and the account number itself. 

  • How to Validate:   

  • Free –Verify with Vendor Bank.  There is no regulated validation for the IBAN.  IBAN validations are included with most third party's paid subscription plan.  

 

Address 

  • Required Document:  IRS W-8(X) or Invoice (if remit address is different) or Fully Executed Contract 

  • Reason to Validate:  Confirms that vendors are not fraudulent attempting to use addresses that do not exist.  Also reduces the potential that check payments or distributed 1042s will not be returned causing rework for the team.  Standardizes address formats in accordance with US Postal Service (US) or Universal Postal Union (Non-US). For PO Boxes, also require a street address and validate both.  

  • How to Validate:   

Now that you have all this great information to validate Non-US vendor information, protect it. Implement internal controls and best practices to reduce the potential for letting fraudulent vendors or data into your vendor master file.  Get training or the eGuide.  

Want a handy Cheat Sheet that includes the links to the validation resources?  Sign up for my mailing list below, download the Vendor Validation Reference List and share with your entire team!   

Protect the Vendor Master File from Fraud.  Keep it Clean.   

Vendor Setup & Maintenance Additional Resources:   

  

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