Tax Treaties Between the U.S. and the Commonwealth of Independent States
The United States has income tax treaties with many foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.
If there is no treaty between your country and the United States, you must pay tax on the income in the same way and at the same rates shown in the instructions for Form 1040NR. Also, see Publication 519.
Many of the individual states in the United States have a tax in addition to the federal taxes. Therefore, you should consult the tax authorities of the state in which you live to find out if that state taxes the income of individuals. Once you have determined the state’s general taxation, you should decide if the tax applies to any of your income.
Tax treaties reduce the U.S. taxes of residents of foreign countries. With certain exceptions, they do not reduce the U.S. taxes of U.S. citizens or residents. U.S. citizens and residents are subject to U.S. income tax on their worldwide income.
Treaty provisions generally are reciprocal (apply to both treaty countries); therefore, a U.S. citizen or resident who receives income from a treaty country may refer to the tables in this publication to see if a tax treaty might affect the tax to be paid to that foreign country. Foreign taxing authorities sometimes require certification from the U.S. Government that an applicant filed an income tax return as a U.S. citizen or resident as part of the proof of entitlement to the treaty benefits. See Form 8802, Application for United States Residency Certification, to request a certification.
Disclosure of a treaty-based position that reduces your tax. If you take the position that any U.S. tax is overruled or otherwise reduced by a U.S. treaty (a treaty based position), you generally must disclose that position on Form 8833 and attach it to your return. If you are not required to file a return because of your
treaty-based position, you must file a return anyway to report your status. The filing of Form 8833 does not apply to a reduced rate of withholding tax on non-effectively connected income, such as dividends, interest, rents or royalties, or to a reduced rate of tax on pay received for services performed as an employee, including pensions, annuities, and social security. For more information, see Publication 519 and the Form 8833 instructions.
If you fail to file Form 8833, you may have to pay a $1,000 penalty. Corporations are subject to a $10,000 fine for each failure.
Tax Exemptions Provided by Treaties
This publication contains discussions of the exemptions from tax and specific other effects of the tax treaties on the following types of income.
- Pay for certain personal services per formed in the United States.
- Pay a professor, teacher, or researcher who teaches or performs research in the United States for a limited time.
- Amounts received for maintenance and studies by an international student or apprentice here for study or experience.
- A foreign government pays Wages, salaries, and pensions.
Personal Services Income
Pay for certain personal services performed in the United States is exempt from U.S. income tax if you are a resident of one of the countries discussed below if you are in the United States for a limited number of days and meet certain other conditions. For this purpose, the word “day” means a day during any part of which you are physically present in the United States.
Terms defined. Several terms appear in many of the discussions that follow. The particular tax treaty determines the exact meanings of the terms under discussion; thus, the meanings vary among treaties. Therefore, the following definitions are general definitions that may not give the precise meaning intended by a particular treaty.
The terms fixed base and permanent establishment generally means a fixed place of business, such as a place of management, a branch, an office, a factory, a warehouse, or a mining site, through which an enterprise carries on its business.
The term borne generally means having ultimate financial accounting responsibility for, or providing the monetary resources for, an expenditure or payment, even if another entity in another location made the expenditure or payment.
Professors, Teachers, and Researchers
Pay of professors and teachers who are residents of the following countries is generally exempt from U.S. income tax for 2 or 3 years if they temporarily visit the United States to teach or do research. The exemption applies to pay earned by the visiting professor or teacher during the applicable period. For most of the following countries, the relevant period begins on the date of arrival in the United States to teach or engage in research. Furthermore, this applies to the exemption for most countries even if they stay in the United States extends beyond the applicable period.
The exemption generally applies to pay received during a second teaching assignment if both are completed within the specified time, even if the second assignment was not arranged until after arrival in the United States on the first assignment. Below, the conditions are stated under which the payment of a professor or teacher from that country is exempt from U.S. income tax.
If you do not meet the requirements for exemption as a teacher or if you are a resident of a treaty country that does not have a special provision for teachers, you may qualify under a personal services income provision discussed earlier.
Students and Apprentices
Residents of the following countries who are in the United States to study or acquire technical experience are exempt from U.S. income tax, under certain conditions, on amounts received from abroad for their maintenance and studies.
This exemption does not apply to the salary paid by a foreign corporation to one of its executives, a citizen and resident of a foreign country who is temporarily in the United States to study a particular industry for an employer. That amount is a continuation of salary and is not received to learn or acquire experience.
There is a statement of the conditions under which the exemption applies to students and apprentices from that country for each country listed.
Amounts received from the National Institutes of Health (N.I.H.) under provisions of the Visiting Fellows Program are generally treated as a grant, allowance, or award for purposes of whether the treaty provides an exemption. Amounts received from N.I.H. under the Visiting Associate Program, and Visiting Scientist Program are not exempt from U.S. tax as a grant, allowance, or award.
Wages and Pensions Paid by a Foreign Government
Wages, salaries, pensions, and annuities paid by the governments of the following countries to their residents who are present in the United States as nonresident aliens generally are exempt from U.S. income tax. The conditions under which the income is exempt are stated for each of the countries listed.
Exemption under U.S. tax law. Employees of foreign countries who do not qualify under a tax treaty provision and employees of international organizations should see if they can qualify for exemption under U.S. tax law.
Suppose you work for a foreign government in the United States. In that case, your foreign government salary is exempt from U.S. tax if you perform services similar to those performed by U.S. government employees in that foreign country and that foreign government grants an equivalent exemption. If you work for an international organization in the United States, your salary from that source is exempt from U.S. tax. See Chapter 10 of Publication 519 for more information.
Overview of the Treaties Between the U.S. and the Commonwealth of Independent States
Income that residents of a C.I.S. member receive for performing personal services in the United States is exempt from U.S. income tax if those residents are in the United States for no more than 183 days during the tax year.
Pay received by an employee who is a member of the regular complement of a ship or aircraft operated in international traffic by a C.I.S. member or a resident of a C.I.S. member is exempt from U.S. tax.
Professors, Teachers, and Researchers
An individual who is a resident of a C.I.S. member on the date of arrival in the United States and who is temporarily in the United States at the invitation of the U.S. Government or an educational or scientific research institution in the United States primarily to teach, engage in research, or participate in scientific, technical, or professional conferences is exempt from U.S. income tax on income for teaching, research, or participation in these conferences for a maximum period of 2 years.
This exemption does not apply to income from research carried on mainly for the benefit of a private person, including a commercial enterprise of the United States or a foreign trade organization of a C.I.S. member.
The exemption does, however, apply if the research is conducted through an intergovernmental cooperation agreement.
This exemption also applies to journalists and correspondents who are temporarily in the United States for periods not longer than two years and who receive their compensation from abroad. The journalists or correspondents don’t need to be invited by the U.S. Government or other appropriate institutions, nor does it matter that they are employed by a private person, including commercial enterprises and foreign trade organizations.
Students and Apprentices
An individual who is a resident of a C.I.S. member and who is temporarily in the United States primarily to study at an educational or scientific research institution or to obtain training for qualification in a profession or specialty is exempt from U.S. income tax on amounts received as stipends, scholarships, or other substitute allowances necessary to provide ordinary living expenses. An individual is entitled to the benefit of this exemption for a maximum of 5 years and for less than 10,000 in each tax year.
An individual who is a resident of a C.I.S. member and who is temporarily in the United States primarily to acquire technical, professional, or commercial experience or perform technical services and who is an employee of, or under contract with, a resident of a C.I.S. member is exempt from U.S. income tax on the amounts received from that resident. Also, exempt is an amount received from U.S. sources, of not more than $10,000, that is necessary to provide for ordinary living expenses. The exemption contained in this paragraph is limited to 1 year.
An individual who is a resident of a C.I.S. member and who is temporarily present in the United States under an exchange program provided for by an agreement between governments on cooperation in various fields of science and technology is exempt from U.S. income tax on all income received in connection with the exchange program for a period not longer than one year.
Wages and Pensions Paid by a Foreign Government
Wages, salaries, and similar income paid by the C.I.S. or a member of the C.I.S. to its citizens for personal services performed as an employee of a governmental agency or institution of the C.I.S. or a member of the C.I.S. (excluding local government employees) in the discharge of governmental functions are exempt from U.S. income tax. For this purpose, persons engaged in commercial activities are not considered engaged in the discharge of governmental functions.