Why Treaties May Benefit your Expat or
Nonresident Tax Return Preparation:
Many specific and
sometimes unique individual and
business income tax benefits
are available to nonresidents,
expatriates and others under the tax
treaties the United States has with
foreign countries. The US does not have tax treaties with all countries.
The United States has tax treaties with a
number of foreign countries. Under these treaties, residents (not necessarily
citizens) of foreign countries are taxed at a reduced rate, or are exempt from
U.S. 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. Under these same treaties, residents or citizens of
the United States are taxed at a reduced rate, or are exempt from foreign taxes,
on certain items of income they receive from sources within foreign countries.
Most income tax treaties contain what is known as a "saving clause" which
prevents a citizen or resident of the United States from using the provisions of
a tax treaty in order to avoid taxation of U.S. source income.
If the treaty does not cover a particular kind of income, or 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 the
applicable U.S. tax return.
Many of the individual states of the United States tax income which is sourced
in their states. Therefore, you should consult the tax authorities of the state
from which you derive income to find out whether any state tax applies to any of
your income. Some states of the United States do not honor the provisions of tax
Often to claim treaty benefits you must include form 8833 with your tax return.
Also with respect to US citizens and permanent residents, most US tax treaties
have something referred to as a "savings clause". Those provisions
basically state that if you are a US Citizen or permanent resident, you cannot
use treaty provisions to avoid US taxes that you would have to pay absent any
contrary provision in the treaty. There are in some treaties special exceptions
to these rules. Therefore each treaty must be reviewed carefully to determine if
it benefits you. Many of the treaties contain provisions not contained in
Read the US Tax Treaty Applicable to Your Country of Residency or
Applicable Situation Here