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IRS.gov Website
Publication 519
taxmap/pubs/p519-042.htm#en_us_publink1000222713

Chapter 9
Tax Treaty Benefits(p46)


taxmap/pubs/p519-042.htm#en_us_publink1000177224Introduction

A nonresident alien (and certain resident aliens) from a country with which the United States has an income tax treaty may qualify for certain benefits. Most treaties require that the nonresident alien be a resident of the treaty country to qualify in the year the benefit is claimed. However, in the case of certain students, trainees, teachers or researchers, some treaties only require the nonresident alien to be a resident of the treaty country immediately prior to coming to the United States.
taxmap/pubs/p519-042.htm#en_us_publink100051172

Tax treaties tables.(p46)

rule
The treaty tables previously contained in this publication have been updated and moved to IRS.gov. You can locate the tables on IRS.gov by entering "Tax Treaty Table" in the search box. Click on "Tax Treaty Tables." You also can access the tables by going to IRS.gov/Individuals/International-Taxpayers/Tax-Treaty-Tables.
You can access the texts of recently signed U.S. income tax treaties, protocols, and tax information exchange agreements (TIEAs) and the accompanying Treasury Department tax treaty technical explanations as they become publicly available, as well as the U.S. Model Income Tax Convention, at Treasury.gov/resource-center/tax-policy/treaties/Pages/treaties.aspx. Note that treaty and TIEA documents are posted on this site after signature and before ratification and entry into force.
The full text of individual tax treaties is available at IRS.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties-A-to-Z. For more information about tax treaties, go to IRS.gov/Individuals/International-Taxpayers/Tax-Treaties.
You can generally arrange to have withholding tax reduced or eliminated on wages and other income that are eligible for tax treaty benefits. See Income Entitled to Tax Treaty Benefits in chapter 8.

taxmap/pubs/p519-042.htm#TXMP3c170460

Useful items

You may want to see:


Publication
 901  U.S. Tax Treaties
Form (and Instructions)
 1040NR: U.S. Nonresident Alien Income Tax Return
 1040NR-EZ: U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents
 8833: Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)
See chapter 12 for information about getting these publications and forms.
taxmap/pubs/p519-042.htm#en_us_publink1000222716

Treaty Income(p46)

rule
A nonresident alien's treaty income is the gross income on which the tax is limited by a tax treaty. Treaty income includes, for example, dividends from sources in the United States that are subject to tax at a tax treaty rate not to exceed 15%. Nontreaty income is the gross income of a nonresident alien on which the tax is not limited by a tax treaty.
Figure the tax on treaty income on each separate item of income at the reduced rate that applies to that item under the treaty.
To determine tax on nontreaty income, figure the tax at either the flat 30% rate or the graduated rate, depending upon whether or not the income is effectively connected with your trade or business in the United States.
Your tax liability is the sum of the tax on treaty income plus the tax on nontreaty income, but cannot be more than the tax liability figured as if the tax treaty had not come into effect.
taxmap/pubs/p519-042.htm#en_us_publink1000222717

Example.(p47)

Arthur Banks is a nonresident alien who is single and a resident of a foreign country that has a tax treaty with the United States. He received gross income of $25,900 during the tax year from sources within the United States, consisting of the following items.
Dividends on which the tax is limited to a 15% rate by the tax treaty  $1,400
Compensation for personal services on which the tax is not limited by the tax treaty  24,500
Total gross income$25,900
Arthur was engaged in business in the United States during the tax year. His dividends are not effectively connected with that business. He has no deductions.
His tax liability, figured as though the tax treaty had not come into effect, is $3,173 determined as follows.
Total compensation $24,500
Less: Deductions 0
Taxable income $24,500
Tax determined by graduated rate (Tax Table column for single taxpayers) $2,753
Plus: Tax on gross dividends ($1,400 × 30%) 420
Tax determined as though treaty had not come into effect $3,173
Arthur's tax liability, figured by taking into account the reduced rate on dividend income as provided by the tax treaty, is $2,963 determined as follows.
Tax determined by graduated rate (same as figured above) $2,753
Plus: Tax on gross dividends ($1,400 × 15%) 210
Tax on compensation and dividends $2,963
His tax liability, therefore, is limited to $2,963, the tax liability figured using the tax treaty rate on the dividends.