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IRS.gov Website
Publication 519
taxmap/pubs/p519-043.htm#en_us_publink1000222721

Some Typical Tax Treaty Benefits(p47)

rule
The following paragraphs briefly explain the exemptions that are available under tax treaties for personal services income, remittances, scholarships, fellowships, and capital gain income. The conditions for claiming the exemptions vary under each tax treaty. For more information about the conditions under a particular tax treaty, download the complete text of most U.S. tax treaties at IRS.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties-A-to-Z. Technical explanations for many of those treaties also are available at that site. Also see Pub. 901.
Tax treaty benefits also cover income such as dividends, interest, rentals, royalties, pensions, and annuities. These types of income may be exempt from U.S. tax or may be subject to a reduced rate of tax. For more information, see Pub. 901 or the applicable tax treaty.
taxmap/pubs/p519-043.htm#en_us_publink1000222722

Personal Services(p47)

rule
Under most income tax treaties, nonresident aliens from treaty countries and dual residents who tie break in favor of the treaty country (see chapter 1) who are temporarily present in the United States to perform services may be eligible to exempt some or all of their personal services income from U.S. tax if they meet the requirements of the applicable treaty article.
taxmap/pubs/p519-043.htm#en_us_publink100017232

Income from employment.(p47)

rule
Most income tax treaties have an “income from employment” article, sometimes called the “dependent personal services” article, which allows residents of the treaty country to exempt income earned as employees in the United States from U.S. tax if they satisfy the following. Some income tax treaties contain different requirements, such as a different period of maximum presence. For more information, see Pub. 901.
taxmap/pubs/p519-043.htm#en_us_publink100017233

Independent personal services.(p47)

rule
Some income tax treaties contain an “independent personal services” article, which allows residents of the treaty country to exempt income earned as an independent contractor or as a self-employed individual from U.S. tax if they are present in the United States for a period not exceeding a certain number of days and if they do not have a fixed base regularly available to them in the United States.
Note. Some treaties do not have an independent service article. Under these treaties, income for independent personal services may be covered by the business profits article. Under the business profits article, individuals can generally exempt their business profits from U.S. tax unless they have a permanent establishment in the United States to which the business profits are attributable. For more information, including definitions of the terms "fixed base" and "permanent establishment," see Pub. 901.
taxmap/pubs/p519-043.htm#en_us_publink1000222723

Teachers, Professors, and Researchers(p47)

rule
Under many income tax treaties, nonresident alien teachers or professors who temporarily visit the United States for the primary purpose of teaching at a university or other accredited educational institution are not subject to U.S. income tax on compensation received for teaching for the first 2 or 3 years after their arrival in the United States. Many treaties also provide an exemption for engaging in research.
Generally, the teacher or professor must be in the United States primarily to teach, lecture, instruct, or engage in research. A substantial part of that person's time must be devoted to those duties. The normal duties of a teacher or professor include not only formal classroom work involving regularly scheduled lectures, demonstrations, or other student-participation activities, but also the less formal method of presenting ideas in seminars or other informal groups and in joint efforts in the laboratory.
If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens, later, under Resident Aliens.
taxmap/pubs/p519-043.htm#en_us_publink1000222725

Employees of Foreign Governments(p47)

rule
All treaties have provisions for the exemption of income earned by certain employees of foreign governments. However, a difference exists among treaties as to who qualifies for this benefit. Under many treaties, aliens who are U.S. residents do not qualify. Under most treaties, aliens who are not nationals or subjects of the foreign country do not qualify. Employees of foreign governments should read the pertinent treaty carefully to determine whether they qualify for benefits. Chapter 10 of this publication also has information for employees of foreign governments.
taxmap/pubs/p519-043.htm#en_us_publink1000222726

Students, Apprentices, and Trainees(p47)

rule
Under some income tax treaties, students, apprentices, and trainees are exempt from tax on remittances received from abroad for study and maintenance. Also, under some treaties, scholarship and fellowship grants, and a limited amount of compensation received by students, apprentices, and trainees may be exempt from tax.
If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens, later under Resident Aliens.
taxmap/pubs/p519-043.htm#en_us_publink1000222728

Capital Gains(p47)

rule
Most treaties provide for the exemption of gains from the sale or exchange of personal property. Generally, gains from the sale or exchange of real property located in the United States are taxable.
taxmap/pubs/p519-043.htm#en_us_publink1000222729

Resident Aliens(p47)

rule
Resident aliens may qualify for tax treaty benefits in the situations discussed below.
taxmap/pubs/p519-043.htm#en_us_publink1000222730

General Rule for Resident Aliens(p48)

rule
Resident aliens generally do not qualify for tax treaty benefits because most tax treaties contain a "saving clause" which preserves or "saves" the right of the United States to tax its citizens and residents as if the tax treaty had not come into effect. However, many tax treaties have exceptions to the saving clause, which may allow a resident alien to continue to claim treaty benefits.
Some exceptions to the saving clause apply to all resident aliens (for example, under the United States–People's Republic of China treaty); others apply only to resident aliens who are not lawful permanent residents of the United States (green card holders).
In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U.S. tax under the treaty. However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 1 in the case of wages or salaries). Enter the amount for which treaty benefits are claimed in parentheses on Schedule 1 (Form 1040), line 21. Next to the amount write "Exempt income," the name of the treaty country, and the treaty article that provides the exemption. On Form 1040, subtract this amount from your income to arrive at total income on Schedule 1 (Form 1040), line 22.
Also follow the above procedure for income that is subject to a reduced rate of tax, instead of an exemption, under the treaty. Attach a statement to Form 1040 showing a computation of the tax at the reduced rate, the name of the treaty country, and the treaty article that provides for the reduced tax rate. Include this tax on Form 1040, line 11a. Write "Tax from attached statement" on the dotted line next to line 11 and enter the amount of the tax on line 11.
taxmap/pubs/p519-043.htm#en_us_publink1000222732

Example.(p48)

Jacques Dubois, who is a resident of the United States under Article 4 of the United States–France income tax treaty, receives French social security benefits. Under Article 18(1) of the treaty, French social security benefits are not taxable by the United States. Benefits conferred by Article 18(1) are excepted from the saving clause under Article 29(3) of the treaty. Mr. Dubois is not required to file a Form 8833 for his French social security benefits or report the benefits on Form 1040.
taxmap/pubs/p519-043.htm#en_us_publink1000222733

Special Rule for Canadian and German Social Security Benefits(p48)

rule
Under income tax treaties with Canada and Germany, if a U.S. resident receives social security benefits from Canada or Germany, those benefits are treated for U.S. income tax purposes as if they were received under the social security legislation of the United States. If you receive social security benefits from Canada or Germany, include them on line 1 of your Social Security Benefits Worksheet for purposes of determining the taxable amount to be reported on Form 1040, line 5b. You are not required to file a Form 8833 for those benefits.
taxmap/pubs/p519-043.htm#en_us_publink1000222734

Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens(p48)

rule
Generally, you must be a nonresident alien student, apprentice, trainee, teacher, professor, or researcher in order to claim a tax treaty exemption for remittances from abroad for study and maintenance in the United States, for scholarship, fellowship, and research grants, and for wages or other personal service compensation. Once you become a resident alien, you generally can no longer claim a tax treaty exemption for this income.
However, if you entered the United States as a nonresident alien, but you are now a resident alien for U.S. tax purposes, the treaty exemption will continue to apply if the tax treaty's saving clause (explained earlier) provides an exception for it and you otherwise meet the requirements for the treaty exemption (including any time limit for claiming treaty exemptions, explained below). This is true even if you are a nonresident alien electing to file a joint return, as explained in chapter 1.
If you qualify under an exception to the treaty's saving clause, you can avoid income tax withholding by giving the payer a Form W-9 with the statement required by the Form W-9 instructions.
taxmap/pubs/p519-043.htm#en_us_publink1000222736

Time limit for claiming treaty exemptions.(p48)

rule
Many treaties limit the number of years you can claim a treaty exemption. For students, apprentices, and trainees, the limit is usually 4–5 years; for teachers, professors, and researchers, the limit is usually 2–3 years. Once you reach this limit, you can no longer claim the treaty exemption. See the treaty or Pub. 901 for the time limits that apply.
taxmap/pubs/p519-043.htm#en_us_publink1000222737

How to report income on your tax return.(p48)

rule
In most cases, you alsowill not need to report the income on your Form 1040 because the income will be exempt from U.S. tax under the treaty. However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 1 in the case of wages, salaries, scholarships, or fellowships). Enter the amount for which treaty benefits are claimed in parentheses on Schedule 1 (Form 1040), line 21. Next to the amount write "Exempt income," the name of the treaty country, and the treaty article that provides the exemption. On Form 1040, subtract this amount from your income to arrive at total income on Schedule 1 (Form 1040), line 22.
taxmap/pubs/p519-043.htm#en_us_publink1000222738

Example.(p48)

Mr. Yu, a citizen of the People's Republic of China, entered the United States as a nonresident alien student on January 1, 2014. He remained a nonresident alien through 2018 and was able to exclude his scholarship from U.S. tax in those years under Article 20 of the U.S.–People's Republic of China income tax treaty. On January 1, 2019, he became a resident alien under the substantial presence test because his stay in the United States exceeded 5 years. Even though Mr. Yu is now a resident alien, the provisions of Article 20 still apply because of the exception to the saving clause in paragraph 2 of the Protocol to the U.S.–People's Republic of China treaty dated April 30, 1984. Mr. Yu should submit Form W-9 and the required statement to the payer.