Tax Treaty Exemption
Nonresident aliens from countries
that have a U.S. tax treaty agreement can exclude some
or all of their income from Federal Income Tax withholding under the terms
of the tax treaty between their country of residence and the U.S. These
treaties provide exemptions from federal
income tax payable on wages, scholarships/fellowship grants, and
independent personal services. Student exemptions from withholding of
income tax for personal services exist for several countries but are
limited to specific dollar amounts per calendar year. Most treaties
specify a limited number of years individuals are eligible for an
exemption.
Nonresident aliens eligible for an
income tax exemption must complete the Internal Revenue Service (IRS) Form
8233 (Exemption From Withholding on Compensation for Independent Personal
Services of a Nonresident Aliens).
If you wish to claim the benefits of a tax treaty between the United
States and your country of residence, you must:
-
Have a U.S. taxpayer identification
number. A U.S. social security number is required for employees. A
social security number or a taxpayer identification number (ITIN) is
required for all other types of payments.
-
Be a resident of a country that has an
income tax treaty with the U.S.
-
Receiving income covered by a specific
article in the tax treaty for which you claim an exemption.
-
Meet all eligibility requirements (visa
type, period of presence in the U.S., etc).
IRS Publication 901- U.S. Tax Treaties
(http://www.irs.ustreas.gov/pub/irs-pdf/p901.pdf)
can be used for a quick reference guide for treaty information. However,
it is not a complete guide to all provisions of every income tax treaty.
GLACIER Determines Eligibility
Once the individual has completed their GLACIER record, the system will
automatically determine eligibility for a tax treaty exemption and
generate Form 8233. Individuals
eligible for a tax treaty exemption will need to date and sign Form 8233
and submit along with all of their GLACIER documents.
Form 8233
Form 8233
should be used by nonresident alien students, teachers, and researchers to
claim exemption from withholding on compensation for services exempt from
taxation under a U.S. tax treaty.
Form 8233 must be filed by all nonresident
aliens who claim a withholding exemption on compensation based on a tax
treaty between the U.S. and the individual's home country. The individual
must file the Form 8233 whether the exemption is claimed for services as
an employee or services as an independent contractor.
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