Alien Manual, Section D3, Tax Treaty Exemption

ALIEN MANUAL - TAX RULES AND REGULATIONS, SECTION D3

D3.0 TAX TREATY EXEMPTION

An income tax treaty is an agreement between two governments. Both governments agree to tax residents of foreign countries (in which they have a tax treaty with) at a reduced rate or exempt from that countries tax rules and regulations. The IRS allows individuals from a country with a tax treaty with the U.S. to be exempt from federal tax withholdings. There are no state tax treaties.

Each tax treaty has articles that describe the type of income and particular instances in which an exemption from federal tax withholding is allowed. Generally, all treaties take into consideration payments for employment, independent personal service, and scholarship/fellowship. It is important to review each tax treaty to determine which article (if any) applies to the payment. For reference, see Tax Treaty Tables 3.2 - 3.5 included in this section.

D3.1 Determining Tax Treaty Eligibility

Eligibility for the exemption from federal income tax due to tax treaty must be determined prior to completing the UCLA Statement of Citizenship and Federal Tax Status Form. Listed below are the factors to be considered for eligibility.

There must be an existing tax treaty agreement between the U.S. and the individual’s country of residency. A resident is defined as a person who is liable for tax in their country by reason of domicile, residence, citizenship, or other factors.
The visitor must be a nonresident of the U.S. unless the tax treaty provides for "dual residency". Sometimes it is possible for a nonresident to be a resident of the U.S. for tax purposes and still avail themselves of a tax treaty. These situations must be looked at on a case by case basis. Please ask Payroll Services for assistance.
The primary purpose of the visit to the United States must meet the individual tax treaty requirements and the visitor must be paid that that type of work. Example: If a visiting professor is sponsored by UCLA as a researcher, the tax treaty must provide for that research. The purpose can easily be determined by reviewing the DS-2019 for J visa holders, the I-20 for F visa holders, and the Notice of Action for other types of visas.
The time constraints and the dollar limitations of the tax treaty must be considered. The individual is eligible for the tax treaty exemption from the first date of entry to the time limit set in the treaty. Some treaties have retroactive clauses. When an individual is in the U.S. longer than 2 years (even by 1 day), the entire tax treaty exemption is lost. There are no dollar limitation on the professor/research treaties but there are dollar and time limits on some student tax treaties.
Some tax treaties allow an individual to repeat the exemption as long as the individual has been out of the United States at least 1 full calendar year.
The individual must have a tax payer identification number. A Social Security number is required for employment and an Individual Tax Payer Identification number (ITIN) for individuals unable to receive a Social Security number.

D3.2 Tax Treaty Eligibility Table by Country - Employment (Income Code 18)

Use this table for individual whose primary purpose of entering the U.S. is to teach and or research.

COUNTRY	CODE	MAXIMUM TREATY PERIOD (from date of entry)	MAXIMUM AMOUNT OF COMPENSATION	PRIMARY PURPOSE OF WORK	TAX TREATY ARTICLE
Belgium	BE	2 years	no limit	Teaching or Research	20
China	CH	3 years*	no limit	Teaching or Research	19
Commonwealth	^{SEE BELOW}	2 years	no limit	Teaching or Research	VI (1)
Czech Republic	EZ	2 years**	no limit	Teaching or Research	21(5)
Egypt	EG	2 years	no limit	Teaching or Research	22
France**	FR	2 years	no limit	Teaching or Research	20
Germany	GM	2 years****	no limit	Teaching or Research	20 (1)
Greece	GR	3 years	no limit	Teaching only	XII
Hungary	HU	2 years	no limit	Teaching or Research	17
Iceland	IC	2 years	no limit	Teaching or Research	21
India	IN	2 years****	no limit	Teaching or Research	22
Indonesia **	ID	2 years	no limit	Teaching or Research	20
Israel	IS	2 years	no limit	Teaching or Research	23
Italy	IT	2 years	no limit	Teaching or Research	20
Jamaica**	JM	2 years	no limit	Teaching or Research	22
Japan (pre 2005)	JA	2 years	no limit	Teaching or Research	19
Japan (current)	JA	2 years	no limit	Teaching or Research	20
Korea (south)	KS	2 years	no limit	Teaching or Research	20
Luxembourg***	LU	2 years	no limit	Teaching or Research	21(2)
Netherlands	NL	2 years****	no limit	Teaching or Research	21 (1)
Norway	NO	2 years	no limit	Teaching or Research	15
Pakistan	PK	2 years	no limit	Teaching only	XII
Philippines	RP	2 years	no limit	Teaching or Research	21
Poland	PL	2 years	no limit	Teaching or Research	17
Portugal**	PO	2 years	no limit	Teaching or Research	22
Romania	RO	2 years	no limit	Teaching or Research	19
Slovak Repub**	LO	2 years	no limit	Teaching or Research	21(5)
Slovenia	SI	2 years	no limit	Teaching or Research	20(3)
Thailand	TH	2 years****	no limit	Teaching or Research	23
Tobago/Trinidad	TD	2 years	no limit	Teaching or Research	18
United Kingdom	UK	2 years****	no limit	Teaching or Research	20A
Venezuela	VE	2 years	no limit	Teaching or Research	21(3)
* Maximum aggregate period of three years Only one 2 year period allowed per individual * Exemption only applies to sponsoring institution **** Tax Treaty is lost retroactively if stay in country exceeds 2 year period.
Commonwealth includes: Armenia(AM), Azerbajian(AJ), Belarus(BO), Georgia(GG), Kyrgyzstan(KG), Moldava(MD), Tajikistan(TI), Turkmenistan(TX), and Uzbekistan(UZ)

D3.3 Tax Treaty Eligibility Table by Country - Personal Services (Income Code 16)

This table is to be used for individuals who perform an independent personal service.

COUNTRY	CODE	MAXIMUM PRESENCE IN U.S.	FIXED BASE	MAXIMUM AMOUNT OF PAYMENT	TAX TREATY ARTICLE
Australia	AS	183 days		no limit	14
Austria	AU	no limit		no limit	14
Barbados	BB	89 days		$5,000.00	14
Belgium	BE	182 days		no limit	14 (2)(a)(b)
Canada	CA	no limit		no limit	XIV
China*	CH	183 days		no limit	13
Commonwealth	SEE BELOW	183 days		no limit	VI (2)
Cyprus	CY	182 days		no limit	17
Czech Republic	EZ	183 days		no limit	14
Denmark	DA	no limit		no limit	14
Egypt	EG	89 days		no limit	15
Estonia	EN	183 days		no limit	14
Finland	FI	no limit		no limit	14
France	FR	no limit		no limit	14
Germany	GM	no limit		no limit	14
Greece	GR	183 days		$10,000.00	X
Hungary	HU	183 days		no limit	13
Iceland	IC	182 days		no limit	18
India	IN	89 days		no limit	15
Indonesia	ID	119 days		no limit	15
Ireland	EI	no limit		no limit	14
Israel	IS	182 days		no limit	16
Italy	IT	183 days		no limit	14
Jamaica	JM	89 days		$5,000.00	14
Kazakstan	KZ	183 days		no limit	14
Korea (south)	KS	182 days		$3,000.00	18
Latvia	LE	183 days		no limit	14
Lithuania	LH	183 days		no limit	14
Luxembourg	LU	no limit		no limit	15
Mexico	MX	183 days		no limit	14
Morocco	MO	182 days		$5,000.00	14
Netherlands	NL	no limit		no limit	15
New Zealand	NZ	183 days		no limit	14
Norway	NO	182 days		no limit	13
Philippines	RP	89 days		$10,000.00	15
Poland	PL	182 days		no limit	15
Portugal	PO	182 days		no limit	15
Romania	RO	182 days		no limit	14
Russia	RS	183 days		no limit	13
Slovak Republic	LO	183 days		no limit	14
Slovenia	SI	no limit		no limit	14
South Africa	SF	183 days		no limit	14
Spain	SP	no limit		no limit	15
Sweden	SW	no limit		no limit	14
Switzerland	SZ	no limit		no limit	14
Thailand	TH	89 days		10,000.00	15
Tobago/Trinidad	TD	183 days		$3,000.00*	17
Tunisia	TS	183 days		$7,500.00	14
Turkey	TU	183 days		no limit	14
Ukraine	UP	no limit		no limit	14
Venezuela	VE	no limit		no limit	14
* Under fixed base rule - presence in US for an aggregate greater than 183 in 12 month period.
Commonwealth includes: Armenia(AM), Azerbajian(AJ), Belarus(BO), Georgia(GG), Kyrgyzstan(KG), Moldava(MD), Tajikistan(TI), Turkmenistan(TX), and Uzbekistan(UZ)

D3.4 Tax Treaty Eligibility Table by Country - Fellowship/Scholarship (Income Code 15)

This table is used to exempt federal withholding for students who also receive fellowship/scholarship awards.

COUNTRY	COUNTRY CODE	MAXIMUM PRESENCE IN U.S.	MAXIMUM AMOUNT OF PAYMENT	TAX TREATY ARTICLE
Armenia*	AM	5 years	$9,999.99	VI (1)
Azerbaijan*	AJ	5 years	$9,999.99	VI(1)
Belgium	BE	5 years	no limit	21 (1)
Belarus*	BO	5 years	$9,999.99	VI (1)
China, Peo.’s Rep	CH	no limit	no limit	20 (b)
Cyprus	CY	5 years	no limit	21(1)
Czech Republic	EZ	5 years	no limit	21(1)
Egypt	EG	5 years	no limit	23(1)
Estonia	EN	5 years	no limit	20(1)
France	FR	5 years	no limit	21(1)
Georgia*	GG	5 years	$9,999.99	VI (1)
Germany	GM	no limit	no limit	20(3)
Iceland	IC	5 years	no limit	22(1)
Indonesia	ID	5 years	no limit	19(1)
Israel	IS	5 years	no limit	24(1)
Kazakstan	KZ	5 years	no limit	19
Korea	KS	5 years	no limit	21(1)
Kyrgystan*	KG	5 years	$9,999.99	VI (1)
Latvia	LG	5 years	no limit	20(1)
Lithuania	LH	5 years	no limit	20(1)
Moldova*	MD	5 years	$9,999.99	VI (1)
Morocco	MO	5 years	no limit	18
Netherlands	NL	3 years	no limit	22 (2)
Norway	NO	5 years	no limit	16 (1)
Philippines	RP	5 years	no limit	22(1)
Poland	PL	5 years	no limit	18 (1)
Portugal	PO	5 years	no limit	23
Romania	RO	5 years	no limit	20(1)
Russia	RS	5 years**	no limit	18
Slovak	LO	5 years	no limit	21(1)
Slovenia	SI	5 years	no limit	20(1)
Spain	SP	5 years	no limit	22(1)
Tajikistan*	TI	5 years	$9,999.99	VI (1)
Thailand	TH	5 years	no limit	22 (1)
Tobago/Trinidad	TD	5 years	no limit	19 (1)
Tunisia	TS	5 years	no limit	20
Turkmenistan*	TX	5 years	$9,999.99	VI (1)
Ukraine	UP	5 years**	no limit	20
Uzbekistan*	UZ	5 years	$9,999.99	VI (1)
Venezuela	VE	5 years	no limit	21(1)
* These countries are also known as the Commonwealth Countries. Students of the Commonwealth Countries can only qualify for the IRC Section 117 Exemption or for the Tax Treaty Exemption; whichever is more favorable. ** 5 year limit pertains only to Training or Research.

D3.5 Tax Treaty Eligibility Table by Country - Student & Trainee Employees (Income Code 19)

This table list the countries that have a tax treaty with the United States for individuals who are students and receive income from personal services.

COUNTRY	CODE	MAXIMUM PRESENCE IN U.S.	MAXIMUM AMOUNT OF PAYMENT	TAX TREATY ARTICLE
Belgium	BE	5 years	$2,000.00	21 (1)
China, Peo.’s Rep	CH	no limit*	$5,000.00	20 (c)
Cyprus	CY	5 years	$2,000.00	21(1)
Czech Republic	EZ	5 years	$5,000.00	21(1)
Egypt	EG	5 years	$3,000.00	23(1)
Estonia	EN	5 years	$5,000.00	20(1)b
France	FR	5 years	$5,000.00	21 (1)
Germany	GM	4 years****	$5,000.00	20(4)
Iceland	IC	5 years	$2,000.00	22(1)
Indonesia	ID	5 years	$2,000.00	19(1)
Israel	IS	5 years	$3000.00	24(1)
Japan (until 12/31/2005)	JA	5 years	$2,000.00	20(1)
Korea	KS	5 years	$2,000.00	21(1)
Latvia	LG	5 years	$5,000.00	20(1)b
Lithuania	LH	5 years	$5,000.00	20(1)b
Morocco	MO	5 years	$2,000.00	18
Netherlands - training**	NL	no limit*	$2000.00	22 (1)
Netherlands	NL	3 year	$2000.00	22 (2)
Norway	NO	5 years	$2,000.00	16 (1)
Pakistan	PK	no limit*	$5,000.00	XIII(1)
Philippines	RP	5 years	$3,000.00	22(1)
Poland	PL	5 years	$2,000.00	18 (1)
Portugal	PO	5 years	$5,000.00	23(1)
Romania	RO	5 years	$2,000.00	20(1)
Slovak Republic	LO	5 years	$5,000.00	21(1)
Slovenia	SI	5 years	$5,000.00	20(1)
Spain	SP	5 years	$5,000.00***	22(1)
Thailand	TH	5 years	3,000.00	22(1)
Tobago/Trinidad	TD	5 years	$2,000.00	19 (1)
Tobago/Trinidad - training**	TD	5 years	$5,000.00	19 (1)
Tunisia	TS	5 years	$4,000.00	20
Venezuela	VE	5 years	$5,000.00	21(1)
* Benefits provided shall extend only for such period of time as is reasonably necessary to complete the education, training, or purpose of visit. Must be securing training required to qualify for a professional specialty. * Less personal allowance. ****Tax Treaty is lost retroactively if stay in country exceeds 4 year period.

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