The United States has income 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. income 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.
Publication 901, U.S. Tax Treaties will tell you whether a tax treaty between the United States and a particular country offers a reduced rate of, or possibly a complete exemption from, U.S. income tax for residents of that particular country. Tables in the back of the publication show the countries that have income tax treaties with the United States, the tax rates on different kinds of income, and the kinds of income that are exempt from tax. In addition to the tables in the back of the publication, the publication contains discussions of the exemptions from tax and certain other effects of the tax treaties on the following types of income:
- Pay for certain personal services performed in the United States,
- Pay of a professor, teacher, or researcher who teaches or performs research in the United States for a limited time,
- Amounts received for maintenance and studies by a foreign student or apprentice who is here for study or experience,
- Wages, salaries, and pensions paid by a foreign government.
CAUTION! You should use the publication only for quick reference. It is not a complete guide to all provisions of every income tax treaty.
Some common tax treaty benefits available to U.S. citizens and resident aliens with foreign income are explained in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Look here for the complete texts of many of the tax treaties in force and their accompanying Treasury Technical Explanations. For further information on tax treaties refer also to the Treasury Department’s Tax Treaty Documents page.
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 Form 1040NR (PDF). Also see Publication 519, U.S. Tax Guide for Aliens, and Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
Many of the individual states of the United States tax the income of their residents. Some states honor the provisions of U.S. tax treaties and some states do not. Therefore, you should consult the tax authorities of the state in which you live to find out if that state taxes the income of individuals and, if so, whether the tax applies to any of your income, or whether your income tax treaty applies in the state in which you live.
Tax treaties reduce the U.S. taxes of residents of foreign countries. With certain exceptions, they do not reduce the U.S. taxes of U.S. citizens or residents. U.S. citizens and residents are subject to U.S. income tax on their worldwide income.
Treaty provisions generally are reciprocal (apply to both treaty countries). Therefore, a U.S. citizen or resident who receives income from a treaty country and who is subject to taxes imposed by foreign countries may be entitled to certain credits, deductions, exemptions, and reductions in the rate of taxes of those foreign countries. Treaty benefits generally are available to residents of the United States. They generally are not available to U.S. citizens who do not reside in the United States. However, certain treaty benefits and safeguards, such as the nondiscrimination provisions, are available to U.S. citizens residing in the treaty countries. U.S. citizens residing in a foreign country may also be entitled to benefits under that country's tax treaties with third countries. Foreign taxing authorities sometimes require certification from the U.S. Government that an applicant filed an income tax return as a U.S. citizen or resident, as part of the proof of entitlement to the treaty benefits. For information on this, refer to Form 8802, Application for United States Residency Certification – Additional Certification Requests. In addition, refer to the discussion at Form 6166 - Certification of U.S. Tax Residency.