Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abord - 2011 Page 34
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44Saving clauses. U.S. treaties contain sav-
In this situation (Example 5), you can-
tax treaty. Certification can be requested for the
not use Form 2555-EZ since you had
current and any prior calendar years.
ing clauses that provide that the treaties do not
TIP
earned income other than salaries and
affect the U.S. taxation of its own citizens and
You should examine the specific treaty
wages and you had business expenses.
residents. As a result, U.S. citizens and re-
articles to find if you are entitled to a tax
TIP
sidents generally cannot use the treaty to re-
credit, tax exemption, reduced rate of
duce their U.S. tax liability.
tax, or other treaty benefit or safeguard.
However, most treaties provide exceptions
to saving clauses that allow certain provisions of
the treaty to be claimed by U.S. citizens or re-
sidents. It is important that you examine the
Common Benefits
6.
applicable saving clause to determine if an ex-
ception applies.
Some common tax treaty benefits are explained
More information on treaties. Publication
below. The credits, deductions, exemptions, re-
Tax Treaty
901 contains an explanation of treaty provisions
ductions in rate, and other benefits provided by
that apply to amounts received by teachers,
tax treaties are subject to conditions and various
students, workers, and government employees
Benefits
restrictions. Benefits provided by certain treaties
and pensioners who are alien nonresidents or
are not provided by others.
residents of the United States. Since treaty pro-
Personal service income. If you are a U.S.
visions generally are reciprocal, you usually can
resident who is in a treaty country for a limited
substitute “United States” for the name of the
number of days in the tax year and you meet
Topics
treaty country whenever it appears, and vice
certain other requirements, the payment you
This chapter discusses:
versa when “U.S.” appears in the treaty exemp-
receive for personal services performed in that
tion discussions in Publication 901.
country may be exempt from that country’s in-
•
Some common tax treaty benefits,
Publication 597 contains an explanation of a
come tax.
number of frequently-used provisions of the
•
How to get help in certain situations, and
Professors and teachers. If you are a U.S.
United States – Canada income tax treaty.
resident, the payment you receive for the first 2
•
How to get copies of tax treaties.
or 3 years that you are teaching or doing re-
search in a treaty country may be exempt from
Useful Items
Competent
that country’s income tax.
Students, trainees, and apprentices. If
You may want to see:
Authority Assistance
you are a U.S. resident, amounts you receive
from the United States for study, research, or
Publication
business, professional and technical training
If you are a U.S. citizen or resident alien, you
597
Information on the United States —
may be exempt from a treaty country’s income
can request assistance from the U.S. competent
Canada Income Tax Treaty
tax.
authority if you think that the actions of the
Some treaties exempt grants, allowances,
901
U.S. Tax Treaties
United States, a treaty country, or both, cause or
and awards received from governmental and
will cause a tax situation not intended by the
certain nonprofit organizations. Also, under cer-
See chapter 7 for information about getting
treaty between the two countries. You should
tain circumstances, a limited amount of pay re-
these publications.
read any treaty articles, including the mutual
ceived by students, trainees, and apprentices
agreement procedure article, that apply in your
may be exempt from the income tax of many
situation.
treaty countries.
The U.S. competent authority cannot con-
Purpose of
Pensions and annuities. If you are a U.S.
sider requests involving countries with which the
resident, nongovernment pensions and annui-
United States does not have a tax treaty.
Tax Treaties
ties you receive may be exempt from the income
Effect of request for assistance. If your re-
tax of treaty countries.
quest provides a basis for competent authority
Most treaties contain separate provisions for
The United States has tax treaties or conven-
assistance, the U.S. competent authority gener-
exempting government pensions and annuities
tions with many countries. See Table 6-1 at the
ally will consult with the treaty country compe-
from treaty country income tax, and some trea-
end of this chapter for a list of these countries.
tent authority on how to resolve the situation.
ties provide exemption from the treaty country’s
Under these treaties and conventions, citi-
income tax for social security payments.
zens and residents of the United States who are
How to make your request. It is important
Investment income. If you are a U.S. resi-
subject to taxes imposed by the foreign coun-
that you make your request for competent au-
dent, investment income, such as interest and
tries are entitled to certain credits, deductions,
thority consideration as soon as either of the
dividends, that you receive from sources in a
exemptions, and reductions in the rate of taxes
following occurs.
treaty country may be exempt from that coun-
of those foreign countries. If a foreign country
•
You are denied treaty benefits.
try’s income tax or taxed at a reduced rate.
with which the United States has a treaty im-
Several treaties provide exemption for capi-
•
poses a tax on you, you may be entitled to
Actions taken by both the United States
tal gains (other than from sales of real property
benefits under the treaty.
and the foreign country result in double
in most cases) if specified requirements are met.
taxation or will result in taxation not in-
Treaty benefits generally are available to re-
Tax credit provisions. If you are a U.S.
tended by the treaty.
sidents of the United States. They generally are
resident who receives income from or owns cap-
not available to U.S. citizens who do not reside
ital in a foreign country, you may be taxed on
In addition to making a request for assistance,
in the United States. However, certain treaty
that income or capital by both the United States
you should take steps so that any agreement
benefits and safeguards, such as the nondis-
and the treaty country.
reached by the competent authorities is not
crimination provisions, are available to U.S. citi-
Most treaties allow you to take a credit
barred by administrative, legal, or procedural
zens residing in the treaty countries. U.S.
against or deduction from the treaty country’s
barriers. Some of the steps you should consider
citizens residing in a foreign country also may be
taxes based on the U.S. tax on the income.
taking include the following.
entitled to benefits under that country’s tax trea-
Nondiscrimination provisions. Most U.S.
ties with third countries.
•
Filing a protective claim for credit or refund
tax treaties provide that the treaty country can-
of U.S. taxes.
Certification of U.S. residency. Use Form
not discriminate by imposing more burdensome
•
8802, Application for United States Residency
taxes on U.S. citizens who are residents of the
Delaying the expiration of any period of
Certification, to request certification of U.S. resi-
treaty country than it imposes on its own citizens
limitations on the making of a refund or
dency for purposes of claiming benefits under a
in the same circumstances.
other tax adjustment.
Chapter 6 Tax Treaty Benefits
Page 34
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