Alien - Tax Treaty Overview

Alien - Tax Treaty Overview

February 26, 2014

Summary: An income tax treaty is an agreement between the United States and foreign governments to limit or modify domestic tax laws to prevent double taxation. The Internal Revenue Service (IRS) allows individuals from countries that have tax treaties with the United States to be exempt from federal tax withholdings. Articles in the tax treaty specify the eligibility criteria for particular types of income. Treaty articles pertaining to employment, independent personal service, scholarship/fellowship, and royalties may be considered for tax treaty exemption at UCLA. UCLA Payroll Services is required to review each tax treaty application to determine tax treaty eligibility.

Determining Tax Treaty Eligibility

In order to determine tax treaty eligibility a GLACIER record must be completed. All required GLACIER forms and supporting documentation need to be submitted to Payroll Services for a case by case review. Reviewed criteria includes: 

  • There must be an existing tax treaty agreement between the United States 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 United States unless the tax treaty provides for "dual residency". Sometimes it is possible for a nonresident to be a resident for tax purposes in the United States and still avail themselves of a tax treaty. These situations are few. 
  • The primary purpose of the visit to the United States must meet the individual tax treaty requirements. The primary 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.  
  • Each individual tax treaty article contains specific limitations on when the treaty can be used. Refer to the tax treaty charts in related information for more specific information on each treaty. 
    • The most common limitations involve either or both of the following:
      • the length of time that an individual is eligible for a tax treaty
      • the amount of income that can be earned under the tax treaty within a calendar year. 
    • Some tax treaty articles have specific restrictions on other details, such as the amount of time the individual can spend in the United States, or the number of times they can claim a treaty. 
  • The tax treaty will not be in effect until Payroll Services receives and reviews complete GLACIER generated tax treaty forms and attached required document copies. 
  • Some tax treaties allow an individual to repeat the exemption as long as the individual has been out of the United States at least one full calendar year.
  • Individual’s claiming a tax treaty must have a U.S. Taxpayer Identification Number (TIN). 
    • For employment based tax treaties, this must be a U.S. Social Security Number (SSN).  
    • For non-employee payments to individuals, this can be either a SSN or an Individual Taxpayer Identification Number (ITIN).  
    • Entities claiming a tax treaty would require an Employer Identification Number (EIN).   

The State of California does not recognize the Federal Tax Treaty; therefore, there is no tax treaty for California State Tax.

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