Barron's International Tax Service

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US Tax Treaties

The United States has established over 60 tax treaties with countries around the world. According to Internal Revenue Service, citizens and residents of the United States subject to foreign taxation may qualify for certain credits, deductions, exemptions, and reductions in the tax rates imposed by the foreign countries privy to a tax treaty. Since treaty provisions apply to both countries, a U.S. citizen or resident receiving income from a treaty country can refer to IRS Publication 901 to determine whether a treaty affects the taxes he or she pays to that foreign country. As to foreign residents, treaties can also reduce their U.S. taxes.

Common benefits that apply to temporary or permanent residents of a treaty-based foreign country are generally as follows. The first benefit includes exemption from taxation by a foreign country: personal service income derived for a limited number of days, teaching and research by professors in a treaty country for two to three years, limited pay received by students and apprentices, non-governmental pensions and annuities, and investment income such as interest and dividends.

The second benefit applies where both countries impose taxation on the same income. In this instance, taxpayers should be able to apply a credit or deduction with one or the other country so as to avoid double taxation. The third benefit concerns non-discrimination. This means that the foreign country cannot impose more taxation than it imposes on its own citizens in the same circumstances.

The United States has signed tax treaties with these countries: Australia, 1982; Austria, 1996; Barbados, 1984; Belgium, 1970; Canada, 1980; China, 1984; Cyprus, 1984; Czech Republic, 1993; Denmark, 1948; Egypt, 1980; Estonia, 1998; Finland, 1989; France, 1994; Germany, 1989; Greece, 1950; Hungary, 1979; Iceland, 1975; India, 1989; Indonesia, 1988; Ireland, 1997; Israel, 1975; Italy, 1984; Jamaica, 1980; Japan, 1971; Kazakhstan, 1993; Korea, 1976; Latvia, 1998; Lithuania, 1998; Luxembourg, 1962; Mexico, 1992; Morocco, 1977; Netherlands, 1992; New Zealand, 1982; Norway, 1971; Pakistan, 1957; Philippines, 1976; Poland, 1974; Portugal, 1994; Romania, 1973; Russia, 1992; Slovak Republic, 1993; Slovenia, 1999; South Africa, 1997; Spain, 1990; Sri Lanka, 2005; Sweden, 1994; Switzerland, 1996; Thailand, 1996; Trinidad and Tobago, 1970; Tunisia, 1985; Turkey, 1996; U.S.S.R. (Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Uzbekistan); 1975; Ukraine, 1994; United Kingdom, 1975; and Venezuela, 1999. These treaties can be accessed at www.unclefed.com/ForTaxProfs/Treaties/.