Tax & Accounting Blog

U.S or Foreign Person Part 2: U.S. Person

U.S or Foreign Person Part 2: U.S. Person

Individuals who are U.S. persons include U.S. citizens and non-U.S. citizens who are resident aliens for U.S. federal tax purposes. U.S. citizens and resident aliens are subject to withholding and reporting on their worldwide income even when they live and work outside the U.S. U.S. citizens include: Individuals born in the U.S. Individuals born outside of … Read More

U.S or Foreign Person Part 1

U.S or Foreign Person Part 1

In order for payers (called withholding agents because of their obligation to withhold taxes) to withhold and report income payments appropriately, they must determine whether the beneficial owner of the income is a U.S. person or a foreign person. The broad definition for the term, withholding agent, includes anyone who “has control, receipt, custody, or … Read More

Residency for Tax Treaty Purposes for Individuals Part 4: The Tax Expatriation Rule

Residency for Tax Treaty Purposes for Individuals Part 4: The Tax Expatriation Rule

Tax code Sections 877 and 877A (the exit tax) impose special provisions on certain U.S. citizens who terminate their citizenship and long-term green-card holders who lose their status through abandonment (whether or not intentional) or revocation provided they meet certain criteria. As a result, most tax treaties include provisions limiting the eligibility of these individuals to use … Read More

Residency for Tax Treaty Purposes for Individuals Part 3: The Savings Clause Exception

Residency for Tax Treaty Purposes for Individuals Part 3: The Savings Clause Exception

Because the United States imposes worldwide taxation on its citizens and immigrants (popularly called green-card holders), all U.S. tax treaties include a provision commonly referred to as a savings clause because it saves the right of the U.S. to tax its citizens and residents wherever they reside in the world. For example, Article 1(4), General Scope, … Read More

Residency for Tax Treaty Purposes for Individuals Part 2: Eligibility for Treaty Benefits

Residency for Tax Treaty Purposes for Individuals Part 2: Eligibility for Treaty Benefits

Eligibility for tax treaty benefits in the first instance is based on an individual’s tax residency status (not citizenship) in the treaty country. The timing of tax residency in the treaty country varies with the treaty article providing the benefit. Most treaty benefits require an individual to be a tax resident of the treaty country at the … Read More

Residency for Treaty Purposes for Individuals – Part 1

Residency for Treaty Purposes for Individuals – Part 1

The United States has income tax treaties with over 60 countries for the primary purpose of avoiding double taxation. Double taxation occurs when an individual’s country of residence (or citizenship, in the case of U.S. citizens) taxes an individual on worldwide income and the country where income is derived also taxes the individual’s income, typically by … Read More