Teacher/Researcher Wages and Tax Treaties

The table below indicates which countries have tax treaties with the United States in which some, or all, teaching/researching wages are tax exempt, considering certain conditions are met.

If a student’s country of residence exists on the table below and they meet the criteria in Column B and Column C, wages qualify for a tax exemption and the following tax form needs to be completed upon hiring:

• Form 8233:  Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.     

If a individual’s country of residence does not exist on the table below – Form 8233 does not need to be completed.

Description of Table Columns

Column A:  Individuals’ country of permanent citizenship.  This is used in completing Form 8233 line 12c.

Column B:  Maximum length of exemption.  After the maximum years in the USA has been reached, the individual is subject to federal tax withholding.

• EXAMPLE:  An individual from Egypt has $22,000 of wages but has been in the United States for 4 years.  The $22,000 is subject to taxation because the individual has been in the United States over the 2 year limit.

Column C:  Maximum earnings for exemption. There is no limit on earnings for teachers/researchers. The amount you enter on Line 12b on Form 8233 is the same as what you entered on Line 11b.

• *The one exception to this condition is for Canada and the maximum earnings are $10,000.  Wages below the $10,000 threshold are exempt. However- if wages exceed $10,000, the entire amount is taxable and not just the amount that exceeds $10,000.          
• CANADA EXAMPLE:    An individual from Canada earns $12,000.  Because it exceeds the $10,000 threshold amount – the entire $12,000 is taxable.

Tax Treaty Table for Teaching/Researching Wages

• Note (®):   This represents the U.S.S.R income tax treaty which includes Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.
• ***THIS EXEMPTION DOES NOT APPLY TO INCOME FROM RESEARCH CARRIED ON MAINLY FOR THE PRIVATE BENEFIT OF ANY PERSON. THE RESEARCH MUST BE IN THE PUBLIC INTEREST. THIS APPLIES FOR ALL COUNTRIES.

Listed below are countries in which there are stipulations to the exemption:

• Czech Republic:  This benefit can only be claimed once and it does not apply if the resident claimed, during the immediate preceding period, the benefits as a student or apprentice.

  France:  This benefit can only be claimed once.  In addition, this benefit and the benefits received as a student/apprentice (if applicable) can be claimed for no more than 5 years.

  Germany:  This benefit does not apply, if during the preceding period, the benefit described in paragraph (2), (3), or (4) of Article 20 of the treaty, pertaining to students, was claimed.

  India: If an individual's visit to the United States exceeds 2 years, the exemption is lost for the entire visit.

  Indonesia:  An individual is entitled to this exemption only once.

  Israel:  The exemption does not apply if, during the immediately preceding period, the benefits described in Article 24(1) of the treaty, pertaining to students was claimed.

  Luxembourg:  If the individual’s visit to the United States is longer than 2 years, the exemption is lost for the entire visit unless the competent authorities of Luxembourg and the United States agree otherwise.

  Netherlands:  If the individual’s visit to the United States is longer than 2 years, the exemption is lost for the entire visit unless the competent authorities of the Netherlands and the United States agree otherwise.  In addition, the exemption does not apply if the resident claimed, during the immediate preceding period, the benefits as a student or apprentice.

  Philippines:  The exemption does not apply if the resident claimed, during the immediate preceding period, the benefits as a student or apprentice.

  Slovak Republic:  The exemption does not apply if the resident claimed, during the immediate preceding period, the benefits as a student or apprentice.

  Slovenia:  This benefit can be claimed for no more than 5 years.

  Thailand:  The exemption does not apply if, during the immediately preceding period, the benefits described in Article 22(1) of the treaty, pertaining to students was claimed.

  Trinidad & Tobago:  The exemption does not apply to this income if an agreement exists between the Governments of Trinidad and Tobago and the United States for providing the services of these individuals.

Tax Treaties can be found at http://www.irs.gov/businesses/international/article/0,,id=96739,00.html.

It is highly recommended that an individual visit the following website that summarizes tax treaty benefits and eligibility. http://www.irs.gov/pub/irs-pdf/p901.pdf  Pages 16-19.

If you have additional questions regarding tax treaties, please call or e-mail the contact below with any questions or to set up an appointment.

        Sara Marcotte, Accountant
        487-2449
        sjmarcot@mtu.edu

Information for Form 8233 and attachment