Claiming Tax Treaty Benefits

Eligibility

In order for foreign nonresident alien students and scholars to be exempt from federal and state income tax withholding the non-resident alien must meet certain criteria. First, there must be a treaty provision that exists between the United States and the nonresident alien’s country of residence. Second, the individual must meet the treaty eligibility requirements for the particular treaty article being claimed. Third, the nonresident alien must have either a social security number or an Individual Taxpayer Identification Number (ITIN) to be able to receive treaty benefits. Fourth, the correct tax treaty exemption forms must be completed and supported by all required documentation.

Forms

The type of form used to claim treaty benefits depends upon the type of income being paid under the treaty provision, and whether the foreign individual is a nonresident alien or resident alien for tax purposes.

  • For personal services income
    • Use form 8233 and the Tax Treaty Statement if the individual is a student, a teacher or researcher. Form 8233 and the Tax Treaty Statement expires at the end of each calendar year. The UNL Payroll Office will notify the nonresident alien that he/she must complete a new form each year. The nonresident alien is responsible for completing the form and returning it to the Payroll Office prior to the deadline indicated in the letter. If the nonresident fails to complete the proper forms each years, he/she will not be given treaty benefits until such time that the new treaty forms are completed.
    • Use form W-9 and Attachment to form W-9 if the foreign individual is a resident alien for tax purposes. This form is valid indefinitely until the individual’s circumstances change where the information reported is no longer valid, i.e. the resident alien becomes a “green card” holder or citizen, or treaty time limits run out. Use form W-8BEN for scholarship/fellowship grants and royalty income if the foreign individual is a nonresident alien for tax purposes. This form is valid as long as the individual is eligible for treaty benefits and the individual receives a tax reportable payment at least once per year.
    • Use form W-9 and Attachment to form W-9 if the individual is the foreign individual is a resident alien for tax purposes. This form is valid indefinitely until the individual’s circumstances change where the information reported is no longer valid. ie. resident alien becomes a “green card” holder, a citizen or treaty time limits run out.

Nonresident & Resident Alien Social Security Number / Taxpayer Identification Number (TIN) Requirement

Effective for payments made on or after January 1, 2001, any tax treaty claim made on forms 8233 or W-8BEN which do not contain a social security number or a permanent U. S. Taxpayer Identification number cannot be accepted.

A permanent TIN is:

  • Social Security Number (SSN) – Used for employees, independent contractor and scholarship/fellowship recipients
  • Individual Taxpayer Identification Number (ITIN) – Used for independent contractor and some scholarship/fellowship recipients

Related links:

Tax Treaty Table on Sapphire

Tax Treaty Statements on Sapphire

IRS Publication 901- U.S. Tax Treaties 

IRS Tax Treaty Information