Publication 54 |
2008 Tax Year |
Topics - This chapter discusses:
-
Some common tax treaty benefits,
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How to get help in certain situations, and
-
How to get copies of tax treaties.
Useful Items - You may want to see:
See chapter 7 for information about getting these publications.
The United States has tax treaties or conventions with many countries. See Table 6-1 at the end of this chapter for a list
of these countries.
Under these treaties and conventions, citizens and residents of the United States who are subject to taxes imposed by the
foreign countries are entitled to certain credits, deductions, exemptions, and reductions in the rate of taxes of those foreign
countries. If a foreign country with which the United States has a treaty imposes a tax on you, you may be entitled to benefits
under the treaty.
Treaty benefits generally are available to residents of the United States. They generally are not available to U.S. citizens
who do not reside in the United States. However, certain treaty benefits and safeguards, such as the nondiscrimination provisions,
are available to U.S. citizens residing in the treaty countries. U.S. citizens residing in a foreign country may also be entitled
to benefits under that country's tax treaties with third countries.
You should examine the specific treaty articles to find if you are entitled to a tax credit, tax exemption, reduced rate of
tax, or other treaty benefit or safeguard.
Some common tax treaty benefits are explained below. The credits, deductions, exemptions, reductions in rate, and other benefits
provided by tax treaties are subject to conditions and various restrictions. Benefits provided by certain treaties are not
provided by others.
Personal service income.
If you are a U.S. resident who is in a treaty country for a limited number of days in the tax year and you meet certain other
requirements, pay you receive for personal services performed in that country may be exempt from that country's income tax.
Professors and teachers.
If you are a U.S. resident, pay you receive for the first 2 or 3 years that you are teaching or doing research in a treaty
country may be exempt from that country's income tax.
Students, trainees, and apprentices.
If you are a U.S. resident, amounts you receive from the United States for study, research, or business, professional and
technical training may be exempt from a treaty country's income tax.
Some treaties exempt grants, allowances, and awards received from governmental and certain nonprofit organizations. Also,
under certain circumstances, a limited amount of pay received by students, trainees, and apprentices may be exempt from the
income tax of many treaty countries.
Pensions and annuities.
If you are a U.S. resident, nongovernment pensions and annuities you receive may be exempt from the income tax of treaty countries.
Most treaties contain separate provisions for exempting government pensions and annuities from treaty country income tax,
and some treaties provide exemption from the treaty country's income tax for social security payments.
Investment income.
If you are a U.S. resident, investment income, such as interest and dividends, that you receive from sources in a treaty country
may be exempt from that country's income tax or taxed at a reduced rate.
Several treaties provide exemption for capital gains (other than from sales of real property in most cases) if specified requirements
are met.
Tax credit provisions.
If you are a U.S. resident who receives income from or owns capital in a foreign country, you may be taxed on that income
or capital by both the United States and the treaty country.
Most treaties allow you to take a credit against or deduction from the treaty country's taxes based on the U.S. tax on the
income.
Nondiscrimination provisions. Most U.S. tax treaties provide that the treaty country cannot discriminate by imposing more burdensome taxes on U.S. citizens
who are residents of the treaty country than it imposes on its own citizens in the same circumstances.
Saving clauses. U.S. treaties contain saving clauses that provide that the treaties do not affect the U.S. taxation of its own citizens and
residents. As a result, U.S. citizens and residents generally cannot use the treaty to reduce their U.S. tax liability.
However, most treaties provide exceptions to saving clauses that allow certain provisions of the treaty to be claimed by U.S.
citizens or residents. It is important that you examine the applicable saving clause to determine if an exception applies.
More information on treaties.
Publication 901 contains an explanation of treaty provisions that apply to amounts received by teachers, students,
workers, and government employees and pensioners who are alien nonresidents or residents of the United States. Since treaty
provisions generally are reciprocal, you can usually substitute “ United States” for the name of the treaty country whenever it appears, and vice versa when “ U.S.” appears in the treaty exemption discussions in Publication 901.
Publication 597 contains an explanation of a number of frequently-used provisions of the United States–Canada income
tax treaty.
Competent Authority Assistance
If you are a U.S. citizen or resident alien, you can request assistance from the U.S. competent authority if you think that
the actions of the United States, a treaty country, or both, cause or will cause a tax situation not intended by the treaty
between the two countries. You should read any treaty articles, including the mutual agreement procedure article, that apply
in your situation.
The U.S. competent authority cannot consider requests involving countries with which the United States does not have a tax
treaty.
Effect of request for assistance.
If your request provides a basis for competent authority assistance, the U.S. competent authority generally will consult
with the treaty country competent authority on how to resolve the situation.
How to make your request.
It is important that you make your request for competent authority consideration as soon as either of the following
occurs.
In addition to making a request for assistance, you should take steps so that any agreement reached by the competent
authorities is not barred by administrative, legal, or procedural barriers. Some of the steps you should consider taking include
the following.
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Filing a protective claim for credit or refund of U.S. taxes.
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Delaying the expiration of any period of limitations on the making of a refund or other tax adjustment.
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Avoiding the lapse or termination of your right to appeal any tax determination.
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Complying with all applicable procedures for invoking competent authority consideration.
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Contesting an adjustment or seeking an appropriate correlative adjustment with respect to the U.S. or treaty country tax.
Taxpayers can consult with the U.S. competent authority to determine whether they need to take protective steps and when any
required steps need to be taken.
The request should contain all essential items of information, including the following items.
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A reference to the treaty and the treaty provisions on which the request is based.
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The years and amounts involved in both U.S. dollars and foreign currency.
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A brief description of the issues for which competent authority assistance is requested.
A complete listing of the information that must be included with the request can be found in Revenue Procedure 2006-54, 2006-49
I.R.B. 1035, available at www.irs.gov/pub/irs-irbs/irb06-49.pdf.
Your request for competent authority consideration should be addressed to:
Deputy Commissioner (International) Large and Mid-Size Business Division Attn: Office of Tax Treaty Internal Revenue Service 1111 Constitution Avenue, NW Routing MA3-322A Washington, DC 20224
Additional filing.
In the case of U.S.- initiated adjustments, you also must file a copy of the request with the IRS office where your
case is pending. If the request is filed after the matter has been designated for litigation or while a suit contesting your
relevant tax liability is pending in a United States court, a copy of the request, with a separate statement attached identifying
the court where the suit is pending and the docket number of the action, also must be filed with the:
Office of Associate Chief Counsel (International) Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224
Additional details on the procedures for requesting competent authority assistance are included in Revenue Procedure 2006-54.
Obtaining Copies of Tax Treaties
Table 6-1 lists those countries with which the United States has income tax treaties. This table is updated through September
30, 2008.
You can get complete information about treaty provisions from the taxing authority in the country from which you receive income
or from the treaty itself. You can obtain the text of most U.S. treaties at www.irs.gov. You can also request the text of treaties from the Department of Treasury at the following address.
Department of Treasury Executive Secretariat Rm. 3413 1500 Pennsylvania Avenue, NW Washington, DC 20220
If you have questions about a treaty and you are in the United States, Puerto Rico, or the U.S. Virgin Islands, you can call
the IRS at 1-800-829-1040. From anywhere in the world, you can send your questions to:
Internal Revenue Service International Section P.O. Box 920 Bensalem, PA 19020-8518
Table 6–1.List of Tax Treaties (Updated through September 30, 2008)
Country |
Official Text Symbol1 |
General Effective Date
|
Citation |
Applicable Treasury Explanations or Treasury Decision (T.D.)
|
Australia |
TIAS 10773 |
Dec. 1, 1983 |
1986-2 C.B. 220 |
1986-2 C.B. 246 |
Protocol |
TIAS |
Jan. 1, 2004 |
|
|
Austria |
TIAS |
Jan. 1, 1999 |
|
|
Bangladesh |
TIAS |
Jan. 1, 2007 |
|
|
Barbados |
TIAS 11090 |
Jan. 1, 1984 |
1991-2 C.B. 436 |
1991-2 C.B. 466 |
Protocol |
TIAS |
Jan. 1, 2005 |
|
|
Belgium |
TIAS |
Jan. 1, 2008 |
|
|
Canada2 |
TIAS 11087 |
Jan. 1, 1985 |
1986-2 C.B. 258 |
1987-2 C.B. 298 |
Protocol |
TIAS |
Jan. 1, 1996 |
|
|
China, People's Republic of |
TIAS 12065 |
Jan. 1, 1987 |
1988-1 C.B. 414 |
1988-1 C.B. 447 |
Commonwealth of Independent States3 |
TIAS 8225 |
Jan. 1, 1976 |
1976-2 C.B. 463 |
1976-2 C.B. 475 |
Cyprus |
TIAS 10965 |
Jan. 1, 1986 |
1989-2 C.B. 280 |
1989-2 C.B. 314 |
Czech Republic |
TIAS |
Jan. 1, 1993 |
|
|
Denmark |
TIAS |
Jan. 1, 2001 |
|
|
Protocol |
TIAS |
Jan. 1, 2008 |
|
|
Egypt |
TIAS 10149 |
Jan. 1, 1982 |
1982-1 C.B. 219 |
1982-1 C.B. 243 |
Estonia |
TIAS |
Jan. 1, 2000 |
|
|
Finland |
TIAS 12101 |
Jan. 1, 1991 |
|
|
Protocol |
TIAS |
Jan. 1, 2008 |
|
|
France |
TIAS |
Jan. 1, 1996 |
|
|
Protocol |
TIAS |
Jan. 1, 2007 |
|
|
Germany |
TIAS |
Jan. 1, 1990 |
|
|
Protocol |
TIAS |
Jan. 1, 2008 |
|
|
Greece |
TIAS 2902 |
Jan. 1, 1953 |
1958-2 C.B. 1054 |
T.D. 6109, 1954-2 C.B. 638 |
Hungary |
TIAS 9560 |
Jan. 1, 1980 |
1980-1 C.B. 333 |
1980-1 C.B. 354 |
Iceland |
TIAS 8151 |
Jan. 1, 1976 |
1976-1 C.B. 442 |
1976-1 C.B. 456 |
India |
TIAS |
Jan. 1, 1991 |
|
|
Indonesia |
TIAS 11593 |
Jan. 1, 1990 |
|
|
Ireland |
TIAS |
Jan. 1, 1998 |
|
|
Israel |
TIAS |
Jan. 1, 1995 |
|
|
Table 3. (continued)
Country |
Official Text Symbol1 |
General Effective Date
|
Citation |
Applicable Treasury Explanations or Treasury Decision (T.D.)
|
Italy |
TIAS 11064 |
Jan. 1, 1985 |
1992-1 C.B. 442 |
1992-1 C.B. 473 |
Jamaica |
TIAS 10207 |
Jan. 1, 1982 |
1982-1 C.B. 257 |
1982-1 C.B. 291 |
Japan |
TIAS |
Jan. 1, 2005 |
|
|
Kazakstan |
TIAS |
Jan. 1, 1996 |
|
|
Korea, Republic of |
TIAS 9506 |
Jan. 1, 1980 |
1979-2 C.B. 435 |
1979-2 C.B. 458 |
Latvia |
TIAS |
Jan. 1, 2000 |
|
|
Lithuania |
TIAS |
Jan. 1, 2000 |
|
|
Luxembourg |
TIAS |
Jan. 1, 2001 |
|
|
Mexico |
TIAS |
Jan. 1,1994 |
|
|
Protocol |
TIAS |
Jan. 1, 2004 |
|
|
Morocco |
TIAS 10195 |
Jan. 1, 1981 |
1982-2 C.B. 405 |
1982-2 C.B. 427 |
Netherlands |
TIAS |
Jan. 1, 1994 |
|
|
Protocol |
TIAS |
Jan. 1, 2005 |
|
|
New Zealand |
TIAS 10772 |
Nov. 2, 1983 |
1990-2 C.B. 274 |
1990-2 C.B. 303 |
Norway |
TIAS 7474 |
Jan. 1, 1971 |
1973-1 C.B. 669 |
1973-1 C.B. 693 |
Protocol |
TIAS 10205 |
Jan. 1, 1982 |
1982-2 C.B. 440 |
1982-2 C.B. 454 |
Pakistan |
TIAS 4232 |
Jan. 1, 1959 |
1960-2 C.B. 646 |
T.D. 6431, 1960-1 C.B. 755 |
Philippines |
TIAS 10417 |
Jan. 1, 1983 |
1984-2 C.B. 384 |
1984-2 C.B. 412 |
Poland |
TIAS 8486 |
Jan. 1, 1974 |
1977-1 C.B. 416 |
1977-1 C.B. 427 |
Portugal |
TIAS |
Jan. 1, 1996 |
|
|
Romania |
TIAS 8228 |
Jan. 1, 1974 |
1976-2 C.B. 492 |
1976-2 C.B. 504 |
Russia |
TIAS |
Jan. 1, 1994 |
|
|
Slovak Republic |
TIAS |
Jan. 1, 1993 |
|
|
Slovenia |
TIAS |
Jan. 1, 2002 |
|
|
South Africa |
TIAS |
Jan. 1, 1998 |
|
|
Spain |
TIAS |
Jan. 1, 1991 |
|
|
Sri Lanka |
TIAS |
Jan. 1, 2004 |
|
|
Sweden |
TIAS |
Jan. 1, 1996 |
|
|
Protocol |
TIAS |
Jan. 1, 2007 |
|
|
Switzerland |
TIAS |
Jan. 1, 1998 |
|
|
Thailand |
TIAS |
Jan. 1, 1998 |
|
|
Trinidad and Tobago |
TIAS 7047 |
Jan. 1, 1970 |
1971-2 C.B. 479 |
|
Tunisia |
TIAS |
Jan. 1, 1990 |
|
|
Turkey |
TIAS |
Jan. 1, 1998 |
|
|
Ukraine |
TIAS |
Jan. 1, 2001 |
|
|
United Kingdom |
TIAS |
Jan. 1, 2004 |
|
|
Venezuela |
TIAS |
Jan. 1, 2000 |
|
|
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