Employees of foreign governments (including foreign municipalities) have two ways to get exemption of their governmental wages
from U.S. income
tax:
-
By a provision in a tax treaty or consular convention between the United States and their country, or
-
By meeting the requirements of U.S. tax law.
Employees of international organizations can only exempt their wages by meeting the requirements of U.S. tax law.
The exemption discussed in this chapter applies only to pay received for services performed for a foreign government or international
organization.
Other U.S. income received by persons who qualify for this exemption may be fully taxable or given favorable treatment under
an applicable tax treaty
provision. The proper treatment of this kind of income (interest, dividends, etc.) is discussed earlier in this publication.
Exemption Under Tax Treaty
If you are from a country that has a tax treaty with the United States, you should first look at the treaty to see if there
is a provision that
exempts your income. The income of U.S. citizens and resident aliens working for foreign governments usually is not exempt.
However, in a few
instances, the income of a U.S. citizen with dual citizenship may qualify. Often the exemption is limited to the income of
persons who also are
nationals of the foreign country involved.
Resident aliens from France.
The United States and France have an agreement to relieve double taxation of U.S. permanent residents who receive
wages and pensions for
governmental services performed for the government of France. Generally, this income is taxable in the United States and France.
However, the United
States will allow a credit for taxes paid to France on this income.
Exemption Under U.S. Tax Law
Employees of foreign governments who do not qualify under a tax treaty provision and employees of international organizations
may qualify for
exemption by meeting the following requirements of U.S. tax law.
The exemption under U.S. tax law applies only to current employees and not to former employees. Pensions received by former
employees living in
this country do not qualify for exemption.
Employees of foreign governments.
If you are not a U.S. citizen, or if you are a U.S. citizen but also a citizen of the Philippines, and you work for
a foreign government in the
United States, your foreign government salary is exempt from U.S. tax if you perform services similar to those performed by
U.S. Government employees
in that foreign country and that foreign government grants an equivalent exemption.
Certification.
To qualify for the exemption under U.S. tax law, the foreign government for which you work must certify to the Department
of State that you are
their employee and that you perform services similar to those performed by employees of the United States in your country.
However, see
Aliens
who keep immigrant status, later, for a special rule that may affect your qualifying for this exemption.
Employees of international organizations.
If you work for an international organization in the United States and you are not a U.S. citizen (or you are a U.S.
citizen but are also a citizen
of the Philippines), your salary from that organization is exempt from U.S. tax. However, see
Aliens who keep immigrant status, later, for
a special rule that may affect your qualifying for this exemption.
An international organization is an organization designated by the President of the United States through Executive
Order to qualify for the
privileges, exemptions, and immunities provided in the International Organizations Immunities Act.
You should find out if you have been made known to, and have been accepted by, the Secretary of State as an officer
or an employee of that
organization, or if you have been designated by the Secretary of State, before formal notification and acceptance, as a prospective
officer or
employee.
If you are claiming exemption, you should know the number of the Executive Order covering the international organization
and should have some
written evidence of your acceptance or designation by the Secretary of State.
The exemption is denied when, because the Secretary of State determines your presence in the United States is no longer
desirable, you leave the
United States (or after a reasonable time allowed for leaving the United States). The exemption is also denied when a foreign
country does not allow
similar exemptions to U.S. citizens. Then the Secretary of State can withdraw the privileges, exemptions, and immunities from
the nationals of that
foreign country.
Aliens who keep immigrant status.
If you file the waiver provided by section 247(b) of the Immigration and Nationality Act to keep your immigrant status,
you no longer qualify for
the exemption from U.S. tax under U.S. tax law from the date of filing the waiver with the Attorney General.
However, you do not lose the exemption if you file the waiver and meet either of the following conditions.
-
You are exempt from U.S. tax by an income tax treaty, consular agreement, or international agreement between the United States
and your
country.
-
You work for an international organization and the international agreement creating the international organization provides
that alien
employees are exempt from U.S. income tax. Two international organizations that have such a provision are the International
Monetary Fund (IMF) and
the International Bank for Reconstruction and Development (World Bank).
