How to claim the US-China tax treaty?

[Jie0721]

Hi Sophy,

Did you get your tax treaty return without 8833 last year using Turbotax?

[muccini.ivan]

In the instruction section of Form 8833 i see several exemption that may avoid you to file the 8833.

E.g. in case:

That a treaty reduces or modifies the taxation of income derived by an individual from dependent personal services, pensions, annuities, social security, and other public pensions, as well as income derived by artists, athletes, students, trainees, or teachers;

So, if you received the forign income form another employer as "dependent personal services", my understanding is that you don't need to file 8833.

Is that correct?

[RalphH1]

That is an excellent point, @muccini.ivan, and one which should save some little headaches for non-residents who just have income from employment. (There are some “exceptions to the exceptions,” but they’re for unusual scenarios...)

One complication which is sometimes missing from discussions like this (in case someone comes along to whom this applies) is that treaty benefits are generally available when you’re a non-resident of a country where you’re staying, but not once you’re a “resident for tax purposes.”

The existence of “exceptions to savings clauses” in treaties can change this, and it’s also possible to continue characterizing yourself as a U.S. non-resident (with treaty benefits) according to other rules (with possible non-tax implications, as well as the requirement to continue using Form 1040NR). But the important consideration is that everything must be revisited at this point.

[pk]

@manjuli4 , specifically for US-China treaty there is no hard time clause -- it uses "reasonable time"  i.e. as long as the intent is to study , train etc.  ( for most F and J visa this is true ), the US$5000 exclusion is valid.  You can use  as negative other income -- schedule-1, line z -- write in the US -China Tax Treaty article 20 and enter the amount as a negative 5000 or less.  That should work

pk

@RalphH1 

[muccini.ivan]

@RalphH1 I completely missed the non-resident part...  

Fore example, the section of ITA-USA treaty the regulates Personal Dependent Personal Service, only talks about  "resident" (according to the related country's definitions are rules).

1. Subject to the provisions of Articles 16 (Directors' Fees), 18 (Pensions, Etc.), 19 (Government Service), 20 (Professors and Teachers), and 21 (Students and Trainees), salaries, wages, and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

• (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned;
• (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and
• (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

I am a US Resident Alien in 2022. I earned 2 months of wages form employment in Italy form an Italian company.

According to the above text:

1. I owe taxes to the US on this income (point 1)
2. I do not owe exclusively taxes to the US (point 2), Italy can also tax me since I do not meet the criteria (2b) - the company was Italian.

Pretty crazy....