US Double Tax Treaties Under these treaties, residents of foreign countries are taxed at a reduced rate or are exempt from income taxes on certain items of income they receive from sources within the United States, and vice versa.

Table Of Tax Treaties A listing of the 54 countries with which the US has double tax treaties.

Recent Developments In US Tax Treaties New treaties; Changes and clarifications to existing treaties.

Dividend Taxation Under 2003 Tax-Cutting Legislation Four US income tax treaties do not meet the requirements of the Act.

Tax Information Exchange Agreements Many offshore jurisdictions don't want to or are not eligible to enter fully-fledged double tax treaties with their major trading partners.

Transfer Pricing Most double tax benefits are linked to acceptable transfer pricing; few international transactions can now ignore it.

US Double Tax Treaties

The United States has income tax treaties (conventions) with a number of foreign countries, which are negotiated by the Treasury Department, approved by the President of the United States, and sent to the US Senate for its advice and consent. Once approved by the Senate, the treaty is returned to the President for ratification. After ratification by the other country, the instruments of ratification are exchanged and the treaty becomes law.

Under these treaties, residents of foreign countries are taxed at a reduced rate or are exempt from income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.

The benefits provided by an income tax treaty are generally on the basis of residence for income tax purposes.

Tax treaties reduce the US taxes on residents of foreign countries (non-resident aliens). With certain exceptions, they do not reduce the US taxes of US citizens or residents (including resident aliens). US citizens and residents are subject to US income tax on their worldwide income. But, because treaty provisions generally are reciprocal (i.e., apply to both treaty countries), a US citizen or resident who receives income from a treaty country may refer to the tax treaty to see if it might affect the tax to be paid to that foreign country.

Income tax treaties commonly also provide for exchange of information and mutual assistance, and the curbing of tax avoidance practices.

If a taxpayer takes a position that any US tax is reduced or potentially reduced by a US treaty (a treaty-based position), the taxpayer generally must disclose that position on a US tax return. If the taxpayer is otherwise not required to file a tax return because it owes no tax, a return still has to be filed reporting the taxpayer's treaty-based position. This disclosure requirement does not apply to a reduced rate of withholding tax on income that is not connected with a US trade or business, such as dividends, interest, rents, or royalties. It also does not apply to a reduced rate of tax on pay received for services performed as an employee, including pensions, annuities, and social security.

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Table Of Tax Treaties
A listing of the 54 countries with which the US has double tax treaties.

Recent Developments In US Tax Treaties
New treaties; Changes and clarifications to existing treaties.

Dividend Taxation Under 2003 Tax-Cutting Legislation
Four US income tax treaties do not meet the requirements of the Act.

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