Form 8233 is an Internal Revenue Service (IRS) form used by nonresident alien individuals to claim withholding exemptions on compensation for personal services due to a U.S. income tax treaty.
You should complete Form 8233 and give it to your withholding agent if some or all of your income is considered to be exempt from withholding under the rules outlined below. You should complete a separate Form 8233 for each tax year, for each withholding agent, and for each type of income that you qualify for an exemption. However, one form can be filed if you have the same withholding agent for both compensation for personal services (including compensatory scholarship or fellowship income) and noncompensatory scholarship or fellowship income.
Typically, the U.S. tax code requires 30% income tax withholding on compensation for independent personal services and 30% or more on compensation for dependent personal services. However, some payments are exempt from tax withholding due to U.S. tax treaties.
If you believe your income is exempt from tax withholding due to a U.S. tax treaty with your resident country, you may need to file Form 8233 to claim the withholding exemption. Some, or all, of your income may be exempt from withholding depending on the nature of the income and the specific articles in the treaty.
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According to the IRS, a nonresident alien is an individual who is not a U.S. citizen or U.S. national.
The United States has several tax treaties with different countries. Under a tax treaty, residents of foreign countries are taxed at reduced rates, or are exempt from income taxes on certain types of income received within the United States. A U.S. income tax treaty is effective at the federal level, and the exemptions apply to federal income taxes. States may or may not honor the provisions of a tax treaty, so be sure to understand your state’s income tax rules as well.
A tax treaty withholding exemption is based on a tax treaty benefit permitted by the IRS under section 1441 of the U.S. tax code. It allows a resident of a treaty country to reduce or eliminate the taxation of their income, depending on the source of income and specifics in the U.S. tax treaty with the other country.
A resident of a treaty country is an individual who qualifies as a resident of the other country under the country’s domestic law. They must also qualify under the terms of the tax treaty between the United States and the treaty country. A nonresident alien may claim a tax treaty benefit on Form 8233 only if they are the beneficial owner of the income and meet the residency requirements for the terms of the tax treaty.
There may be different residency requirements for various forms of income. For example, dependent and independent personal services require that you must be a resident of the treaty country. For students or researchers, however, you typically only need to have been a resident of the treaty country at the time you entered the United States or immediately prior.
Compensation for independent personal services includes income received by a nonresident alien while working as a self-employed independent contractor in the United States, rather than as an employee. If a tax treaty does not have an independent personal services article, this type of income may be covered under a business profits article of the tax treaty.
Compensation for dependent personal services includes income received by a nonresident alien while working as an employee in the United States. It includes compensatory scholarship or fellowship income.
With compensatory scholarship or fellowship income, the performance of a service– such as teaching– is a condition for the nonresident alien individual receiving the scholarship or fellowship.
Noncompensatory scholarship or fellowship income is any scholarship or fellowship income that does not meet the requirements of a compensatory scholarship or fellowship, as defined above. For example, a nonresident alien individual may receive a scholarship for academic performance– with no requirement to perform a service in exchange for receiving the scholarship. This does not meet the requirements for compensatory scholarship or fellowship income, so it is noncompensatory.
Typically, the taxable portion of this type of income is withheld at 30% (or 14% if the nonresident alien is temporarily present in the United States under an F, J, M, or Q visa).
A withholding agent is someone who has control, receipt, or custody of an amount subject to income tax withholding. The withholding agent can disburse or make payments of this amount to the nonresident alien. It can be an individual, corporation, partnership, trust, association, or any other entity. A withholding agent can be U.S. or foreign based.
A beneficial owner is the person who is required under U.S. tax code to include the income they received in gross income on their tax return. In other words, the person receiving the income is not the beneficial owner if they are receiving income as a nominee, agent, or custodian.
If you are a nonresident alien individual who is receiving compensation for independent personal services performed in the United States and you are the beneficial owner of the income, you can use Form 8233 to claim a tax treaty withholding exemption for all or part of that income.
If you are a nonresident alien individual who is receiving compensation for dependent personal services performed in the United States and you are the beneficial owner of the income, you can use Form 8233 to claim a tax treaty withholding exemption for all or part of that income.
If you are a nonresident alien individual who is receiving noncompensatory scholarship or fellowship income and personal services income from the same withholding agent, and you are the beneficial owner of the income, you can use Form 8233 to claim a tax treaty withholding exemption for all or part of both types of income.
If you are a beneficial owner who is receiving compensation for dependent personal services performed in the United States and you are not claiming a tax treaty withholding exemption for that compensation, use Form W-4 instead.
If you are a beneficial owner who is receiving noncompensatory scholarship or fellowship income and you are not receiving any personal services income from the same withholding agent, instead use Form W-8BEN or Form W-4, if elected by the withholding agent.
If you are a beneficial owner who is claiming only foreign status or treaty benefits with respect to income that is not compensation for personal services, use Form W-8BEN instead.
Form 8233 is valid for only one year. It must be provided annually by the nonresident alien who remains in the United States and is receiving qualifying compensation.
There are three copies of each Form 8233. After signing part IV, the withholding agent should retain a copy for their own records, give one completed copy back to the nonresident alien individual, and mail one completed copy to the IRS. Each copy should include any attachments that were submitted by the nonresident alien individual. The IRS copy should be mailed to:
Department of the Treasury
Internal Revenue Service
Philadelphia, PA 19255-0725
Alternatively, the Form 8233 could also be faxed to 877-824-9781 or 267-466-1365. The fax option has a limit of 100 pages at a time.
When you complete Form 8233, you should enter the calendar year or other tax year for which the compensation is effective in the top section, just above Part I. The form will not be considered complete without this information.
Part I is used to identify the beneficial owner of the income. Enter your name, U.S. taxpayer identification number (TIN), and foreign tax identification number, if applicable, in lines 1 through 3. Your TIN is likely your social security number (SSN) or individual taxpayer identification number (ITIN)-- if you are not eligible for a SSN. If you have applied for a SSN or ITIN but have not received iit yet, you can attach a copy of the Form W-7, Application for IRS Individual Taxpayer Identification Number, or Form SS-5, Application for Social Security Card.
You will also enter your permanent resident address and address in the United States in lines 4 and 5. Lines 6 through 9b relate to your U.S. visa type, country issuing passport, passport number, date of entry into the United States, current nonimmigrant status, and date current nonimmigrant status expires. If you are a citizen of Canada or Mexico, you do not need to enter your country issuing passport or passport number in lines 7a or 7b. Check the box in line 10 if you are a foreign student, trainee, professor/teacher, or researcher. There is a required additional statement that you must attach with Form 8233 if you check this box.
Part II relates to the specific claim you are making for your U.S. tax treaty withholding exemption. If you have compensation for independent personal services, describe the service in line 11a. Acceptable statements include “consulting to provide engineering services” or “gave 4 lectures at ABC University.”
If you have compensation for dependent personal services, provide a description in line 11a. For example, an acceptable statement would be “teaching one psychology course per semester to undergraduate students.” In line 11b, enter the total dollar amount you expect for compensation of the services described on line 11a.
If the compensation is exempt from withholding due to a tax treaty, enter the tax treaty in which you are basing the exemption in line 12a, the article from that treaty in line 12b, and the amount of compensation from line 11b that is exempt under the treaty in line 12c. Also, enter your country of residence in line 12d.
If you received noncompensatory scholarship or fellowship income, enter the total amount in line 13a, the tax treaty in which you are basing the exemption in line 12b, the article from that treaty in line 13c, and the total income from line 13a that is exempt from tax in line 13d. Please note, only complete this section if you also had compensation for personal services from the same withholding agent.
Line 14 is where you will provide sufficient details to justify the exemption from withholding based on the tax treaty you are claiming for any amounts listed in lines 12 or 13.
Part III includes a certification under penalty of perjury that the information is complete and accurate to the best of your knowledge. It authorizes your withholding agent to receive the Form 8233. It also certifies that:
The withholding agent will review and sign the Form 8233 after confirming the exemption from withholding is warranted. They will also include their name, address, employer identification number (EIN), and telephone number in Part IV.
Common errors include:
Be sure to thoroughly understand your specific country’s tax treaty with the United States prior to filing Form 8233. You can work with a tax professional who specializes in international tax law to ensure your form is submitted and approved in a timely manner.
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