Treaty rate table

Meaning and location

IRS treaty tables summarize income types that may receive a reduced U.S. tax rate or exemption under a treaty.^[4]

The IRS says the tables have moved from Publication 901 to IRS.gov, where they are available through the Tax Treaty Tables page. Publication 901 remains a quick reference to treaty rules, while the full treaty texts are available through the treaty listing and treaty tables page.^[1][3]

The tables divide their material by function. Table 1 covers income other than personal service income, including interest, dividends, royalties, pensions, annuities, and Social Security payments. Table 2 covers compensation for personal services performed in the United States. Table 3 lists treaty countries and general effective dates, while Table 4 identifies limitation on benefits tests found in certain treaties.^[4]

How to read a listed rate

A listed rate or exemption is a summary of possible treaty treatment, not a complete statement of every treaty condition. The IRS says all requirements in the applicable treaty must be met before income can be exempt, including any treaty requirement that it be remitted to the recipient's country of residence.^[4]

Table 1's income code numbers match the codes on Form 1042-S, which reports U.S.-source income of foreign persons subject to withholding. The article references in Tables 1 and 2 point readers to the relevant treaty provision for each income category. The IRS directs readers seeking more detail about a particular country's treaty treatment to Publication 901 and the treaty text.^[4]

The tables are not a complete guide to every treaty provision. A treaty protocol amends a treaty, and the IRS says the treaty and any protocol applicable to the payment's tax year are relevant. The tables may also describe rates a treaty partner could apply to U.S. residents receiving income there; rates may not be bilateral, and foreign procedures are set by that country's laws and practices.^[4]

What it means for a U.S. citizen

The tables principally describe possible U.S. tax treatment for residents of treaty partner countries receiving U.S.-source income. The IRS explains that U.S. citizens and residents generally remain subject to U.S. income tax on worldwide income, with certain treaty exceptions. Treaty provisions are generally reciprocal, so a U.S. citizen receiving income from a treaty country may use the tables as a reference to whether that country's tax on the income could be affected.^[1][4]

The IRS states that many treaties contain a saving clause that limits use of treaty provisions by U.S. citizens and residents. The A-to-Z treaty listing links to the treaty texts and points readers to Table 3 for general effective dates. Those references help locate the relevant treaty, but the treaty and applicable protocol contain the controlling provisions and conditions.^[3]

In more detail

Foreign taxing authorities sometimes require a certification as part of establishing entitlement to treaty benefits. The certification comes from the U.S. Government and confirms that the applicant filed an income tax return as a U.S. citizen or resident.^[1]

Related reading

Income tax treaty provides context on the agreements summarized by treaty rate tables. Withholding tax explains the withholding concept associated with some table entries. Limitation on benefits covers a treaty condition that may relate to eligibility for benefits. Tax residence connects treaty treatment with residence status.

Questions and answers

Related terms

• Tax residence: Tax residence describes a person's status in a country for tax purposes. Treaty texts address how it affects income items and applicable treaty requirements.
• Withholding tax: The IRS tax treaty tables describe withholding tax on chapter 3 income payments. Such payments may be exempt under a treaty or taxed at a reduced rate.
• Income tax treaty: An income tax treaty may provide reduced U.S. tax rates or exemptions for specified U.S.-source income. Rules vary by country and income type under each treaty.
• Treaty-based return position: A treaty-based position claims that a U.S. treaty overrides or reduces U.S. tax. The IRS discusses the term in Publication 901 and in the title of Form 8833.

Related guides and articles

• How income tax treaties are structured: Income tax treaty terms and structure, related U.S. reporting for U.S. citizens, the OECD Model Tax Convention description and IRS guidance on treaty positions.
• The OECD Common Reporting Standard: The Common Reporting Standard sets rules for financial account reporting and the annual exchange of that information between jurisdictions, for U.S. citizens.
• The court and control tests for foreign trusts: The court test and the control test classify a trust as domestic or foreign, and foreign trust status connects to U.S. reporting rules for U.S. citizens.

Related pages

• Glossary: All terms.
• Tax residence
• Treaty-based return position
• Withholding tax
• Income tax treaty
• IRS forms